UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-23818
MERIX CORPORATION
(Exact name of registrant as specified in its charter)
OREGON 93-1135197
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1521 Poplar Lane, Forest Grove, Oregon 97116
(Address of principal executive offices) (Zip Code)
(503) 359-9300
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or in any amendment to
this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of July 1, 1997 was $64.1 million based upon the composite closing
price of the Registrant's Common Stock on the Nasdaq National Market System on
that date.
The number of shares of the Registrant's Common Stock outstanding as of July 1,
1997 was 6,184,327 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement in connection with its 1997 Annual
Meeting of Shareholders are incorporated by reference into Part III.
<PAGE>
MERIX CORPORATION
FORM 10-K
TABLE OF CONTENTS
Part I Page
Item 1. Business 2
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Part II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 9
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure 31
Part III
Item 10. Directors and Executive Officers of the Registrant 31
Item 11. Executive Compensation 31
Item 12. Security Ownership of Certain Beneficial
Owners and Management 31
Item 13. Certain Relationships and Related Transactions 31
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 31
Signatures 34
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PART I
ITEM 1. BUSINESS.
Merix Corporation (Merix or the Company) is a leading manufacturer of
technologically advanced electronic interconnect products, custom engineered to
meet customers' specific needs. The Company's principal products are high
density, multilayer, rigid printed circuits used to connect the microprocessors,
integrated circuits (ICs) and other components essential to the functioning of
electronic equipment. The Company has also produced a small amount of flexible
circuits, but has recently decided to exit the flexible circuit market. The
Company recently entered the market for laminate-based chip carriers that are
used to connect ICs to printed circuits. The Company's customers include a
diversified base of manufacturers in the industrial instrumentation, computer,
and communications segments of the electronics industry.
Merix, an Oregon corporation, was formed in March 1994 to succeed to the
business conducted by the Circuit Board Division (the Division) of Tektronix,
Inc. (Tektronix), which had been in the electronic interconnect manufacturing
business for over 30 years. On June 1, 1994, Merix acquired the assets and
assumed certain liabilities (the Acquisition) of the Division in connection with
the initial public offering of its common stock, and began to operate as an
independent corporation. The term "Company" is used in this document to refer to
both Merix and its predecessor, the Division. The Company has manufacturing
operations in Forest Grove, Oregon, Loveland, Colorado and San Diego, California
(Soladyne division). The Company's corporate offices are located at 1521 Poplar
Lane, Forest Grove, Oregon 97116 and the telephone number is (503) 359-9300.
Electronic Interconnect Industry Overview
Printed circuits, including rigid and flexible printed circuits, are the basic
platforms used to connect the microprocessors, ICs and other components
essential to the functioning of electronic equipment. These products consist of
a pattern of electrical circuitry etched from copper that is laminated to a
board made of insulating material. The manufacture of these and other complex
interconnect products requires increasingly sophisticated engineering and
manufacturing expertise and substantial capital investment. This has contributed
to increasing reliance by original equipment manufacturers (OEMs) on independent
manufacturers for such products.
According to industry reports, the U.S. domestic market for all interconnect
products was approximately $7.8 billion in 1996, including both "captive" and
"independent" producers. Captive producers are typically divisions of larger
OEMs that manufacture interconnect products for use in their own product lines.
Independent producers, such as the Company, manufacture interconnect products
for multiple OEMs, and represented approximately 85% of the U.S. domestic market
revenues in 1996. The market share of independent producers has increased in
recent years as OEMs have found that independent producers can often provide
greater flexibility, higher levels of responsiveness and faster delivery at a
lower overall cost than their own captive operations.
Historically, the industry has been highly fragmented. Increasing technology
demands and resulting demands for capital investment are expected to continue to
contribute to a growing trend toward consolidation of independent producers.
Customers, Marketing and Sales
The Company's customers include a diversified base of leading OEMs in the
industrial instrumentation, computer, and communications segments of the
electronics industry. These customers often use leading-edge technologies and
their product requirements generally drive the advancement of electronic
interconnect manufacturing technology.
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The Company also manufactures and sells products to electronic manufacturing
service industry (EMSI) customers such as Benchmark Electronics, Inc., Pro-Log
Corporation, Solectron Corporation, and SCI Systems, Inc. which assemble
components on the products for resale to OEMs. The Company seeks to expand
existing relationships and establish relationships with other EMSI customers to
gain access to more OEM customers.
The Company seeks to develop strategic relationships with its customers and
markets its products and services through a direct sales force and
manufacturers' representatives. The Company's sales strategy includes providing
advice to customers with respect to applicable technology, manufacturability of
designs and cost implications.
The Company believes continuous improvement in product technology is essential
to satisfy customer needs. To gain knowledge of future technology needs, the
Company holds technology planning and review meetings with its major customers,
attends technical conferences and trade shows, and hosts an annual conference
with its customers and suppliers. These activities also enhance the Company's
visibility in the marketplace.
In fiscal year 1997, the following five customers represented approximately 74%
of net sales: Hewlett-Packard Company (HP), Tektronix, Motorola, Inc., Teradyne,
Inc. and Storage Technology Corporation represented approximately 25.4%, 18.4%,
13.0% 8.9% and 7.9% of net sales, respectively. See Management's Discussion and
Analysis of Financial Condition and Results of Operations in Item 7 of this
Report.
Supply Agreements
In December 1996, the Company entered into a four year supply agreement with
Amkor Electronics, Inc. (Amkor) under which the Company will manufacture
laminate-based substrates for chip carrier products. In connection with this
agreement, the Company purchased certain assets, including manufacturing
equipment, and licensed process know-how from Amkor. The Company anticipates
that volume shipments under the supply agreement with Amkor will commence in
fiscal year 1998.
In connection with the Company's acquisition of the Loveland operation (See Note
3 of the Notes to Financial Statements in Item 8 of this Report) from HP in
fiscal year 1996, the Company entered into a two-year supply agreement, which
expires on October 31, 1997, under which HP agreed to purchase, at market
prices, at least $35 million of products in the first year and at least $25
million in the second year.
Immediately prior to consummation of the Acquisition, Tektronix, through
participating divisions and subsidiaries, entered into seven separate three-year
supply agreements with the Company under which they agreed to purchase annually
from the Company at least the lesser of 90% of their aggregate requirements for
printed circuit boards, flexible circuits and related tooling and test fixtures
or $28.5 million worth of the Company's products. These supply agreements with
Tektronix expired on May 31, 1997 and have not been renewed. The Company is
continuing to manufacture products for Tektronix, but there can be no assurance
that Tektronix will continue to purchase products from the Company at historic
levels.
Manufacturing and Engineering
Product Profiles
The Company's principal products are high density, multilayer printed circuits
manufactured with materials ranging from standard fiberglass to high performance
materials. The Company has also produced a small amount of flexible circuits,
but has recently decided to exit the flexible circuit market. The Company
recently entered the market for laminate-based chip carriers that are used to
connect ICs to printed circuits. The Company's products and their applications
are described below.
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Rigid Epoxy Substrate Circuits. This product group consists of epoxy/glass
laminate circuit boards used in virtually all segments of the electronics
industry and is manufactured at the Forest Grove and Loveland facilities. The
Company also manufactures rigid-flex circuits which are a hybrid of the rigid
and flexible circuits. Such boards combine performance characteristics of rigid
circuits with the spatial advantages of flexible circuits. For fiscal years 1997
and 1996, rigid circuits represented approximately 75% and 73%, respectively, of
the Company's net sales.
High Performance Circuits. High performance circuits are used in electronic
products requiring high speed and high frequency interconnect solutions, such as
cellular phone base stations and other communications, computing and
instrumentation products and are manufactured at the Forest Grove and Soladyne
facilities. High performance circuits are manufactured using specialty materials
with properties that address the need for faster speeds, higher operating
temperatures and higher frequencies. The Company has developed the expertise and
specialized engineering processes required to manufacture high performance
circuits using a broad range of materials, including Teflon(R), Duroid(R),
Cyanate Ester and GETEK(R). For fiscal years 1997 and 1996, high performance
circuits represented approximately 23% and 24%, respectively, of the Company's
net sales.
Chip Carrier Products. Chip carriers are very small circuits (typically less
than two square inches) that are used to attach ICs to printed circuits. For
certain end product applications, laminate-based chip carriers are a preferred
alternative to conventional ceramic carriers. In December 1996, the Company
entered into a four year supply agreement to manufacture chip carriers for
Amkor. Under the agreement, the Company will be Amkor's primary North American
supplier of substrates for laminate-based enhanced ball grid array (BGA) chip
carriers, provided the Company meets the rigorous qualification and other
requirements of Amkor and Amkor's customers. Although the Company believes it is
well positioned to capitalize on the emerging chip carrier market, there is no
assurance that the Company will be successful in entering and competing in this
new market.
Flexible Circuits. Flexible circuits are thin, lightweight circuits used to
interconnect other circuit boards and electronic devices within electronic
equipment, and are used in high speed computers and other electronic equipment
as replacements to cables, wiring and other interconnect devices to improve
product reliability and performance. Flexible circuits, which represented
approximately 2% and 3% of the Company's net sales in fiscal years 1997 and
1996, respectively, are manufactured at the Company's Forest Grove facility. The
Company intends to exit the flexible and rigid-flex circuit markets in order to
focus its resources on rigid and high performance printed circuits and chip
carrier products. Sales of flexible circuit products are expected to be phased
out during the first quarter of fiscal year 1998.
Manufacturing Processes
The manufacture of complex multilayer printed circuits involves the use of a
variety of sophisticated production processes and equipment. In general, the
Company receives circuit designs directly from its customers in the form of
computer aided design files that it reviews to ensure manufacturability. Using
these computer files, the Company generates images of the circuit patterns that
it develops on individual layers using advanced photographic processes. Through
a variety of plating and etching processes, the Company adds and removes
conductive and insulating materials. Separate layers are combined, or laminated
together, using intense heat and pressure under vacuum. Connections between
layers are achieved by plating through small holes called vias. Vias are made by
highly specialized equipment capable of achieving extremely fine tolerances with
high accuracy.
The formation of very small holes (microvias) permits the Company's customers to
increase circuit densities and reduce overall circuit board size to meet their
design requirements. Because mechanical drill bits below a certain size break
during the drilling process, microvia formation requires new manufacturing
processes. In December 1995, the Company entered into a sub-license agreement
with HP's Printed Circuit Organization under which the Company obtained the
rights to use the DYCOstrate(R) interconnect substrate technology (DYCOstrate).
DYCOstrate is a trademark of Dyconex Patente AG, a Swiss company. The Company is
currently using both DYCOstrate and Plasma Etched Redistribution Layer (PERL)
technologies to manufacture microvias as small as .004 inches. These
technologies utilize plasma
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(excited gases) to etch microvias. As an alternative to plasma etching, the
Company is currently evaluating the use of laser drilling equipment for the
formation of microvias.
The Company specializes in products with extremely fine geometries and
tolerances. Because of the tolerances involved, the Company uses clean rooms in
certain manufacturing processes where tiny particles can create defects on the
circuit patterns, and uses automated optical inspection (AOI) to ensure
consistent quality.
The manufacturing of chip carriers shares some of the same equipment and
processes as printed circuits, but also requires the use of certain other
specialized equipment used only in the manufacture of chip carriers. For
example, after the Company manufactures a panel with dozens of chip carriers, it
uses specialized singulation equipment and processes to cut the panel into
individual or strips of carriers.
The Company embraces Total Quality Management to meet the highest industry
standards for product quality. The Company has remained ISO 9001 certified since
1992, when it was the first independent circuit board operation in the United
States to be certified to this level of international quality standards. In May
1996, the Company's Forest Grove facility received the Shingo Prize for
Manufacturing Excellence. The Shingo Prize is awarded annually by the National
Association of Manufacturers to recognize North American domestic manufacturing
companies that demonstrate excellence in manufacturing leading to quality
enhancement, productivity improvement, and customer satisfaction.
The Company operates on a twenty-four hour, five or six day manufacturing work
week schedule, with non-scheduled days reserved for maintenance.
Supplier Relationships
Historically, the majority of raw materials used in the manufacture of the
Company's products have been readily available. However, as product changes
increase the industry's use of new laminate materials, the potential for
shortages in the supply of these materials increases. To date, material
shortages or price fluctuations have not had a materially adverse effect on the
Company.
In order to reduce lead times and inventory carrying costs, to enhance the
quality and reliability of the supply of raw materials and to reduce
transportation and other logistics costs, the Company has entered into strategic
relationships with certain of its suppliers of laminates, raw materials and
services. Matsushita Electronics Materials, a key laminate supplier, operates an
82,000 square foot factory adjacent to the Company's Forest Grove facility to
produce laminates previously imported by the Company from Japan. Insulectro, a
supplier of raw materials and services, operates a warehouse distribution center
adjacent to the Company's Forest Grove facility. In addition, Probe Test
Fixtures, Inc. provides on-site electrical test services to Company's Forest
Grove facility.
The Company strives to develop and maintain good working relationships with its
key suppliers to enhance operation of the business. Supplier management programs
drive improvements and working relationships between the parties. These programs
include, but are not limited to, quarterly review meetings, joint product and
process development, and participation in an annual technology needs assessment
meeting with the Company's key and strategic customers.
