exv10w19



 





Exhibit
10.19




MANAGEMENT SERVICES AGREEMENT




     THIS MANAGEMENT SERVICES AGREEMENT (this “Agreement”) is made as of September
20, 2005 by and between Advanced Circuits, Inc., a Colorado corporation (the “Company”),
with offices at 21100 E. 33rd Drive, Aurora, Colorado, and WAJ, LLC, a Delaware limited
liability company (“Consultant”), with offices at 61 Wilton Road, Second Floor, Westport,
Connecticut.



RECITALS




     WHEREAS, the Company is engaged in the manufacturing, marketing and selling of printed circuit
boards (the “Business”); and



     WHEREAS, the Company desires to retain Consultant to provide executive, financial, and
managerial oversight services to it relating to the Business on the terms herein set forth, and
Consultant has capability enabling it to provide such services and is agreeable to providing the
same on such terms.



     NOW, THEREFORE, in consideration of the mutual covenants herein contained, it is hereby
agreed as follows:



AGREEMENT




     1. TERM AND DUTIES.



     For the five year period commencing on the date hereof, unless sooner terminated pursuant to
the provisions of Sections 7 or 8 (the “Term”), Consultant shall provide
executive, financial and managerial oversight services to the Company and the Company’s
subsidiaries from time to time. The nature of such services shall be to analyze the performance of
the Company’s executive personnel and to assist them in developing and planning the implementation
of financing, internal growth and acquisition strategies; however, Consultant will not become
involved in day-to-day operations of the Company. In general, such services shall be provided by
reviewing internal reports and financial statements and analyses prepared by the executive
officers of the Company and advising them as to matters covered by such reports as well as
assisting them to formulate financial and corporate growth strategies. If so requested,
appropriate personnel of Consultant will attend all meetings of the Board of Directors. It is
understood that the individuals who will provide services to the Company may be employees of
Consultant and will also have duties with and to Consultant, and that, therefore, none of said
individuals will devote their full business time to the business of the Company, but that they
will devote thereto only such time as may be necessary from time to time to properly perform their
duties. Unless either party shall have notified the other of its intention not to renew, at least
sixty days prior to the expiration of the Term, this Agreement shall automatically renew for
successive three year periods.



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     2. DEGREE OF CARE.



     Consultant shall use its best efforts to perform its services and to cause its personnel to
perform their services hereunder in a professional manner and with due care, but shall have no
liability to the Company for any act or omission except for gross negligence or the willful breach
of this Agreement.



     3. FEES.



     (a) In full consideration and compensation for the services to be furnished by Consultant to
the Company and its subsidiaries during the Term,




     (i) the Company or an affiliate of the Company shall pay to Consultant upon execution
of this Agreement, and Consultant shall accept, an up-front fee in cash in an amount equal
to $500,000.00, which shall be earned in full upon Consultant’s receipt thereof and relates
to additional financial and managerial oversight and strategic planning services to be
rendered by Consultant during the first 90 days following the closing of the transactions
contemplated in the Stock Purchase Agreement (as defined below); and




     (ii) the Company shall pay to Consultant and Consultant shall accept, an annual fee in
an amount equal to $500,000.00. Such fee shall be payable in arrears in equal quarterly
installments of $125,000.00 (each a “Management Fee Payment”) commencing on
December 31, 2005 (the first installment to also include a pro rated fee attributed to the
period September 20 through September 30, 2005) and continuing on a calendar quarter basis
until the Termination of this Agreement. Consultant may elect to defer all or a portion of
its fee for any such installment due by delivering written notice of such election to the
Company. If payment of any Management Fee Payment would cause the Company to violate the
fixed charge coverage ratio covenant set forth in the credit facility between the Company
and Madison Capital Funding, LLC, such Management Fee Payment shall automatically be
deferred and the Company shall accrue such amount, together with interest at 6.0% per annum,
compounded quarterly. Any amount accrued, payable and/or in arrears shall be paid promptly
to Consultant as soon as and to the extent assets are legally available therefor, provided
payment thereof is not legally or contractually restricted or prohibited.



     (b) Unless full payment in respect of Management Fee Payments for all past periods and the
then current period shall have been paid and a sum sufficient for the payment thereof set apart;
(i) no dividend whatsoever (other than a dividend payable solely in capital sock of the Company or
other securities and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of capital stock of the Company) shall be declared or paid, and no
distribution shall be made on, any capital stock, and (ii) no shares of capital stock shall be
redeemed, purchased or otherwise acquired (or pay into or set aside for a sinking fund for such
purpose); provided, however, that this restriction shall not apply to the repurchase of shares of
capital stock of the Company from employees, officers, directors, consultants or other persons
performing services for the Company or any subsidiary pursuant to agreements under which the
Company has the option to repurchase such shares upon the occurrence of certain events, such as the
termination of employment.



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     (c) All payments hereunder shall be in U.S. Dollars and shall be made at the offices of
Consultant, unless otherwise instructed at least three business days prior to the due date of the
payment.