Environmental Controls
Electronic interconnect product manufacturing requires the use of a variety of
materials, including metals and chemicals. As a result, the Company is subject
to environmental laws relating to the storage, use and disposal of chemicals,
solid waste, and other hazardous materials, as well as air quality regulations.
Water used in the manufacturing process must be treated to remove metal
particles and other contaminates before it can be discharged into the municipal
sanitary sewer system. The Company operates and maintains effluent water
treatment systems and utilizes approved laboratory testing procedures at each of
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its manufacturing facilities under effluent discharge permits issued by a number
of governmental authorities. These permits must be renewed periodically and are
subject to revocation in the event of violations of environmental laws. The
Company believes that its waste treatment complies with all current
environmental protection requirements in all material respects. However, there
can be no assurance that violations will not occur in the future. Further, to
the extent that environmental laws change, environmental expenditures could
increase.
Certain waste products generated by the Company's manufacturing facilities
require further treatment or controlled disposal. In connection with the
Acquisition, the Company entered into an agreement with Tektronix to provide
tanker and containerized waste handling, storage, treatment and disposal
arrangement services for the Forest Grove facility in accordance with applicable
environmental regulations for the three year period ended May 31, 1997. The
Company and Tektronix extended the agreement with certain revisions which
eliminate disposal arrangement services and reduce waste treatment services. The
Forest Grove facility's waste materials not treated by Tektronix, and those from
the Loveland and Soladyne facilities, are sent to approved third parties for
recycling, reclaim, treatment or disposal.
The Company is a recognized leader in the professional management of industrial
chemicals, waste treatment and recycling. The Company's commitment to
responsible management of hazardous chemicals has resulted in eliminating from
use in manufacturing many hazardous chemicals common to the Company's industry
such as ozone depleting substances, chromium, trichloroethylene and
perchloroethylene.
Backlog
The Company's 90 day backlog was approximately $26.4 million at the end of
fiscal year 1997 and $19.9 million at the end of fiscal year 1996. Backlog at
the end of fiscal year 1997 included $6.8 million of orders with delivery dates
beyond lead time which have not been previously included in the Company's
backlog calculation. Backlog at the end of fiscal year 1996 has not been
restated to include these orders. A substantial portion of the Company's backlog
is typically scheduled for delivery within 60 days. A certain portion of the
Company's backlog is subject to cancellation or postponement without significant
penalty. Accordingly, the Company's backlog is not necessarily indicative of
future sales or earnings. Cancellation and postponement charges generally vary
depending upon the time of cancellation or postponement.
Competition
Competitive factors in the market for printed circuits include product quality,
technological capability, responsiveness to customers in delivery and service,
and price. The Company believes that competition in the printed circuit market
segments served by the Company is based more on product quality, technical
capability and delivery than on price. The Company believes its primary
competitive strengths are its ability to provide a wide array of interconnect
products at a high quality within a shorter lead time, engineering and
manufacturing expertise, and customer service and support.
The printed circuit industry in the United States is highly fragmented. An
industry source estimates the number of companies producing circuit boards in
the United States is between 750 and 800 companies. According to an industry
source, the top 10 merchant suppliers accounted for approximately 23% of total
circuit board sales by independent suppliers in 1996. Increasing technology
demands and resulting demands for capital investment are expected to continue to
contribute to a growing trend toward consolidation of independent producers. The
Company also faces potential competition from captive printed circuit
manufacturers, many of which have substantial resources and production
capabilities, who may seek orders in the open market to fill excess capacity,
thereby increasing competition.
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Patents and Other Intellectual Property
The Company's success depends in part on proprietary technology and
manufacturing expertise. While the Company attempts to protect its proprietary
technology through patents, copyrights and trade secrets, it believes that its
success will depend more upon further innovation and technological advances.
Companies in the electronics industry from time to time receive letters from
third parties alleging infringement of patent rights. The Company has received
no such letters; however, Tektronix, prior to the Acquisition, received a notice
of infringement from Jerome H. Lemelson, alleging infringement of several of Mr.
Lemelson's "barcode reader," "machine vision," "video imaging," "beam
processing" and certain other patent claims. Mr. Lemelson contends that any
modern manufacturing facility such as that operated by the Company must
necessarily infringe on at least some of the asserted patent claims at some time
during the course of product design, fabrication, or testing. In connection with
the Acquisition, Tektronix agreed to assume any liabilities, in excess of any
manufacturer's indemnity, relating to the claim made by Mr. Lemelson for
products of the Company shipped to customers prior to the consummation of the
Acquisition. Tektronix and Mr. Lemelson have announced that Tektronix has
entered into an agreement with Mr. Lemelson to license certain of Mr. Lemelson's
patents. Should Mr. Lemelson assert a claim against the Company and be able to
identify processes or products of the Company for which a license is legally
required, although there can be no assurance, the Company expects Mr. Lemelson
to license the patented technology to the Company under terms that would not
have a material financial impact.
Executive Officers
The following table sets forth certain information with respect to the executive
officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Deborah A. Coleman 44 Chair, Chief Executive Officer and President
Joseph H. Howell 45 Senior Vice President and Chief Financial
Officer
Joseph Reichbach 52 Senior Vice President - Sales and Marketing
Terri L. Timberman 39 Vice President - Human Resources and Quality
Samuel R. DeSimone, Jr. 37 Vice President - Corporate Development and
Secretary
Mark H. Hynes 39 Vice President - Site Operations
Charles William Payne 59 Vice President - Engineering and Chief
Technology Officer
</TABLE>
Deborah A. Coleman serves as Chair of the Board of Directors, Chief Executive
Officer and President of the Company. From November 1992 to the inception of the
Company, Ms. Coleman served as Vice President, Materials Operations of
Tektronix, where she led worldwide procurement, distribution, component
engineering and component manufacturing operations. Prior to joining Tektronix,
Ms. Coleman held various positions at Apple Computer, Inc. for 11 years,
including Chief Financial Officer, Vice President Information Systems &
Technology, and Vice President of Operations. Ms Coleman serves on the Board of
Directors of Applied Materials, Inc., Octel Communications Corporation and
Synopsys, Inc.
Joseph H. Howell serves as Senior Vice President and Chief Financial Officer of
the Company. From 1988 until joining the Company in January 1995, Mr. Howell
served as Controller of Borland International, Inc., where he was appointed Vice
President in 1991 and acting Chief Financial Officer in 1994.
Joseph Reichbach serves as Senior Vice President - Sales and Marketing of the
Company. From 1989 until joining the Company in February 1997, Mr. Reichbach
served as Vice President of Sales for North America for Analog Devices, Inc.
Terri L. Timberman serves as Vice President - Human Resources and Quality of the
Company. Ms. Timberman joined the Circuit Board Division in February 1994. From
1992 until joining the Company, Ms. Timberman served in various human resource
management positions for Tektronix. Prior to 1992, Ms. Timberman served as
Director of Human Resources for TriQuint Semiconductor, Inc.
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Samuel R. DeSimone, Jr. serves as Vice President - Corporate Development and
Secretary. From 1990 until joining the Company in September 1995, Mr. DeSimone
was a partner at the law firm of Lane Powell Spears Lubersky in Portland,
Oregon. Prior to 1990, Mr. DeSimone worked for the law firm of Testa, Hurwitz &
Thibeault in Boston, Massachusetts.
Mark H. Hynes serves as Vice President - Site Operations. From 1990 until
joining the Company in November 1995, Mr. Hynes served as the Operations Manager
of the Loveland Circuit Board Facility of Hewlett-Packard Company. Prior to
1990, Mr. Hynes served as Engineering Manager of that facility.
Charles William Payne serves as Vice President - Engineering and Chief
Technology Officer of the Company. Mr. Payne joined the Company in 1991 and
served as an engineering manager and then Director of Engineering until May 1995
when he became Vice President - Engineering and Chief Technology Officer. Prior
to 1991, Mr. Payne served as Executive Manager of the Printed Circuit Facility
of Intergraph Corporation.
Employees
As of May 31, 1997 the Company had a total of 1,572 employees, of which 1,348
were regular employees and 224 were temporary agency employees. None of the
Company's employees are represented by a labor union. The Company has never
experienced an employee-related work stoppage. The average length of service for
the Company's regular employees is approximately 10 years. The Company believes
its relationship with its employees is good. The Company also believes that the
continued hiring and retention of engineers and management personnel is integral
to the success of the Company.
ITEM 2. PROPERTIES.
The Company owns a 73-acre industrial land site located in Forest Grove, Oregon
on which a 174,000-square-foot manufacturing facility, a 6,300-square-foot waste
treatment facility and a new 62,500-square- foot administration and training
facility are located. Pursuant to a trust deed granted by the Company to
Tektronix, such site is subject to a mortgage securing the Company's obligation
to repay $10 million pursuant to a note payable to Tektronix in connection with
the Acquisition. See Note 1 of Notes to Financial Statements in Item 8.
Additionally, during the fourth quarter of fiscal year 1995, the Company
acquired a vacant 37,500-square-foot building approximately one mile from the
Forest Grove manufacturing facility. This building was retrofitted to provide
interim office space pending the completion of the new administration and
training facility. During the third quarter of fiscal year 1997, approximately
15,000 square feet of this building was converted to provide additional
manufacturing capacity.
In connection with the acquisition of the Loveland operation in October 1995,
the Company entered into a five year lease with HP for 120,000 square feet of
manufacturing space housing the acquired operations. In connection with the
acquisition of the Soladyne operation from Rogers Corporation in December 1995,
the Company assumed a lease for the 37,000-square-foot manufacturing facility
housing the acquired operations. The lease has four years remaining. See Note 14
of the Notes to Financial Statements in Item 8.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the security holders during the fourth
quarter of the fiscal year covered by this Report.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the Nasdaq National Market System under
the symbol MERX. The range of the high and low prices for the Company's Common
Stock as reported on the Nasdaq National Market System for the eight most recent
fiscal quarters was as follows:
High Low
Fiscal year 1997:
Quarter 4 $ 18.88 $ 13.00
Quarter 3 20.13 15.25
Quarter 2 22.38 13.75
Quarter 1 31.50 16.25
Fiscal year 1996:
Quarter 4 $ 39.13 $ 30.25
Quarter 3 38.00 27.00
Quarter 2 38.75 29.00
Quarter 1 34.75 23.50
As of July 11, 1997 there were 146 shareholders of record and approximately
4,700 beneficial shareholders.
The Company has never declared any cash dividends. The Company currently intends
to retain all future earnings, if any, for use in the Company's business and,
accordingly, does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
Financial information for fiscal years 1994 and 1993 relates to the Circuit
Board Division of Tektronix, and is not necessarily indicative of the results
that would have occurred had the Division operated as a separate entity for the
fiscal years presented.
<TABLE>
<CAPTION>
1997 1996 1995 1994(2) 1993(2)
---- ---- ---- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales $156,184 $155,634 $101,448 $78,442 $70,340
Net income 321 12,793 10,564 6,791 5,146
Primary earnings per share (1) $0.05 $1.98 $1.67 $1.12 $ .85
Balance Sheet Data:
Working capital $45,586 $34,841 $34,201 $28,215 $ 4,213
Total assets 130,449 111,170 69,597 52,254 24,487
Long-term debt 42,390 26,670 6,427 8,073 240
Shareholders' equity $67,416 $66,353 $52,319 $38,093 $16,271
(1) Primary earnings per share for fiscal years 1994 and 1993 are pro forma
based on the initial 6,055 shares outstanding following the Acquisition.
(2) See Note 1 of the Notes to Financial Statements in Item 8 of this
Report.
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Acquisitions (In thousands)
On October 31, 1995, the Company acquired certain assets of Hewlett-Packard
Company's (HP) Loveland, Colorado printed circuit board manufacturing facility
for a total purchase price of approximately $26,868. See Note 3 of the Notes to
Financial Statements in Item 8 of this Report. Of the purchase price paid in
cash, $20 million was borrowed on the Company's unsecured bank line of credit,
which was subsequently repaid from the proceeds of the Company's $40 million
private placement of senior unsecured notes in September 1996. See Note 7 of the
Notes to Financial Statements in Item 8 of this Report. The Company's primary
purpose in acquiring this operation was to add manufacturing capacity and create
a second manufacturing operation for products produced for its current
customers. In connection with this transaction, the Company and HP entered into
a two year supply agreement under which HP agreed to purchase, at market prices,
at least $35 million of product in the first year and at least $25 million in
the second year.
On December 31, 1995, the Company acquired certain assets, consisting
principally of inventory and manufacturing equipment, of the Soladyne printed
circuit fabrication operation from Rogers Corporation. Soladyne is located in
San Diego, California, and Rogers is one of the Company's suppliers of high
performance material. The purchase price was not material to the financial
position of the Company.
The acquisitions were accounted for as purchase transactions and, accordingly,
the results of the Loveland and Soladyne operations are included in the
financial statements since the effective dates of the transactions.
In December 1996, the Company entered into a four year supply agreement with
Amkor Electronics, Inc. (Amkor) under which the Company will manufacture
laminate-based substrates for chip carrier products. In connection with this
agreement, the Company purchased certain assets, including manufacturing
equipment, and licensed process know-how from Amkor. The Company anticipates
that volume shipments under the supply agreement with Amkor will commence in
fiscal year 1998.
10
<PAGE>
Results of Operations (In thousands)
Results of operations information in dollars and as a percentage of net sales
are as follows:
<TABLE>
<CAPTION>
Percentage of Net Sales
-------------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net sales $156,184 $155,634 $101,448 100.0% 100.0% 100.0%
Cost of sales 134,328 118,234 72,380 86.0% 76.0% 71.3%
-------- -------- -------- ------ ------ ------
Gross profit 21,856 37,400 29,068 14.0% 24.0% 28.7%
Operating expenses:
Engineering 6,013 5,019 3,523 3.9% 3.2% 3.5%
Selling, general and
administrative 13,822 11,399 8,726 8.8% 7.3% 8.6%
-------- -------- -------- ------ ------ ------
Total operating expenses 19,835 16,418 12,249 12.7% 10.5% 12.1%
-------- -------- -------- ------ ------ ------
Operating income 2,021 20,982 16,819 1.3% 13.4% 16.6%
Interest income 1,380 950 1,005 0.9% 0.6% 1.0%
Interest expense 3,247 1,333 721 2.1% 0.8% 0.7%
Other income (expense), net 137 (260) (65) 0.1% (0.2)% (0.1)%
-------- -------- -------- ------ ------ ------
Income before taxes 291 20,339 17,038 0.2% 13.0% 16.8%
Income tax (expense) benefit 30 (7,546) (6,474) - (4.8)% (6.4)%
-------- -------- -------- ------ ------ ------
Net income $ 321 $ 12,793 $ 10,564 0.2% 8.2% 10.4%
======== ======== ======== ====== ====== ======
</TABLE>
Sales by product lines, market segments and largest customers in dollars and as
a percent of net sales are as follows:
<TABLE>
<CAPTION>
Percentage of Net Sales
-------------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Product Lines
Rigid $117,395 $114,530 $ 73,144 75.2% 73.6% 72.1%
High Performance 36,407 36,750 25,571 23.3% 23.6% 25.2%
Flexible -------- -------- -------- ------ ------ ------
2,382 4,354 2,733 1.5% 2.8% 2.7%
-------- -------- -------- ------ ------ ------
Total $156,184 $155,634 $101,448 100.0% 100.0% 100.0%
======== ======== ======== ====== ====== ======
Market Segments
Computers $ 42,998 $ 33,206 $ 19,261 27.5% 21.3% 19.0%
Communications 32,406 43,798 40,058 20.7% 28.2% 39.5%
Test and Instruments 54,263 55,828 35,103 34.8% 35.9% 34.6%
Contract Manufacturing 23,134 20,606 6,793 14.8% 13.2% 6.7%
Other -------- -------- -------- ------ ------ ------
3,383 2,196 233 2.2% 1.4% 0.2%
-------- -------- -------- ------ ------ ------
Total $156,184 $155,634 $101,448 100.0% 100.0% 100.0%
======== ======== ======== ====== ====== ======
Largest Customers
Hewlett-Packard Company $ 39,693 $ 29,100 $ - 25.4% 18.7% -
Tektronix, Inc. 28,766 32,010 31,577 18.4% 20.6% 31.1%
Motorola, Inc. 20,321 30,427 23,170 13.0% 19.5% 22.8%
Teradyne, Inc. 13,885 16,389 11,497 8.9% 10.5% 11.4%
Storage Technology Corp. 12,341 9,491 9,899 7.9% 6.1% 9.8%
Other 41,178 38,217 25,305 26.4% 24.6% 24.9%
-------- -------- -------- ------ ------ ------
Total $156,184 $155,634 $101,448 100.0% 100.0% 100.0%
======== ======== ======== ====== ====== ======
</TABLE>
11
<PAGE>
The Company's five largest customers comprised 73.6%, 75.4% and 75.1% of net
sales for fiscal years 1997, 1996 and 1995, respectively. One of the Company's
principal short-term objectives is to diversify its customer base in order to
grow sales and reduce the risks associated with a concentration of sales to a
relatively small number of customers. The Company is taking actions to increase
sales by broadening its customer base, and expects that a small number of
customers will continue to account for a substantial majority of its sales until
efforts to broaden its customer base are successful. There can be no assurance
that the Company's principal customers will continue to purchase products and
services from the Company at current levels, that the mix or volume of products
purchased will be in the same ratio or that actions to broaden its customer base
and increase sales to new and existing customers will be successful. The loss of
one or more principal customers, or a change in the mix of product sales, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Comparison of Fiscal Years 1997 and 1996 (In thousands)
Fiscal Year. The Company's fiscal year is the 52 or 53-week period ending the
last Saturday in May. Fiscal year 1997 was a 53-week year and fiscal years 1996
and 1995 were 52-week years.
Net Sales. The Company is engaged in the single business segment of producing
custom, complex, technologically advanced electronic interconnect products to
customer specifications. The Company classifies its printed circuits,
principally based on the type of production materials used, as rigid, high
performance and flexible printed circuit boards. There were no production sales
of chip carrier products during fiscal year 1997.
Net sales for fiscal year 1997 of $156,184 were relatively flat with net sales
of $155,634 in fiscal 1996, due principally to a decrease in sales to certain of
the Company's significant customers, largely offset by an increase in sales to
HP resulting from a full year of operations at the Loveland site (see above
table). Sales to Motorola, Inc. (Motorola) decreased due to a transition to a
new generation of its cellular base station products. Motorola is consuming its
existing inventory of these older products, which have been a significant part
of the Company's sales to Motorola. The Company has begun production of the next
generation of Motorola's products, but expects that future sales of these
products will have lower margins. Sales to Teradyne, Inc. (Teradyne) decreased
in fiscal 1997 due to a decline in Teradyne's sales to its customers as a result
of a softening in the semiconductor industry earlier in the year.
In addition, the Company experienced overall changes in product mix, which
caused average selling prices to decline from the prior year.
Gross Margins. The Company's gross margin was 14.0% in fiscal year 1997,
compared with 24.0% in fiscal year 1996. The Company's gross margin can be
affected by various factors, including sales volumes, product mix, production
yields, price changes and changes in the Company's cost structure. High
performance products are generally more complex and carry higher margins than
the Company's rigid products. Gross margins in fiscal year 1997 declined
principally due to flat sales combined with a higher level of fixed costs. A
significant portion of the Company's manufacturing costs are relatively fixed,
and these costs were higher in fiscal year 1997 principally as a result of the
acquisitions of the Loveland and Soladyne sites in the middle of fiscal year
1996.
The level and mix of sales were the major factors in determining the Company's
1997 gross margin. The product mix in fiscal year 1997 included a greater
proportion of lower priced, lower margin products than in fiscal year 1996. The
Company is working to increase the level of sales and to enhance its product mix
by targeting higher complexity products which have higher gross margins in order
to improve profitability. However, there can be no assurance that these efforts
will be successful or result in an increase in gross margins.
Engineering. Engineering expenses were $6,013 and $5,019 in fiscal years 1997
and 1996, respectively, and were 3.9% and 3.2% of net sales, respectively, each
year. Engineering expenses have increased due to additional engineering staff as
a result of the acquisitions of the Loveland and Soladyne operations in fiscal
year 1996.
12
<PAGE>
Selling, General and Administrative. Selling, general and administrative
expenses were $13,822 and $11,399 in fiscal years 1997 and 1996, respectively,
and were 8.8% and 7.3% of net sales, respectively. The increase over the prior
year was due principally to costs associated with increased selling efforts. The
Company is continuing to invest in expanded selling activity, including the
restructuring and relocation of its sales force. However, there can be no
assurance these efforts will result in increased sales or profits.
Interest Income. The increase in interest income from the prior year is due
principally to higher balances of cash and investments for a majority of the
year, primarily as a result of the proceeds from $40,000 of senior notes issued
in September 1996.
Interest Expense. Interest expense was $3,247 and $1,333 in fiscal years 1997
and 1996, respectively. The increase from the prior year is due to the issuance
of $40,000 in senior notes in September 1996.
Income Taxes. The Company's effective tax rate of (10)% in fiscal year 1997 is
lower than the effective tax rate of 37% in 1996, due to lower pretax income in
fiscal year 1997 and higher tax exempt interest income in relation to pretax
income. The Company expects its effective tax rate to be approximately 38% in
fiscal year 1998.
Comparison of Fiscal Years 1996 and 1995 (In thousands)
Net Sales. Net sales for fiscal year 1996 were $155,634 representing a 53.4%
increase over prior year net sales of $101,448. The overall increase in net
sales resulted principally from the acquisition of the Loveland and Soladyne
operations, from increased sales of high performance products which increased by
$11,179, or 44% as compared to sales of high performance products in 1995, and
from capacity and productivity increases to meet customer demand at the Forest
Grove facility.
Gross Margins. The Company's gross margin was 24.0% in fiscal year 1996,
compared with 28.7% in the prior year. The Company's product mix in fiscal year
1996 included a higher percentage of rigid product due to the acquisition of the
Loveland operation which produces exclusively rigid product. Gross margins
decreased in fiscal year 1996 principally as a result of product mix, including
the effect of the Loveland operation, and an increase in sales of products that
include component subassembly.
Engineering. Engineering expenses were $5,019 and $3,523 in fiscal years 1996
and 1995, respectively, and were 3.2% and 3.5% of net sales, respectively, each
year. Engineering expenses have increased due to additional engineering staff as
a result of the acquisitions of the Loveland and Soladyne operations.
Selling, General and Administrative. Selling, general and administrative
expenses were $11,399 and $8,726 in fiscal years 1996 and 1995, respectively,
and were 7.3% and 8.6% of net sales, respectively. Selling, general and
administrative expenses as a percent of sales decreased due to the relatively
fixed nature of certain general and administrative expenses. These expenses
increased primarily to support growth and a multi-site environment.
Interest Expense. Interest expense increased in fiscal year 1996 from the prior
year due to the interest resulting from the $20 million bank borrowing used to
fund the acquisition of the Loveland operation.
Income Taxes. The Company's effective tax rate of 37% in fiscal year 1996 is
lower than the effective tax rate of 38% in 1995, principally due to the State
of Oregon reducing the current year corporate income tax rate as a method of
refunding excess income taxes collected in prior years. The effect of the
reduction was to increase net income for the fiscal year by $204.
13
<PAGE>
Liquidity and Capital Resources (In thousands)
Cash and short-term investments at May 31, 1997 were $25,097, compared to
$19,358 at May 25, 1996. Working capital was $45,586 at May 31, 1997 compared to
$34,841 at May 25, 1996.
In fiscal year 1997, the Company generated cash from operations of $7,371 and
cash from financing activities of $15,715, and used cash of $18,740 in investing
activities. During fiscal year 1997, $13,717 of the Company's investments
matured and $15,110 of short-term investments, consisting of taxable and
municipal debt securities, were purchased. The Company's policy is to hold such
short-term investments to maturity.
During fiscal year 1997, the Company had capital expenditures of $17,769,
including $1,502 for the expansion of manufacturing facilities and completion of
the Company's new administration and training building in Forest Grove, and
$16,267 for purchases of machinery and equipment. The Company had capital
commitments of approximately $6.4 million at May 31, 1997, related to expansion
of manufacturing capacity.
On September 10, 1996, the Company completed a $40 million private placement of
senior unsecured notes with two insurance companies. The notes bear interest at
7.92%, payable on a semi-annual basis, with payment of principal in five equal
annual installments commencing on September 15, 1999. Proceeds from the notes
were used to pay off $20 million outstanding under the Company's bank line of
credit and will be used to fund capital equipment purchases, capacity expansion
and possible acquisitions.
The Company has an unsecured $30 million bank line of credit against which it
had no borrowings at May 31, 1997. Borrowings under this line of credit would
bear interest at the agent's prime or alternative LIBOR based rates available at
the time of borrowing rate (7.65% at May 31, 1997). The instrument matures on
September 30, 1998.
The senior unsecured notes and the line of credit include certain financial
covenants (such as minimum net worth, debt ratio, quick ratio and interest
coverage requirements) and cross-default provisions. As of May 31, 1997, the
Company was in compliance with all covenants.
The Company's future needs for financial resources include amounts to support
investments for expansion of manufacturing capacity. The Company believes that
its existing capital resources, including the proceeds from the $40 million
private placement of debt and bank line of credit, and cash generated from
operations will be sufficient to meet its working capital and capital
expenditure requirements through fiscal year 1998.
14
<PAGE>
Forward-Looking Information
Information contained in this Form 10-K regarding fiscal year 1998 and in the
1997 Annual Report to Shareholders regarding goals and expectations of the
Company, including: anticipated customer demand, product shipments, sales and
profitability; gross margins; estimated effective tax rate for fiscal year 1998;
and Company goals with respect to revenue growth, customer diversification,
changes in product mix, technology leadership, technology licenses, human
resources and supply chain integration constitute forward-looking statements.