     (d) For purposes of this Agreement, “Stock Purchase Agreement” shall mean that certain
Stock and Membership Interest Purchase Agreement, dated as of September 20, 2005, by and among the
Company, Compass Advanced Partners L.P., Advanced Circuits, Inc., RJCS, LLC, Ron D. Huston and each
of the members of RJCS a party thereto.



      4. EXPENSES.



     (a) During the Term, the personnel of Consultant assigned to perform duties hereunder will
engage in such travel as may be reasonably required in connection with the performance of those
duties. The Company will pay or reimburse all such reasonable expenses upon submission of proper
documentation, with due regard to cost savings for the Company’s benefit.



     (b) The Company will pay for, or reimburse Consultant for, all equipment and supplies bought
by Consultant and specifically dedicated to the purposes of this Agreement (e.g. computer
supplies). Consultant shall not be entitled to reimbursement of incidental expenses (e.g. use of
Consultant’s offices) for purposes hereof.



     (c) Consultant will pay all salaries, wages, bonuses, health and other insurance expenses,
pension fund payments, payroll taxes and withholding and the like applicable to its employees
furnishing services hereunder, without the right to reimbursement from the Company.



     (d) The Company will indemnify, to the fullest extent permitted by law, Consultant and the
personnel of Consultant who perform services hereunder against any claims which may be made against
them by reason thereof other than claims arising from Consultant’s gross negligence or willful
misconduct.



      5. CONFIDENTIALITY.



     The Company acknowledges that Consultant is engaged in various other businesses some of which
may be competitive with the business and that all persons who perform services for the Company
pursuant to this Agreement will be full time employees of Consultant and that their primary loyalty
is to Consultant. The mere existence of Consultant’s business activities as described above and the
use of such employees to perform services for Consultant shall in no way give rise to any liability
of Consultant or such employees under this Agreement.



      6. RELATIONSHIP BETWEEN PARTIES.



     Consultant and the Company are not partners or joint venturers, and neither shall have any
power or right to incur any liability on behalf of the other party; provided, however, that any of
the personnel of Consultant elected as an officer of the Company shall have the power to obligate
the Company in such capacity as an officer, but only to the extent appropriate for such office.
Each party shall discharge its own debts and obligations without recourse against the other.



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7. DEFAULTS.




     (a) The following shall constitute events of default (“Events of Default”)
hereunder:




     (i) The failure of the Company to pay Consultant any sums due to Consultant hereunder
within ten days of written demand therefor by Consultant.



     (ii) The failure of either party to perform, keep or fulfill in any material respect
any of the other covenants, undertakings, obligations or conditions set forth in this
Agreement or the failure of Consultant to perform the services required under this
Agreement in a professional manner and with due care, and the continuance of such default
for a period of 30 days after notice of said default.




     (iii) A Change in Control of the Company. For purposes of this Agreement, a
“Change in Control” means the happening of any of the following: (i) the sale of
all or substantially all of the assets of the Company or (ii) a stock sale, merger,
consolidation, stock exchange, reorganization or similar transaction to which the Company
is a party if the individuals and entities who were shareholders of the Company immediately
prior to the effective date of such transaction collectively own, immediately following the
effective date of such transaction, less than fifty percent (50%) of the total combined
outstanding voting power for the election of directors of the Company or the surviving
entity, in the case of a merger or consolidation.



     (b) Upon the occurrence of any Event of Default, the non-defaulting party may give to the
defaulting party notice of the non-defaulting party’s intention to terminate this Agreement
specifying the cause therefor (“Termination Notice”). If the defaulting party shall fail to cure
the Event of Default before the expiration of a period of 60 days from the date of such Termination
Notice, this Agreement shall terminate. In the case of an Event of Default by the Company, the
parties acknowledge that the damages of Consultant would be substantial, but difficult to compute
with accuracy; accordingly, Consultant shall be entitled to receive in cash as an agreed upon
amount of liquidated damages an amount equal to all amounts payable under this Agreement from the
date of the Event of Default to the end of the Term, provided, that, in no circumstance shall such
amount be less than one year of fees under Section 3 hereof.



     (c) The rights granted hereunder shall not be in substitution for, but shall be in addition
to, any rights and remedies available to the non-defaulting party hereunder by reason of applicable
provisions of law.



     8. TERMINATION.



     In addition to termination pursuant to the provisions of Section 7, this Agreement
shall terminate without liability of any party to the other upon the earlier to occur of the
following:



     (a) upon the expiration of the Term;



     (b) at any time upon the written agreement of the Company and Consultant; or



     (c) immediately upon the dissolution, bankruptcy or insolvency of the Company.



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     9. WAIVER.



     The failure of either party to insist upon a strict performance of any of the terms or
provisions of this Agreement or to exercise any option, right or remedy herein contained, shall
not be construed as a waiver or as a relinquishment for the future of such term, provision,
option, right or remedy, but the same shall continue and remain in full force and effect. No
waiver by either party of any term or provision hereof shall be deemed to have been made unless
expressed in writing and signed by such party. In the event of consent by either party to an
assignment of this Agreement, no further assignment shall be made without the express consent in
writing of such party, unless such assignment may otherwise be made without such consent pursuant
to the terms of this Agreement. In the event that any portion of this Agreement shall be declared
invalid by order, decree or judgment of a court of competent jurisdiction, this Agreement shall be
construed as if such portion had not been inserted herein except when such construction would
operate as an undue hardship to Consultant or the Company or constitute a substantial deviation
from the general intent and purpose of said parties as reflected in this Agreement.