Information contained in forward-looking statements is based on current
expectations and is subject to change and may differ materially from actual
results. From time to time, information provided by the Company or statements
made by its employees may contain other forward-looking information that
involves a number of risks and uncertainties. Factors that could cause actual
results to differ materially from the forward-looking information include, but
are not limited to, the matters discussed in this Form 10-K as well as the
following: customer demand, ability to attract new customers, business
conditions and growth in the general economy and the interconnect industry;
production delays; product mix; the highly competitive interconnect environment;
cancellation or reduction of orders; effective utilization of existing and new
manufacturing resources; customer acceptance of new technologies; environmental
issues; pricing pressures by key customers; costs and yield issues associated
with production; capacity constraints; availability of parts and supplies from
third parties on a timely basis and at reasonable prices; ability to execute
financing strategies; and other risks listed from time to time in the Company's
Securities and Exchange Commission reports or otherwise disclosed by the
Company. Any forward-looking statements should be considered in light of these
factors.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MERIX CORPORATION
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Merix Corporation:
We have audited the accompanying balance sheets of Merix Corporation as of May
31, 1997 and May 25, 1996 and the related statements of income, shareholders'
equity, and cash flows for the years ended May 31, 1997, May 25, 1996, and May
27, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Merix Corporation as of May 31, 1997 and May
25, 1996, and the results of its operations and its cash flows for the years
ended May 31, 1997, May 25, 1996, and May 27, 1995 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Portland, Oregon
June 20, 1997
16
<PAGE>
<TABLE>
<CAPTION>
MERIX CORPORATION
BALANCE SHEETS
(In thousands)
May 31
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 2) $ 16,537 $ 12,191
Short-term investments (Notes 2 and 4) 8,560 7,167
Accounts receivable, net of allowance of $322 21,066 21,401
and $78, respectively (Note 4)
Accounts receivable - affiliates (Note 13) 3,091 3,138
Inventories (Notes 2 and 5) 8,642 6,435
Income tax refund receivable (Note 10) 2,308 -
Deferred tax asset (Note 10) 1,410 794
Other current assets 1,817 589
-------------- --------------
Total current assets 63,431 51,715
Property, plant and equipment, net (Notes 2 and 6) 63,398 55,576
Deferred tax asset (Note 10) - 1,489
Goodwill, net of accumulated amortization of $265 and $96
(Notes 2 and 3) 2,292 2,390
Other assets 1,328 -
-------------- --------------
Total assets $ 130,449 $ 111,170
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,011 $ 7,456
Accrued compensation 3,084 4,502
Current portion of long-term debt (Note 7) 2,260 1,931
Income taxes payable (Note 10) - 67
Other accrued liabilities 2,490 2,918
-------------- --------------
Total current liabilities 17,845 16,874
Long-term debt (Note 7) 42,390 26,670
Deferred tax liability (Note 10) 1,525 -
Other liabilities 1,273 1,273
-------------- --------------
Total liabilities 63,033 44,817
-------------- --------------
Commitments and contingencies (Note 14) - -
Shareholders' equity (Notes 8 and 9):
Preferred stock, no par value; authorized 10,000 shares;
none issued - -
Common stock, no par value; authorized 50,000 shares; issued
and outstanding 1997: 6,167 shares, 1996: 6,133 44,360 43,733
shares
Unearned compensation (622) (737)
Retained earnings 23,678 23,357
-------------- --------------
Total shareholders' equity 67,416 66,353
============== ==============
Total liabilities and shareholders' equity $ 130,449 $ 111,170
============== ==============
See the accompanying Notes to Financial Statements.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
MERIX CORPORATION
STATEMENTS OF INCOME
(In thousands, except per share data)
Years ended May 31
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Net sales (Notes 2, 12 and 13) $ 156,184 $ 155,634 $ 101,448
Cost of sales 134,328 118,234 72,380
------------- ------------- -------------
Gross profit 21,856 37,400 29,068
------------- ------------- -------------
Operating expenses:
Engineering 6,013 5,019 3,523
Selling, general and administrative 13,822 11,399 8,726
------------- ------------- -------------
Total operating expenses 19,835 16,418 12,249
------------- ------------- -------------
Operating income 2,021 20,982 16,819
Interest income 1,380 950 1,005
Interest expense 3,247 1,333 721
Other income (expense), net 137 (260) (65)
------------- -------------- -------------
Income before taxes 291 20,339 17,038
Income tax (expense) benefit (Note 10) 30 (7,546) (6,474)
------------- ------------- -------------
Net income $ 321 $ 12,793 $ 10,564
============= ============= =============
Earnings per share $0.05 $ 1.98 $ 1.67
============= ============= =============
Weighted average shares of common stock and common
stock equivalents outstanding 6,260 6,449 6,340
============= ============= =============
See the accompanying Notes to Financial Statements.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
MERIX CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Common Stock Unearned Retained
Shares Amount Compensation Earnings Total
--------- ---------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at June 1, 1994 after the
reorganization of entities under
common control (Note 1) 6,055 $38,588 $ (495) $38,093
Net income $10,564 10,564
Purchase price adjustment (Note 10) 3,279 3,279
Exercise of stock options 10 90 90
Tax benefit related to stock-based
compensation 72 72
Restricted stock awards 10 233 (233) -
Amortization of unearned
compensation 221 221
--------- ---------- --------------- -------------- ------------
Balance at May 31, 1995 6,075 42,262 (507) 10,564 52,319
Net income 12,793 12,793
Exercise of stock options 40 429 429
Tax benefit related to stock-based
compensation 445 445
Restricted stock awards 18 597 (597) -
Amortization of unearned
compensation 367 367
--------- ---------- --------------- -------------- ------------
Balance at May 31, 1996 6,133 43,733 (737) 23,357 66,353
Net income 321 321
Exercise of stock options 35 316 316
Tax benefit related to stock-based
compensation 261 261
Restricted stock awards 19 364 (364) -
Amortization of unearned
compensation 434 434
Shares surrendered/canceled (20) (314) 45 (269)
--------- ---------- --------------- -------------- ------------
Balance at May 31, 1997 6,167 $44,360 $ (622) $23,678 $67,416
========= ========== =============== ============== ============
See the accompanying Notes to Financial Statements.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
MERIX CORPORATION
STATEMENTS OF CASH FLOWS
(In thousands)
Years ended May 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 321 $ 12,793 $ 10,564
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,762 5,643 2,930
Deferred income taxes 2,398 2,397 570
Amortization of unearned compensation 434 367 221
Other (85) 3 -
Changes in assets and liabilities (exclusive of
effects of purchase of Loveland and
Soladyne assets):
Accounts receivable 382 (11,765) (1,028)
Inventories (2,207) 303 582
Income tax refund receivable (2,048) - -
Other current assets (1,228) 692 (913)
Accounts payable 2,555 3,183 1,207
Accrued compensation (1,418) 1,331 3,171
Income taxes payable (67) 353 231
Other accrued liabilities (428) 1,583 480
------- -------- --------
Net cash provided by operating activities 7,371 16,883 18,015
------- -------- --------
Cash flows from investing activities:
Purchase of Loveland and Soladyne assets - (28,720) -
Capital expenditures (17,769) (16,111) (6,875)
Short-term investments:
Purchases (15,110) (14,000) (21,900)
Maturities 13,717 19,417 9,316
Proceeds from sale of assets 422 91 60
------- -------- --------
Net cash used in investing activities (18,740) (39,323) (19,399)
------- -------- --------
Cash flows from financing activities:
Long-term borrowings:
Proceeds 40,000 20,000 -
Principal payments (23,951) (105) (1,900)
Exercise of stock options 91 429 90
Deferred financing costs (382) - -
Reacquired common stock (43) - -
------- -------- --------
Net cash provided by (used in) financing activities 15,715 20,324 (1,810)
------- -------- --------
Increase (decrease) in cash and cash equivalents 4,346 (2,116) (3,194)
Cash and cash equivalents at beginning of year 12,191 14,307 17,501
------- -------- --------
Cash and cash equivalents at end of year $16,537 $ 12,191 $ 14,307
======= ======== ========
Supplemental Disclosures:
Cash paid for:
Interest $ 3,205 $ 697 $ 721
Taxes - 4,799 5,670
Noncash transactions:
Assets acquired by recognition of lease
renovation liability - 1,273 -
Software license acquired through financing agreement - 367 -
Tax benefit related to stock-based compensation 261 445 72
Purchase price adjustment (Note 10) - - 3,279
Surrender of unvested shares of restricted stock 45 - -
Receipt of common stock for exercise of stock options 225 - -
See the accompanying Notes to Financial Statements.
</TABLE>
20
<PAGE>
MERIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Note 1. ORGANIZATION AND ACQUISITION
Merix Corporation, an Oregon corporation, was formed in March 1994 to succeed to
the business conducted by the Circuit Board Division (the Division) of
Tektronix, Inc. (Tektronix), which had been in the electronic interconnect
manufacturing business for over 30 years. On June 1, 1994, Merix acquired the
assets and assumed certain liabilities (the Acquisition) of the Division in
connection with the initial public offering of its common stock, and began to
operate as an independent corporation.
Note 2. ACCOUNTING POLICIES
Fiscal Year
The Company's fiscal year is the 52 or 53-week period ending the last Saturday
in May. Fiscal year 1997 was a 53-week year ended May 31, and fiscal years 1996
and 1995 were 52-week years ended May 25 and May 27, respectively. For
convenience, these periods have been presented in these financial statements as
ended May 31.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of sales and expenses during the reporting period. Actual
results could differ from those estimates.
Balance Sheet Financial Instruments: Fair Values
The carrying amounts reported in the balance sheet for investments, accounts
receivable and accounts payable approximate fair value because of the immediate
or short-term maturity of these financial instruments. The carrying amount for
long-term debt approximates its fair value because the related interest rates
are comparable to rates currently available to the Company for debt with similar
terms and maturities.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash in banks and highly liquid
investments with maturities of three months or less when purchased.
Investments
The Company classifies securities at acquisition into one of three categories:
held to maturity, available for sale, or trading. At May 31, 1997 and 1996, all
of the Company's investments, consisting of taxable and municipal debt
securities, with original maturities of more than 90 days are classified as held
to maturity and are valued at amortized cost.
21
<PAGE>
Inventories
Inventories are valued at the lower of cost or market and include materials,
labor and manufacturing overhead. Cost is determined on the first-in, first-out
(FIFO) basis.
Property and Depreciation
Property, plant and equipment is carried at cost less accumulated depreciation.
Depreciation is calculated based on the estimated useful lives of depreciable
assets as follows: 40 years for buildings, 10 to 20 years for grounds, 3 to 7
years for machinery and equipment, and is provided using the straight line
method.
Goodwill
The cost of goodwill is amortized on a straight-line basis over the estimated
period benefited of 15 years. Goodwill amortization for fiscal years 1997, 1996
and 1995 was $169, $96 and zero, respectively.
Revenue Recognition
Revenue from product sales is recognized at the time of shipment. Service
revenue is recognized as services are provided.
Engineering Expense
Expenditures for engineering of products and manufacturing processes are
expensed as incurred.
Warranty
The Company generally warrants its products for a period of up to four months
from shipment. Accordingly, a provision for the estimated cost of the warranty
is recorded upon shipment.
Earnings per Share
Earnings per share are computed using the weighted average number of shares of
common stock and common stock equivalents outstanding during the period. Common
stock equivalent shares are computed using common stock options and the treasury
stock method.
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS
128). SFAS 128 changes the standards for computing and presenting earnings per
share (EPS) and supersedes Accounting Principles Board Opinion No. 15, "Earnings
per Share." SFAS 128 simplifies the standards for computing earnings per share
and makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. This Statement
requires restatement of all prior-period EPS data presented.
22
<PAGE>
Following is the pro forma effect of adoption of SFAS 128 on the Company's
earnings per share for the years ended May 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
Years Ended May 31
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Primary EPS as reported $ 0.05 $ 1.98 $ 1.67
Effect of SFAS 128 0.00 0.09 0.07
=========== =========== ==========
Basic EPS as restated $ 0.05 $ 2.07 $ 1.74
=========== =========== ==========
Fully diluted EPS $ 0.05 $ 1.98 $ 1.64
Effect of SFAS 128 0.00 0.00 0.03
=========== =========== ==========
Diluted EPS as restated $ 0.05 $ 1.98 $ 1.67
=========== =========== ==========
</TABLE>
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS 130), which establishes requirements
for disclosure of comprehensive income and is effective for the Company's fiscal
year ending May 1999. Reclassification of earlier financial statements for
comparative purposes is required.
Reclassifications
Reclassifications of certain prior period balances have been made to conform
with the current method of presentation.
Note 3. ACQUISITIONS
On October 31, 1995, the Company acquired certain assets of Hewlett-Packard
Company's (HP) Loveland, Colorado printed circuit fabrication operation for a
total purchase price of approximately $26,868. Of this amount, $23,600 was paid
to HP for the purchase of fixed assets and inventory, $427 was assumed as a
liability for the purchase of manufacturing equipment, $1,813 was paid to others
for costs related to the transaction, and $1,028 was accrued as a long-term
liability for the estimated cost of the Company's contractual obligation to
renovate leased manufacturing facilities in Loveland at the conclusion of the
lease term. The fair value of assets acquired consisted of $1,955 for inventory
and supplies, $22,427 for fixed assets, principally manufacturing equipment, and
$2,486 for goodwill. Of the purchase price paid in cash, $20 million was
borrowed on the Company's unsecured bank line of credit, which was subsequently
repaid from the proceeds of the Company's $40 million private placement of
senior unsecured notes in September 1996. See Note 7.
In connection with the acquisition, the Company entered into a five-year lease
agreement with HP to lease the HP owned printed circuit fabrication facility in
Loveland. Monthly payments under the lease are $171. See Note 14. Also in
connection with this transaction, the Company and HP entered into a two year
supply agreement under which HP agreed to purchase, at market prices, at least
$35 million of product in the first year and at least $25 million in the second
year.
On December 31, 1995, the Company acquired certain assets of the Soladyne
printed circuit fabrication operation, consisting principally of inventory and
manufacturing equipment, from Rogers Corporation, one of the Company's suppliers
of high performance material. Soladyne is located in San Diego, California. The
purchase price was not material to the financial position of the Company. In
connection with the acquisition, the Company assumed the existing lease for the
Soladyne facility with four years remaining. Monthly payments under the lease
are $24, with an annual rate increase of 3-5% each year over the life of the
lease. See Note 14.
The acquisitions were accounted for as purchase transactions and, accordingly,
the results of the Loveland and Soladyne operations are included in the
financial statements since the effective dates of the transactions.
23
<PAGE>
Note 4. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade accounts receivable and investments.
Five customers represented 22%, 14%, 13%, 12% and 9%, respectively, of the
accounts receivable balance at May 31, 1997. The risk in trade accounts
receivable is limited due to the creditworthiness of companies comprising the
Company's customer base and their dispersion across many different sectors of
the electronics industry and geographies. The Company has not had significant
losses related to its accounts receivable in the past. The risk in investments
is limited due to the creditworthiness of investees comprising the portfolio,
the diversity of the portfolio and relative low risk of municipal securities. At
May 31, 1997, the Company does not believe it had any significant credit risks.
<TABLE>
<CAPTION>
Note 5. INVENTORIES
May 31
1997 1996
---------- -----------
<S> <C> <C>
Raw materials $ 2,506 $ 2,254
Work in process 4,790 3,104
Finished goods 1,346 1,077
---------- -----------
Total $ 8,642 $ 6,435
========== ===========
</TABLE>
<TABLE>
<CAPTION>
Note 6. PROPERTY, PLANT AND EQUIPMENT
May 31
1997 1996
------------ ------------
<S> <C> <C>
Land $ 2,190 $ 2,190
Buildings and grounds 23,618 16,345
Machinery and equipment 90,219 77,196
Construction in progress - 6,000
------------ ------------
Total 116,027 101,731
Accumulated depreciation (52,629) (46,155)
------------ ------------
Property, plant and equipment, net $ 63,398 $ 55,576
============ ============
</TABLE>
<TABLE>
<CAPTION>
Note 7. LONG-TERM DEBT
May 31
1997 1996
----------- ------------
<S> <C> <C>
Senior unsecured notes, principal payable in five
equal annual installments commencing
September 15, 1999, with interest at 7.92%
payable on a semi-annual basis $ 40,000
Note payable to Tektronix, payable in five annual
installments including interest at 7.5%,
secured by a Trust Deed 4,437 $ 8,267
Bank line of credit, interest only payable monthly - 20,000
Other 213 334
----------- ------------
Total 44,650 28,601
Less current portion (2,260) (1,931)
----------- ------------
Long-term debt $ 42,390 $ 26,670
=========== ============
</TABLE>
24
<PAGE>
The Company has an unsecured $30 million bank line of credit against which it
had no borrowings at May 31, 1997. Borrowings under this line of credit would
bear interest at prime or other LIBOR based rates available at the time of
borrowing (7.65% at May 31, 1997). The instrument matures on September 30, 1998.
The senior unsecured notes and the line of credit include certain financial
covenants (such as minimum net worth, debt ratio, quick ratio and interest
coverage requirements) and cross-default provisions. As of May 31, 1997, the
Company was in compliance with all covenants.
Future principal payments for long-term debt are as follows: 1998, $2,260; 1999,
$2,390; 2000, $8,000; 2001, $8,000 and 2002, $8,000.
Note 8. STOCK-BASED COMPENSATION PLAN
In March 1994, the Company adopted the 1994 Stock Incentive Plan (the 1994 Plan)
for employees, consultants and directors of the Company. The 1994 Plan, as
amended, covers 1,500,000 shares of common stock and permits the grant of
incentive stock options, non-qualified stock options, stock appreciation rights,
stock and cash bonus rights, restricted stock awards and performance based
awards to employees, independent contractors and consultants. A committee of the
Board of Directors has the authority to determine non-qualified stock option
prices. To date, all options have been granted at the fair market value of the
stock at the date of grant. The options vest ratably over a four-year period
beginning on the first anniversary of their issuance with a maximum term of 10
years. The 1994 Plan provides for automatic option grants to directors not
affiliated with Merix or Tektronix of 20,000 shares at the time first elected to
the board and 5,000 shares annually thereafter. The options generally become
exercisable ratably over a four-year period beginning one year after the date of
grant and expire ten years after the date of grant.
A summary of non-qualified stock option activity is as follows:
<TABLE>
<CAPTION>
Weighted
Number Average
of Price
Shares Per Share
------------ ------------
<S> <C> <C>
Outstanding at May 31, 1994 200,000 $ 9.00
Granted 488,300 11.71
Canceled (34,450) 9.32
Exercised (10,000) 9.00
------------ ------------
Outstanding at May 31, 1995 643,850 11.04
Granted 310,700 32.41
Canceled (7,336) 17.52
Exercised (39,808) 10.79
------------ ------------
Outstanding at May 31, 1996 907,406 18.33
Granted 457,506 19.73
Canceled (284,041) 28.76
Exercised (34,939) 9.04
------------ ------------
Outstanding at May 31, 1997 1,045,932 $16.42
============ ============
Options exercisable at May 31, 1997 339,276 $12.55
============ ============
</TABLE>
25
<PAGE>
Restricted stock awards are subject to vesting and other terms as specified at
the time of issuance by a committee of the Board of Directors. Generally,
restricted stock awards vest ratably over a three-year period beginning on the
first anniversary of their issuance. Unearned compensation expense is recognized
ratably over the vesting period. The weighted average per share fair value of
restricted stock awards issued was $18.79, $33.70 and $11.19 in fiscal years
1997, 1996 and 1995, respectively. A summary of restricted stock award activity
is as follows:
<TABLE>
<CAPTION>
Number
of Value
Shares Per Share
------------- -----------------
<S> <C> <C>
Unvested balance at May 31, 1994 - -
Awarded 65,000 $9.00-$23.25
Vested (5,000) 9.00
------------- -----------------
Unvested balance at May 31, 1995 60,000 9.00-23.25
Awarded 17,700 23.62-37.75
Vested (19,998) 9.00-23.25
------------- -----------------
Unvested balance at May 31, 1996 57,702 9.00-37.75
Awarded 19,400 16.50-21.25
Vested (27,167) 9.00-37.75
Canceled (5,000) 9.00
============= =================
Unvested balance at May 31, 1997 44,935 $9.00-$37.75
============= =================
</TABLE>
During 1995, the FASB issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS 123) which defines a fair
value based method of accounting for employee stock options and similar equity
instruments and encourages all entities to adopt that method of accounting for
all of their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost for those plans using the method
of accounting prescribed by Accounting Principles Board Opinion No. 25 (APB 25).
Entities electing to remain with the accounting in APB 25 must make pro forma
disclosures of net income and, if presented, earnings per share, as if the fair
value based method of accounting defined in SFAS 123 had been adopted.
The Company has elected to account for its stock-based compensation plans under
APB 25; however, the Company has computed, for pro forma disclosure purposes,
the value of all stock options granted during 1997 and 1996 using the
Black-Scholes option pricing model as prescribed by SFAS 123 using the following
weighted average assumptions:
Years ended May 31
1997 1996
---------------- -----------------
Risk-free interest rate 6.48-5.77% 5.23-6.40%
Expected dividend yield 0% 0%
Expected lives 1.6-4.6 years 1.6-4.6 years
Expected volatility 59% 59%
Using the Black-Scholes methodology, the total value of stock options granted
during 1997 and 1996 was $3,330 and $4,402, respectively, which would be
amortized on a pro forma basis over the vesting period of the options (typically
four years). The weighted average fair value of options granted during 1997 and
1996 was $7.30 per share and $14.12 per share, respectively.
26
<PAGE>
If the Company had accounted for its 1994 Plan in accordance with SFAS 123, the
Company's net income and earnings per share would approximate the pro forma
disclosures below:
<TABLE>
<CAPTION>
Years ended May 31
1997 1996
--------------------------- -----------------------------
As Reported Pro Forma As Reported Pro Forma
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) $ 321 $ (866) $ 12,793 $ 12,004
Earnings (loss) per share $ 0.05 $ (0.14) $ 1.98 $ 1.86
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts. SFAS 123 does not apply to awards prior to June 1, 1995, and
additional awards are anticipated in future years.
The following table summarizes information about stock options outstanding at
May 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- --------------------------------------------------------------------------- -------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Number of Average
Exercise Number Contractual Exercise Shares Exercise
Prices Outstanding Life (years) Price Exercisable Price
- ---------------- ----------------- ---------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
$ 9.00 423,945 6.92 $ 9.00 263,445 $ 9.00
9.25-19.00 242,111 9.23 18.31 11,292 14.70
19.25-23.25 273,982 6.35 20.72 33,676 23.25
23.63-35.27 105,269 8.37 30.62 30,613 30.36
37.75 625 8.42 37.75 250 37.75
- ---------------- ----------------- ---------------- ------------- -------------- ------------
$ 9.00-37.75 1,045,932 7.45 $ 16.42 339,276 $ 12.55
================ ================= ================ ============= ============== ============
</TABLE>
Note 9. SHAREHOLDER RIGHTS PLAN
On March 25, 1997, the Board of Directors adopted a Shareholder Rights Plan (the
Plan) designed to preserve and enhance shareholder value and the Company's
ability to carry out its long-term business strategy. In connection with the
adoption of the Plan, the Board of Directors declared a dividend distribution of
one Right per share of common stock, payable to the shareholders of record on
April 25, 1997. A Right enables the holder, under certain circumstances, to
purchase either Series A Preferred or Common Stock of the Company. The Company
may redeem the Rights for $0.001 per Right under certain circumstances. The
Rights will expire in 2007. On March 25, 1997, the Board also reserved 500,000
shares of Series A Preferred Stock for purposes of the Plan.
Note 10. INCOME TAXES
Income tax expense consists of federal and state income taxes. Deferred income
taxes are determined based on differences between the financial reporting and
tax bases of assets and liabilities, using currently enacted tax rates.
27
<PAGE>
The provision for (benefit from) income taxes consisted of the following:
<TABLE>
<CAPTION>
Years ended May 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $(2,428) $ 4,443 $ 4,859
State - 706 1,045
------- ------- -------
Total current (2,428) 5,149 5,904
------- ------- -------
Deferred:
Federal 2,357 1,939 518
State 41 458 52
------- ------- -------
Total deferred 2,398 2,397 570
------- ------- -------
Income taxes $ (30) $ 7,546 $ 6,474
======= ======= =======
</TABLE>
The principal differences between taxes on income computed at the federal
statutory rate of 35% in fiscal years 1997, 1996 and 1995 and recorded income
tax expense (benefit) were as follows:
<TABLE>
<CAPTION>
Years ended May 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tax computed at statutory rate $ 102 $ 7,118 $ 5,963
State income taxes, net of federal benefit - 757 731
Tax exempt interest (182) (280) (273)
Other, net 50 (49) 53
------- ------- -------
Income taxes $ (30) $ 7,546 $ 6,474
======= ======= =======
</TABLE>
Significant components of the Company's deferred tax asset and liability were as
follows:
<TABLE>
<CAPTION>
May 31
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Current:
Inventories $ 553 $ 499
Vacation accrual 427 275
State loss carryforward 370 -
Other 60 20
-------- -------
Deferred tax asset $ 1,410 $ 794
======== =======
Long-term:
Intangible basis difference $ - $ 469
Fixed asset basis difference - 1,020
-------- -------
Deferred tax asset $ - $ 1,489
======== =======
Deferred tax asset (liability):
Intangible basis difference $ 381 $ -
Fixed asset basis difference (2,050) -
Unearned compensation 144 -
-------- -------
Deferred tax liability $(1,525) $ -
======== =======
</TABLE>
The Company finalized its tax basis purchase price allocation for the
Acquisition at the end of fiscal year 1995, resulting in an increase in deferred
tax assets and common stock of $3,279.
28
<PAGE>
For financial reporting purposes the Acquisition was accounted for similar to a
pooling of interests to reflect the reorganization of entities under common
control. A deferred tax asset was recorded for the basis difference in fixed
assets as a result of recording their bases at fair market value for tax
purposes and at carrying value for financial reporting purposes. Since the date
of the Acquisition, the basis difference has decreased and deferred tax
liabilities have been recorded to reflect the use of accelerated depreciation
for tax purposes. During fiscal year 1997, aggregate deferred tax liabilities
for fixed assets exceeded the remaining balance of the original deferred tax
asset.
Note 11. BENEFIT PLAN
Effective June 1, 1994, the Company adopted a defined contribution plan, which
meets the requirements of Section 401(k) of the Internal Revenue Code, for all
regular employees. Under this plan, the Company contributes 50 cents for each
dollar contributed by an employee up to 6% of the employee's base pay. During
fiscal years 1997, 1996 and 1995, the Company's contribution expense was $1,094,
$884 and $578, respectively.