     10. ASSIGNMENT.



     Neither party shall assign or transfer or permit the assignment or transfer of this Agreement,
or it rights or obligations hereunder without the prior written consent of the other; provided,
however, that the sale of substantially all the assets of Consultant to, or the merger of
Consultant into a single entity or a group of entities under common control, shall not constitute
an assignment or transfer for purposes of this Section 10.



     11. MISCELLANEOUS.




     (a) Right to Make Agreement. The Company and Consultant each warrant that neither the
execution of this Agreement nor the consummation of the transactions contemplated hereby shall
violate any provision of law or judgment, writ, injunction, order or decree of any court or
governmental authority having jurisdiction over the Company or Consultant; result in or constitute
a breach under any indenture, contract, other commitment or restriction to which either is a party
or by which either is bound; or require any consent, vote or approval which has not been taken, or
at the time of the transaction involved shall not have been given or taken. Each party covenants
that it has and will continue to have throughout the term of this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations hereunder.



     (b) Applicable
Law; Jurisdiction. This Agreement shall be construed under and shall be
governed by the laws of the State of Connecticut. Each party unconditionally submits itself to the
exclusive jurisdiction of any Connecticut State Court or Federal Court of the United States of
America sitting in Connecticut. Each party unconditionally waives any objection that it may now
or hereafter have to the laying of venue of any suit, action or proceeding in any such court and
waives the defense of an inconvenient forum to the maintenance of such action or proceeding in any
such court. The parties hereby irrevocably waive trial by jury.



     (c) Notices. Notices, statements and other communications to be given under the terms of
this Agreement shall be in writing and shall be deemed to have been received (i) on the



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date of delivery if delivered in person or by facsimile copy and confirmed, (ii) on the date
received if sent by Federal Express or other similar overnight delivery service which requires a
signed receipt or (iii) upon three days after the date of mailing, if mailed first class by
registered or certified mail, return receipt requested, to the party entitled to receive the same
at the following addresses;




	 	 	 	 	 	 	 
	 

	 	If to the Company:
	 	 	 	Advanced Circuits, Inc.
	 

	 	 	 	 	 	21100 E. 33rd Drive
	 

	 	 	 	 	 	Aurora, Colorado 80011
	 

	 	 	 	 	 	Attention: John Yacoub
	 
	 	 	 	 	 	 
	 

	 	with a copy to:
	 	 	 	Squire, Sanders & Dempsey L.L.P.
	 

	 	 	 	 	 	312 Walnut Street, Suite 3500
	 

	 	 	 	 	 	Cincinnati, Ohio 45202 
	 

	 	 	 	 	 	Attention: Stephen C. Mahon, Esq.
	 
	 	 	 	 	 	 
	 

	 	If to Consultant:
	 	 	 	WAJ, LLC
	 

	 	 	 	 	 	c/o The Compass Group International, LLC
	 

	 	 	 	 	 	 61 Wilton Road, 2nd Floor
	 

	 	 	 	 	 	 Westport, Connecticut 06880
	 
	 	 	 	 	 	Attention: I. Joseph Massoud
	 
	 

	 	with a copy to:
	 	 	 	Squire, Sanders & Dempsey L.L.P.
	 

	 	 	 	 	 	312 Walnut Street, Suite 3500
	 

	 	 	 	 	 	Cincinnati, Ohio 45202
	 

	 	 	 	 	 	Attention: Stephen C. Mahon, Esq.






     Any party to receive notices hereunder may change its address for notices by giving
notice to the other parties stating its new address. Commencing on the fifth day after giving such
notice, such newly designated address shall be such party’s address for the purpose of all notices,
statements or other communications required or permitted to be given pursuant to this
Agreement.



     (d) Entire Agreement. This Agreement, together with other writings signed by the parties
expressly stated to be supplementing hereto and together with any instruments to be executed and
delivered pursuant to this Agreement, constitutes the entire agreement between the parties and
supersedes all prior understandings and writings.



     (e) Counterparts. This Agreement may be executed in one or more counterparts, all of which
taken together shall be deemed one original.



[Remainder of Page Intentionally Left Blank]




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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
duly authorized officers on the year and day first above written.



	 	 	 	 	 	 	 
	 	 	ADVANCED CIRCUITS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Elias J. Sabo	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:
	 	Secretary	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	WAJ, LLC	 	 
	 
	 	 	 	 	 	 
	 	 	By: The Compass Group International, LLC,

its Managing Member	 	 






	 	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Elias J. Sabo
	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Elias J. Sabo	 	 
	 

	 	 	 	 	 	 
	 

	 	Its:
	 	Principal	 	 
	 

	 	 	 	 	 	 






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