Note 12. SIGNIFICANT CUSTOMERS
Customers who individually represent 10% or more of net sales for the respective
year are as follows:
<TABLE>
<CAPTION>
Years ended May 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Hewlett-Packard Company 25.4% 18.7% *
Tektronix, Inc. 18.4 20.6 31.1%
Motorola, Inc. 13.0 19.5 22.8
Teradyne, Inc. * 10.5 11.4
* Revenues were less than 10%.
</TABLE>
Note 13. RELATED PARTY TRANSACTIONS
Immediately prior to consummation of the Acquisition, Tektronix, through certain
participating divisions and subsidiaries, entered into seven separate Supply
Agreements with the Company. During the three-year term of the Supply
Agreements, the participating divisions and subsidiaries agreed to purchase from
the Company annually at least the lesser of 90% of their aggregate requirements
for printed circuit boards, flexible circuits and related tooling and test
fixtures or $28,500. The three year supply agreements with Tektronix expired on
May 31, 1997. The Company and Tektronix have not entered into new supply
agreements, although the Company is continuing to manufacture products for
Tektronix.
Included in net sales for fiscal years 1997, 1996 and 1995 are product sales to
Tektronix of $28,766, $32,010 and $31,577, respectively. Accounts
receivable-affiliates at May 31, 1997 and 1996 consists of amounts receivable
from Tektronix of $3,091 and $3,138, respectively.
In addition, the Company and Tektronix entered into Waste Management and Master
Services Agreements covering certain environmental matters for a three-year
term, which ended May 31, 1997. The Company and Tektronix extended the
agreements with certain revisions which eliminate disposal arrangement services
and reduce waste treatment services. The fiscal year 1997, 1996 and 1995 expense
pursuant to the agreements was $291, $426 and $336, respectively.
29
<PAGE>
Note 14. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, the Company is party to various legal claims,
actions and complaints, including actions involving patent infringement and
other intellectual property claims. The Company believes that the disposition of
these matters will not have a material adverse effect on the Company's financial
position and results of operations.
Operating Leases
The Company leases facilities for its printed circuit fabrication operations
under operating leases at its Loveland and Soladyne operations. See Note 3.
Minimum rental payments under operating leases that have non-cancelable lease
terms in excess of 12 months are as follows:
<TABLE>
<CAPTION>
Minimum rental payments
Years ended May 31 under operating leases
------------------ ----------------------
<S> <C>
1998 $ 2,386
1999 2,380
2000 2,380
2001 1,110
=======
Total minimum lease payments $ 8,256
=======
</TABLE>
Rental expense under operating leases was $2,376, $1,333 and $12 in fiscal years
1997, 1996 and 1995, respectively.
Note 15. QUARTERLY FINANCIAL DATA (Unaudited)
Summary quarterly financial data is as follows:
<TABLE>
<CAPTION>
1997
----
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 41,116 $ 35,841 $ 35,942 $ 43,285
Gross profit 7,352 5,086 3,690 5,728
Operating income (loss) 2,270 223 (1,211) 739
Net income (loss) 1,256 (143) (1,086) 294
Earnings (loss) per share 0.20 (0.02) (0.18) 0.05
1997
----
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
-------- -------- -------- --------
Net sales $ 27,713 $ 33,564 $ 46,896 $ 47,461
Gross profit 7,392 8,277 10,810 10,921
Operating income 4,180 4,738 5,856 6,208
Net income 2,708 2,911 3,518 3,655
Earnings per share 0.42 0.45 0.55 0.57
</TABLE>
30
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No information is required to be reported under this item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item regarding directors is included under
"Election of Directors" in the Company's Proxy Statement for its 1997 annual
meeting of shareholders. The information required by this item regarding
executive officers is contained under "Executive Officers" in Item 1 of Part I
hereof. Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 is included under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Proxy Statement for its 1997
annual meeting of shareholders.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is included under "Executive Compensation"
and "Report of the Compensation Committee on Executive Compensation" in the
Company's Proxy Statement for its 1997 annual meeting of shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this item is included under "Voting Securities and
Principal Shareholders" and "Election of Directors" in the Company's Proxy
Statement for its 1997 annual meeting of shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is included under "Certain Relationships
and Related Transactions" in the Company's Proxy Statement for its 1997 annual
meeting of shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Index to Financial Statements.
Merix Corporation Page Reference
----------------- --------------
Independent Auditors' Report 16
Balance Sheets as of May 31, 1997 and May 25, 1996 17
Statements of Income for fiscal years ended May 31, 1997,
May 25, 1996 and May 27, 1995 18
Statements of Shareholders' Equity for fiscal years ended
May 31, 1997, May 25, 1996 and May 27, 1995 19
Statements of Cash Flows for fiscal years ended
May 31, 1997, May 25, 1996 and May 27, 1995 20
Notes to Financial Statements 21
31
<PAGE>
(a)2. Financial Statement Schedules
All schedules have been omitted since they are either not required or the
information is included in the financial statements included herewith.
(b) Reports on Form 8-K
A Current Report on Form 8-K, dated March 25, 1997, was filed reporting the
adoption of a Shareholder Rights Agreement under Item 5.
(a)3. Index to Exhibits
The following exhibits are filed with, or incorporated by reference into,
this Annual Report on Form 10-K:
3.1(1) Articles of Incorporation of the Registrant (Exhibit 3.1)
3.2 Bylaws of the Registrant, as amended
4.1(1) Article II of the Registrant's Articles of Incorporation
(Exhibit 3.1)
4.2(9) Shareholder Rights Agreement dated March 25, 1997
10.1(2) Asset Transfer Agreement between Tektronix and Merix
(including Note and Trust Deed and Assignment of Rents
and Leases) (Exhibit 10.1)
10.2(2) Registration Rights Agreement between Merix and Tektronix
(Exhibit 10.2)
10.3(2) Waste Management Agreement between Merix and Tektronix
(Exhibit 10.3)
10.4(2) Services Agreement between Merix and Tektronix (Exhibit 10.4)
+10.5(4) Stock Incentive Plan of the Registrant, as amended
+10.6(2) Indemnity Agreement between Merix and Deborah A. Coleman as
of April 4, 1994 (Exhibit 10.6)
+10.7(2) Indemnity Agreement between Merix and John P. Karalis as of
April 4, 1994 (Exhibit 10.9)
+10.8(2) Indemnity Agreement between Merix and Carl W. Neun as of
April 4, 1994 (Exhibit 10.10)
+10.9(2) Indemnity Agreement between Merix and Carlene M. Ellis as of
May 24, 1994 (Exhibit 10.11)
+10.10(2) Indemnity Agreement between Merix and Charles M. Boesenberg
as of May 24, 1994 (Exhibit 10.12)
+10.11(2) Indemnity Agreement between Merix and Dr. Koichi Nishimura
as of May 24, 1994 (Exhibit 10.13)
+10.12(3) Indemnity Agreement between Merix and Terri L. Timberman
as of May 25, 1994 (Exhibit 10.14)
+10.13(3) Indemnity Agreement between Merix and Joseph H. Howell as of
January 30, 1995 (Exhibit 10.15)
+10.14(6) Indemnity Agreement between Merix and Samuel R. DeSimone, Jr.
as of September 11, 1995 (Exhibit 10.15)
10.15(1) Form of Supply Agreement (Exhibit 10.7)
+10.16 Amended Executive Severance Agreement between Merix and
Deborah A. Coleman
+10.17 Amended Executive Severance Agreement between Merix and
Terri L. Timberman
+10.18 Amended Executive Severance Agreement between Merix and
Joseph H. Howell
+10.19 Amended Executive Severance Agreement between Merix and
Samuel R. DeSimone, Jr.
+10.20 Executive Severance Agreement between Merix and Joseph Reichbach
+10.21 Executive Severance Agreement between Merix and Charles W. Payne
+10.22 Executive Severance Agreement between Merix and Mark H. Hynes
10.23(8) Loan Agreement with Bank of America dated October 31, 1996
(Exhibit 10)
t10.24(5) Master Asset Purchase Agreement between Merix and
Hewlett-Packard Company dated October 10, 1995 (Exhibit 2)
10.25(7) Note Purchase Agreement dated September 10, 1996 (Exhibit 10.1)
10.26 Amendment to Note Purchase Agreement dated May 28, 1997
32
<PAGE>
10.27 Notice of Assignment and Amendment No. 1 to Loan Agreement with
Bank of America dated December 13, 1996
10.28 Second Amendment to Loan Agreement with Bank of America dated
February 27, 1997
11.1 Computation of Earnings Per Share
23.1 Independent Auditors' Consent
27.1 Financial Data Schedule
(1) Incorporated by reference to the Registrant's Registration
Statement on Form S-1, Registration No. 33-77348.
(2) Incorporated by reference to the Company's Form 10-K for
the fiscal year ended May 28, 1994 (File No. 0-23818).
(3) Incorporated by reference to the Company's Form 10-K for
the fiscal year ended May 27, 1995 (File No. 0-23818).
(4) Incorporated by reference to Appendix A of the Company's
Proxy Statement for the 1995 Annual Meeting of
Shareholders (File No. 0-23818).
(5) Incorporated by reference to the Company's Current Report
on Form 8-K dated October 31, 1995 (File No. 0-23818).
(6) Incorporated by reference to the Company's Form 10-K for
the fiscal year ended May 25, 1996. (File No. 0-23818).
(7) Incorporated by reference to the Company's Form 10-Q for
the quarterly period ended August 31, 1996 (File No.
0-23818).
(8) Incorporated by reference to the Company's Form 10-Q for
the quarterly period ended November 30, 1996 (File No.
0-23818).
(9) Incorporated by reference to the Company's Current Report
on Form 8-K dated March 25, 1997. (File No. 0-23818).
+ This Exhibit constitutes a management contract or
compensatory plan or arrangement.
t Confidential treatment requested for portions of this
Exhibit.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized this 4th day of
August, 1997
MERIX CORPORATION
By: JOSEPH H. HOWELL
-------------------------------------
Joseph H. Howell,
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on August 4, 1997 by the following persons on behalf of
the Registrant and in the capacities indicated.
Signature Title
--------- -----
DEBORAH A. COLEMAN Chair, Chief Executive Officer and
- ---------------------------------- President
Deborah A. Coleman (Principal Executive Officer)
JOSEPH H. HOWELL Senior Vice President and Chief
- ---------------------------------- Financial Officer
Joseph H. Howell (Principal Accounting and Financial
Officer)
JOHN P. KARALIS Director
- ----------------------------------
John P. Karalis
CARL W. NEUN Director
- ----------------------------------
Carl W. Neun
CARLENE M. ELLIS Director
- ----------------------------------
Carlene M. Ellis
CHARLES M. BOESENBERG Director
- ----------------------------------
Charles M. Boesenberg
DR. KOICHI NISHIMURA Director
- ----------------------------------
Dr. Koichi Nishimura
34
8
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1(1) Articles of Incorporation of the Registrant (Exhibit 3.1)
3.2 Bylaws of the Registrant, as amended
4.1(1) Article II of the Registrant's Articles of Incorporation (Exhibit
3.1)
4.2(9) Shareholder Rights Agreement dated March 25, 1997
10.1(2) Asset Transfer Agreement between Tektronix and Merix (including
Note and Trust Deed and Assignment of Rents and Leases) (Exhibit
10.1)
10.2(2) Registration Rights Agreement between Merix and Tektronix
(Exhibit 10.2)
10.3(2) Waste Management Agreement between Merix and Tektronix (Exhibit
10.3)
10.4(2) Services Agreement between Merix and Tektronix (Exhibit 10.4)
+10.5(4) Stock Incentive Plan of the Registrant, as amended
+10.6(2) Indemnity Agreement between Merix and Deborah A. Coleman as of
April 4, 1994 (Exhibit 10.6)
+10.7(2) Indemnity Agreement between Merix and John P. Karalis as of April
4, 1994 (Exhibit 10.9)
+10.8(2) Indemnity Agreement between Merix and Carl W. Neun as of April 4,
1994 (Exhibit 10.10)
+10.9(2) Indemnity Agreement between Merix and Carlene M. Ellis as of May
24, 1994 (Exhibit 10.11)
+10.10(2) Indemnity Agreement between Merix and Charles M. Boesenberg as of
May 24, 1994 (Exhibit 10.12)
+10.11(2) Indemnity Agreement between Merix and Dr. Koichi Nishimura as of
May 24, 1994 (Exhibit 10.13)
+10.12(3) Indemnity Agreement between Merix and Terri L. Timberman as of
May 25, 1994 (Exhibit 10.14)
+10.13(3) Indemnity Agreement between Merix and Joseph H. Howell as of
January 30, 1995 (Exhibit 10.15)
+10.14(6) Indemnity Agreement between Merix and Samuel R. DeSimone, Jr. as
of September 11, 1995 (Exhibit 10.15)
10.15(1) Form of Supply Agreement (Exhibit 10.7)
+10.16 Amended Executive Severance Agreement between Merix and Deborah
A. Coleman
+10.17 Amended Executive Severance Agreement between Merix and Terri L.
Timberman
+10.18 Amended Executive Severance Agreement between Merix and Joseph H.
Howell
+10.19 Amended Executive Severance Agreement between Merix and Samuel R.
DeSimone, Jr.
+10.20 Executive Severance Agreement between Merix and Joseph Reichbach
+10.21 Executive Severance Agreement between Merix and Charles W. Payne
+10.22 Executive Severance Agreement between Merix and Mark H. Hynes
10.23(8) Loan Agreement with Bank of America dated October 31, 1996
(Exhibit 10)
t10.24(5) Master Asset Purchase Agreement between Merix and Hewlett-Packard
Company dated October 10, 1995 (Exhibit 2)
10.25(7) Note Purchase Agreement dated September 10, 1996 (Exhibit 10.1)
10.26 Amendment to Note Purchase Agreement dated May 28, 1997
10.27 Notice of Assignment and Amendment No. 1 to Loan Agreement with
Bank of America dated December 13, 1996
10.28 Second Amendment to Loan Agreement with Bank of America dated
February 27, 1997
<PAGE>
11.1 Computation of Earnings Per Share
23.1 Independent Auditors' Consent
27.1 Financial Data Schedule
(1) Incorporated by reference to the Registrant's Registration Statement
on Form S-1, Registration No. 33-77348.
(2) Incorporated by reference to the Company's Form 10-K for the fiscal
year ended May 28, 1994 (File No. 0-23818).
(3) Incorporated by reference to the Company's Form 10-K for the fiscal
year ended May 27, 1995 (File No. 0-23818).
(4) Incorporated by reference to Appendix A of the Company's Proxy
Statement for the 1995 Annual Meeting of Shareholders (File No.
0-23818).
(5) Incorporated by reference to the Company's Current Report on Form 8-K
dated October 31, 1995 (File No. 0-23818).
(6) Incorporated by reference to the Company's Form 10-K for the fiscal
year ended May 25, 1996. (File No. 0-23818).
(7) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended August 31, 1996 (File No. 0-23818).
(8) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended November 30, 1996 (File No. 0-23818).
(9) Incorporated by reference to the Company's Current Report on Form 8-K
dated March 25, 1997. (File No. 0-23818).
+ This Exhibit constitutes a management contract or compensatory plan or
arrangement.
t Confidential treatment requested for portions of this Exhibit.
BYLAWS, AS AMENDED
OF
MERIX CORPORATION
ARTICLE I
SHAREHOLDERS MEETINGS AND VOTING
1.1 Annual Meeting. The annual meeting of the shareholders shall be held on
the fourth Friday in September of each year at 9:00 a.m., unless a different
date or time is fixed by the Board of Directors and stated in the notice of the
meeting. Failure to hold an annual meeting on the stated date shall not affect
the validity of any corporate action.
1.2 Special Meetings. Special meetings of the shareholders, for any
purposes, unless otherwise prescribed by statute, may be called by the Chair of
the Board or the Board of Directors and shall be called by the Chair of the
Board upon the written demand of the holders of not less than one-tenth of all
the votes entitled to be cast on any issue proposed to be considered at the
meeting. The demand shall describe the purposes for which the meeting is to be
held and shall be signed, dated and delivered to the Secretary.
1.3 Place of Meetings. Meetings of the shareholders shall be held at any
place in or out of Oregon designated by the Board of Directors. If a meeting
place is not designated by the Board of Directors, the meeting shall be held at
the Corporation's principal office.
1.4 Notice of Meetings. Written or printed notice stating the date, time
and place of the shareholders meeting and, in the case of a special meeting or a
meeting for which special notice is required by law, the purposes for which the
meeting is called, shall be delivered by the Corporation to each shareholder
entitled to vote at the meeting and, if required by law, to any other
shareholders entitled to receive notice, not earlier than 60 days nor less than
30 days before the meeting date. If mailed, the notice shall be deemed delivered
when it is mailed to the shareholder with postage prepaid at the shareholder's
address shown in the Corporation's record of shareholders. Any previously
scheduled meeting of the shareholders may be postponed and any special meeting
of the shareholders may be canceled by resolution of the Board of Directors upon
public announcement given prior to the date previously scheduled for such
meeting of shareholders.
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1.5 Waiver of Notice. A shareholder may at any time waive any notice
required by law, these Bylaws or the Articles of Incorporation. The waiver shall
be in writing, be signed by the shareholder entitled to the notice and be
delivered to the Corporation for inclusion in the minutes for filing with the
corporate records. A shareholder's attendance at a meeting waives objection to
(i) lack of notice or defective notice of the meeting, unless the shareholder at
the beginning of the meeting objects to holding the meeting or transacting
business at the meeting, and (ii) consideration of a particular matter at the
meeting that is not within the purposes described in the meeting notice, unless
the shareholder objects to considering the matter when it is presented.
1.6 Fixing of Record Date. The Board of Directors may fix a future date as
the record date to determine the shareholders entitled to notice of a
shareholders meeting, demand a special meeting, vote, take any other action or
receive payment of any share or cash dividend or other distribution. This date
shall not be earlier than 70 days or, in the case of a meeting, later than 35
days before the meeting or action requiring a determination of shareholders. The
record date for any meeting, vote or other action of the shareholders shall be
the same for all voting groups. If not otherwise fixed by the Board of
Directors, the record date to determine shareholders entitled to notice of and
to vote at an annual or special shareholders meeting is the close of business on
the day before the notice is first mailed or otherwise transmitted to
shareholders. If not otherwise fixed by the Board of Directors, the record date
to determine shareholders entitled to receive payment of any share or cash
dividend or other distribution is the close of business on the day the Board of
Directors authorizes the share or cash dividend or other distribution.
1.7 Shareholders List for Meeting. After a record date for a meeting is
fixed, the Corporation shall prepare an alphabetical list of all shareholders
entitled to notice of the shareholders meeting. The list shall be arranged by
voting group and, within each voting group, by class or series of shares, and it
shall show the address of and number of shares held by each shareholder. The
shareholders list shall be available for inspection by any shareholder, upon
proper demand as may be required by law, beginning two business days after
notice of the meeting is given and continuing through the meeting, at the
Corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. The Corporation shall make the
shareholders list available at the meeting, and any shareholder or the
shareholder's agent or attorney shall be entitled to inspect the list at any
time during the meeting or any adjournment. Refusal or failure to prepare or
make available the shareholders list does not affect the validity of action
taken at the meeting.
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1.8 Quorum; Adjournment.
(1) Shares entitled to vote as a separate voting group may take action
on a matter at a meeting only if a quorum of those shares exists with respect to
that matter. A majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter.
(2) The chair of the meeting or a majority of votes represented at the
meeting, whether or not there is a quorum, may adjourn the meeting from time to
time to a different time and place without further notice to any shareholder of
any adjournment, except that notice is required if a new record date is or must
be set for the adjourned meeting. At an adjourned meeting at which a quorum is
present, any business may be transacted that might have been transacted at the
meeting originally held.
(3) Once a share is represented for any purpose at a meeting, it shall
be present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for the
adjourned meeting. A new record date must be set if the meeting is adjourned to
a date more than 120 days after the date fixed for the original meeting.
1.9 Voting Requirements; Action Without Meeting.
(1) If a quorum exists, action on a matter, other than the election of
directors, by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless a
greater number of affirmative votes is required by law or the Articles of
Incorporation. Unless otherwise provided in the Articles of Incorporation,
directors are elected by a plurality of the votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present.
(2) Action required or permitted by law to be taken at a shareholders
meeting may be taken without a meeting if the action is taken by all the
shareholders entitled to vote on the action. The action must be evidenced by one
or more written consents describing the action taken, signed by all the
shareholders entitled to vote on the action and delivered to the Secretary for
inclusion in the minutes for filing with the corporate records. Shareholder
action taken by written consent is effective when the last shareholder signs the
consent, unless the consent specifies an earlier or later effective date.
1.10 Proxies. A shareholder may vote shares in person or by proxy. A
shareholder may appoint a proxy by signing an appointment form either personally
or by the shareholder's attorney-in-fact. An appointment of a proxy is effective
when received by the Secretary or other officer of the Corporation authorized to
tabulate votes. An appointment is valid for 11 months unless a different period
is provided in the appointment form. An appointment is revocable by the
shareholder unless the appointment form conspicuously
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states that it is irrevocable and the appointment is coupled with an interest
that has not been extinguished.
1.11 Meeting by Telephone Conference. Shareholders may participate in an
annual or special meeting by, or conduct the meeting through, use of any means
of communications by which all shareholders participating may simultaneously
hear each other during the meeting, except that no meeting for which a written
notice is sent to shareholders may be conducted by this means unless the notice
states that participation in this manner is permitted and describes how any
shareholder desiring to participate in this manner may notify the Corporation.
Participation in a meeting by this means shall constitute presence in person at
the meeting.
1.12 Proper Business for Shareholders' Meeting. To be properly brought
before the meeting, business must be either (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) otherwise properly brought before a meeting by or at the
direction of the Board of Directors, or (iii) otherwise properly brought before
the meeting by a shareholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive office of the
Corporation not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is more than 30 days before or
more than 60 days after such anniversary date, notice by the shareholder to be
timely must be so received not later than the close of business on the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made. In
no event shall the public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a shareholders notice as described
above. A shareholder's notice to the Secretary shall set forth (i) one or more
matters appropriate for shareholder action that the shareholder proposes to
bring before the meeting, (ii) a brief description of the matters desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (iii) the name and record address of the shareholder, (iv) the class
and number of shares of the Corporation that the shareholder owns or is entitled
to vote and (v) any material interest of the shareholder in such matters.
Notwithstanding anything in these bylaws to the contrary, no business shall be
conducted at the annual meeting except in accordance with the procedure set
forth in this Section 1.12; provided, however, that nothing in this Section 1.12
shall be deemed to preclude discussion by any shareholder of any business
properly brought before the annual meeting. The Chair of the Board, or the
President in the absence of the Chair of the Board, shall, if the facts warrant,
determine and declare to the meeting that the business was not properly brought
before the meeting in accordance with the provisions of this Section 1.12 and if
the Chair of the Board, or the President in the
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<PAGE>
absence of the Chair of the Board, should so determine, shall so declare to the
meeting any such business not properly brought before the meeting shall not be
transacted.
1.13 Shareholder Nomination of Directors.
(1) Not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting of shareholders, any
shareholder who intends to make a nomination at the annual meeting shall deliver
a notice to the Secretary of the Corporation setting forth (i) as to each
nominee whom the shareholder proposes to nominate for election or reelection as
a director, (a) the name, age, business address and residence address of the
nominee, (b) the principal occupation or employment of the nominee, (c) the
class and number of shares of capital stock of the Corporation that are
beneficially owned by the nominee of shares of capital stock of the Corporation
that are beneficially owned by the nominee and (d) any other information
concerning the nominee that would be required, under the rules of the Securities
and Exchange Commission, in a proxy statement soliciting proxies for the
election of such nominee; and (ii) as to the shareholder giving the notice, (a)
the name and record address of the shareholder and (b) the class and number of
shares of capital stock of the Corporation that are beneficially owned by the
shareholder; provided, however, that in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after such anniversary
date, notice by the shareholder to be timely must be so delivered not later than
the close of business on the 90th day prior to such annual meeting and not later
than the close of business on the later of the 60th day prior to such annual
meeting or the 10th day following the day on which public announcement of the
date of such meeting is first made. Such notice shall include a signed consent
to serve as a director of the Corporation, if elected, of each such nominee. The
Corporation may require any proposed nominee to furnish such other information
as may reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director of the Corporation.
(2) Any shareholder who intends to make a nomination at any special
meeting of shareholders held for the purpose of electing directors shall deliver
a timely notice to the Secretary of the Corporation setting forth (i) as to each
nominee whom the shareholder proposes to nominate for election or reelection as
a director, (a) the name, age, business address and residence address of the
nominee, (b) the principal occupation or employment of the nominee, (c) the
class and number of shares of capital stock of the corporation that are
beneficially owned by the nominee of shares of capital stock of the corporation
that are beneficially owned by the nominee and (d) any other information
concerning the nominee that would be required, under the rules of the Securities
and Exchange Commission, in a proxy statement soliciting proxies for the
election of such nominee; and (ii) as to the shareholder giving the notice, (a)
the name and record address of the shareholder and (b) the class and number of
shares of capital stock of the Corporation that are beneficially owned by the
shareholder. To be timely for these purposes, such notice must be given (i) if
given by the shareholder (or any of the shareholders) who or that
5
<PAGE>
made a demand for a meeting pursuant to which such meting is to be held,
concurrently with the delivery of such demand, and (ii) otherwise, not later
than the close of business on the 10th day following the date on which the
public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. Such
notice shall include a signed consent to serve as a director of the Corporation,
if elected, of each such nominee. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as a
director of the Corporation. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
shareholder's notice as described above.
(3) The Chair of the Board, or the President in the absence of the
Chair of the Board, shall, if the facts warrant, determine and declare that a
nominee was not properly nominated in accordance with the provisions of this
Section 1.13 and if the Chair of the Board, or the President in the absence of
the Chair of the Board, should so determine, shall so declare to the meeting any
such nominee shall not be considered by shareholders.
(4) For purposes of Sections 1.4, 1.12 and 1.13, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14, or 15(d) of the Securities Exchange Act of 1934, as amended.
ARTICLE II
BOARD OF DIRECTORS
2.1 Duties of Board of Directors. All corporate powers of the Corporation
shall be exercised by or under the authority of its Board of Directors; the
business and affairs of the Corporation shall be managed under the direction of
its Board of Directors.
2.2 Number, Term and Qualification. The number of directors of the
Corporation shall be at least one and no more than ten. Within this range, the
initial number shall be five, and the number of directors shall otherwise be
determined from time to time by the Board of Directors. The term of a director
shall expire at the next annual meeting of shareholders after his or her
election. Despite the expiration of a director's term, the director shall
continue to serve until the director's successor is elected and qualified or the
number of directors is decreased. Directors need not be residents of the State
of Oregon or shareholders of the Corporation.
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2.3 Regular Meetings. A regular meeting of the Board of Directors shall be
held without notice other than this Bylaw immediately after, and at the same
place as, the annual meeting of shareholders. The Board of Directors may provide
by resolution the time and place for the holding of additional regular meetings
in or out of Oregon without notice other than the resolution.
2.4 Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the Chief Executive Officer or any two directors.
The person or persons authorized to call special meetings of the Board of
Directors may fix any place in or out of Oregon as the place for holding any
special meeting of the Board of Directors called by them.
2.5 Notice. Notice of the date, time and place of any special meeting of
the Board of Directors shall be given at least 24 hours prior to the meeting by
notice communicated in person or by telephone, telegraph, teletype, facsimile
transmission or other form of wire or wireless communication, mail or courier
service sent to directors' business or home addresses. If written, notice shall
be effective at the earliest of (a) when received, (b) three days after its
deposit in the United States mail, as evidenced by the postmark, if mailed
postpaid and correctly addressed, (c) on the date shown on the return receipt,
if sent by registered or certified mail, return receipt requested and the
receipt is signed by or on behalf of the addressee, (d) if given by teletype or
facsimile, upon transmission of the message or (e) if given by overnight mail or
courier, one day after delivery to the overnight mail or courier service
company. Notice by all other means shall be deemed effective when received by or
on behalf of the director. Notice of any regular or special meeting need not
describe the purposes of the meeting unless required by law or the Articles of
Incorporation.
2.6 Waiver of Notice. A director may at any time waive any notice required
by law, these Bylaws or the Articles of Incorporation. Except as set forth
below, the waiver must be in writing, be signed by the director entitled to the
notice, specify the meeting for which notice is waived and be filed with the
minutes or corporate records. A director's attendance at or participation in a
meeting waives any required notice to the director of the meeting unless the
director at the beginning of the meeting, or promptly upon the director's
arrival, objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.
2.7 Quorum. A majority of the number of directors set forth in Section 2.2
of these Bylaws shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors. If less than a quorum is present at a
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
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2.8 Manner of Acting. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors,
unless a different number is provided by law, the Articles of Incorporation or
these Bylaws.
2.9 Meeting by Telephone Conference; Action Without Meeting.
(1) Directors may participate in a regular or special meeting by, or
conduct the meeting through, use of any means of communications by which all
directors participating may simultaneously hear each other during the meeting.
Participation in a meeting by this means shall constitute presence in person at
the meeting.
(2) Any action that is required or permitted to be taken at a meeting
of the Board of Directors may be taken without a meeting if one or more written
consents describing the action taken are signed by all of the directors entitled
to vote on the matter and included in the minutes or filed with the corporate
records reflecting the action taken. The action shall be effective when the last
director signs the consent, unless the consent specifies an earlier or later
effective date.
2.10 Vacancies. Any vacancy on the Board of Directors, including a vacancy
resulting from an increase in the number of directors, may be filled by the
shareholders, the Board of Directors, the remaining directors if less than a
quorum (by the vote of a majority thereof) or by a sole remaining director. Any
vacancy not filled by the directors shall be filled by election at an annual
meeting or at a special meeting of shareholders called for that purpose. A
vacancy that will occur at a specified later date, by reason of a resignation or
otherwise, may be filled before the vacancy occurs, but the new director may not
take office until the vacancy occurs.
2.11 Compensation. By resolution of the Board of Directors, the directors
may be paid reasonable compensation for services as directors and their expenses
of attending meetings of the Board of Directors.
2.12 Presumption of Assent. A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors shall be deemed to
have assented to the action taken at the meeting unless (a) the director's
dissent or abstention from the action is entered in the minutes of the meeting,
(b) the director delivers a written notice of dissent or abstention to the
action to the presiding officer of the meeting before any adjournment or to the
Corporation immediately after the adjournment of the meeting or (c) the director
objects at the beginning of the meeting or promptly upon the director's arrival
to the holding of the meeting or transacting business at the meeting. The right
to dissent or abstain is not available to a director who voted in favor of the
action.
2.13 Removal. The shareholders may remove one or more directors with cause,
only if such removal is approved by a vote of the holders of two-thirds of the
votes entitled to be case on the matter, at a meeting called expressly for that
purpose.
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2.14 Resignation. Any director may resign by delivering written notice to
the Board of Directors, its chair or the Corporation. Unless the notice
specifies a later effective date, a resignation notice shall be effective upon
the earlier of (a) receipt, (b) five days after its deposit in the United States
mails, if mailed postpaid and correctly addressed, or (c) on the date shown on
the return receipt, if sent by registered or certified mail, return receipt
requested, and the receipt is signed by addressee. Once delivered, a resignation
notice is irrevocable unless revocation is permitted by the Board of Directors.
ARTICLE III
COMMITTEES OF THE BOARD
3.1 Committees. The Board of Directors may create one or more committees
and appoint members of the Board of Directors to serve on them. Each committee
shall have two or more members. The creation of a committee and appointment of
members to it must be approved by a majority of all directors in office when the
action is taken. Subject to any limitation imposed by the Board of Directors or
by law, each committee may exercise all the authority of the Board of Directors
in the management of the Corporation. A committee may not take any action that a
committee is prohibited from taking by the Oregon Business Corporation Act.
3.2 Changes of Size and Function. Subject to the provisions of law, the
Board of Directors shall have the power at any time to change the number of
committee members, fill committee vacancies, change any committee members and
change the functions and terminate the existence of a committee.
3.3 Conduct of Meetings. Each committee shall conduct its meetings in
accordance with the applicable provisions of these Bylaws relating to meetings
and action without meetings of the Board of Directors. Each committee shall
adopt any further rules regarding its conduct, keep minutes and other records
and appoint subcommittees and assistants as it deems appropriate.
3.4 Compensation. By resolution of the Board of Directors, committee
members may be paid reasonable compensation for services on committees and their
expenses of attending committee meetings.
ARTICLE IV
OFFICERS
4.1 Appointment. The Board of Directors at its first meeting following its
election each year shall appoint a Chair of the Board of Directors ("Chair of
the Board"), a
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President and a Secretary. The Board of Directors or the Chair of the Board may
appoint any other officers, assistant officers and agents. Any two or more
offices may be held by the same person.
4.2 Compensation. The Corporation may pay its officers reasonable
compensation for their services as fixed from time to time by the Board of
Directors or by the Chair of the Board with respect to officers appointed by the
Chair of the Board.
4.3 Term. The term of office of all officers commences upon their
appointment and continues until their successors are appointed or until their
resignation or removal.
4.4 Removal. Any officer or agent appointed by the Board of Directors or
the Chair of the Board may be removed by the Board of Directors at any time with
or without cause. Any officer or agent appointed by the Chair of the Board may
be removed by the Chair of the Board at any time with or without cause.
4.5 Chair of the Board. The Chair of the Board shall be the chief executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. The Chair of the Board may execute in behalf of the
Corporation all contracts, agreements, stock certificates and other instruments.
The Chair of the Board shall from time to time report to the Board of Directors
all matters within the Chair of the Board's knowledge which should be brought to
the attention of the Board of Directors. The Chair of the Board shall vote all
shares of stock in other corporations owned by the Corporation, and shall be
empowered to execute proxies, waivers of notice, consents and other instruments
in the name of the Corporation with respect to such stock. The Chair of the
Board shall preside at all meetings of the Board of Directors and shall perform
any duties and responsibilities prescribed from time to time by the Board of
Directors.
4.6 President. The President shall be the chief operating officer of the
Corporation and shall supervise the operations of the Corporation, subject to
the discretion of the Board of Directors and the Chair of the Board. The
President shall have any other duties and responsibilities prescribed by the
Board of Directors.
4.7 Vice Presidents. Each Vice President shall perform duties and
responsibilities prescribed by the Board of Directors or the Chair of the Board.
The Board of Directors or the Chair of the Board may confer a special title upon
a Vice President.
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4.8 Secretary.
(1) The Secretary shall record and keep the minutes of all meetings of
the directors and shareholders in one or more books provided for that purpose
and perform any duties prescribed by the Board of Directors or the Chair of the
Board.
(2) Any assistant secretary shall have the duties prescribed from time
to time by the Board of Directors, the Chair of the Board or the Secretary. In
the absence or disability of the Secretary, the Secretary's duties shall be
performed by an assistant secretary.
4.9 Chief Financial Officer. The Chief Financial Officer shall have charge
and custody and be responsible for all funds and securities of the Corporation
and shall have other duties as prescribed from time to time by the Board of
Directors, the Chair of the Board or the President.
ARTICLE V
INDEMNIFICATION
The Corporation shall indemnify to the fullest extent not prohibited by
law, any current or former director or officer of the Corporation who is made,
or threatened to be made, a party to an action, suit or proceeding, whether
civil, criminal, administrative, investigative or other (including an action,
suit or proceeding by or in the right of the Corporation) by reason of the fact
that such person is or was a director, officer, employee or agent of the
Corporation or a fiduciary within the meaning of the Employee Retirement Income
Security Act of 1974 with respect to any employee benefit plan of the Corpora
tion, or serves or served at the request of the Corporation as a director,
officer, employee or agent, or as a fiduciary of an employee benefit plan, of
another corporation, partnership, joint venture, trust or other enterprise. The
Corporation shall pay for or reimburse the reasonable expenses incurred by any
such current or former director or officer in any such proceeding in advance of
the final disposition of the proceeding if the person sets forth in writing (i)
the person's good faith belief that the person is entitled to indemnification
under this Article and (ii) the person's agreement to repay all advances if it
is ultimately determined that the person is not entitled to indemnification. No
amendment to these Bylaws that limits the Corporation's obligation to indemnify
any person shall have any effect on such obligation for any act or omission that
occurs prior to the later to occur of the effective date of the amendment or the
date notice of the amendment is given to the person. This Article shall not be
deemed exclusive of any other provisions for indemnification or advancement of
expenses of directors, officers, employees, agents and fiduciaries that may be
included in the Articles of Incorporation or any statute, agreement, general or
specific action of the Board of Directors, vote of shareholders or other
document or arrangement.
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ARTICLE VI
ISSUANCE OF SHARES
6.1 Adequacy of Consideration. Before the Corporation issues shares, the
Board of Directors shall determine that the consideration received or to be
received for the shares to be issued is adequate. The authorization by the Board
of Directors of the issuance of shares for stated consideration shall evidence a
determination by the Board that such consideration is adequate.
6.2 Certificates for Shares.
(1) Certificates representing shares of the Corporation shall be in
any form determined by the Board of Directors consistent with the requirements
of the Oregon Business Corporation Act and these Bylaws. The certificates shall
be signed, either manually or in facsimile, by two officers of the Corporation,
at least one of whom shall be the Chair of the Board, the President or a Vice
President, and may be sealed with the seal of the Corporation, if any, or a
facsimile thereof. All certificates for shares shall be consecutively numbered
or otherwise identified. The signatures of officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or any
assistant transfer agent or registered by a registrar, other than the
Corporation itself or an employee of the Corporation.
(2) Every certificate for shares of stock that are subject to any
restriction on transfer or registration of transfer pursuant to the Articles of
Incorporation, the Bylaws, securities laws, a shareholders agreement or any
agreement to which the Corporation is a party shall have conspicuously noted on
the face or back of the certificate either the full text of the restriction or a
statement of the existence of the restriction and that the Corporation retains a
copy of the full text. Every certificate issued when the Corporation is
authorized to issue more than one class or series within a class of shares shall
set forth on its face or back either (a) a summary of the designations, relative
rights, preferences and limitations of the shares of each class and the
variations in rights, prefer ences and limitations for each series authorized to
be issued and the authority of the Board of Directors to determine variations
for future series or (b) a statement of the existence of those designations,
relative rights, preferences and limitations and a statement that the
Corporation will furnish a copy thereof to the holder of the certificate upon
written request and without charge.
(3) All certificates surrendered to the Corporation for transfer shall
be canceled. The Corporation shall not issue a new certificate for previously
issued shares until the former certificate or certificates for those shares are
surrendered and canceled; except that in case of a lost, destroyed or mutilated
certificate, a new certificate may be issued on terms prescribed by the Board of
Directors.
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6.3 Transfer Agent and Registrar. The Board of Directors may from time to
time appoint one or more transfer agents and one or more registrars for the
shares of the Corporation, with powers and duties determined by the Board of
Directors.
6.4 Officer Ceasing to Act. If the person who signed a share certificate,
either manually or in facsimile, no longer holds office when the certificate is
issued, the certificate is nevertheless valid.
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS
7.1 Contracts. Except as otherwise provided by law, the Board of Directors
may authorize any officers or agents to execute and deliver any contract or
other instrument in the name of and on behalf of the Corporation, and this
authority may be general or confined to specific instances.
7.2 Loans. The Corporation shall not borrow money and no evidence of
indebtedness shall be issued in its name unless authorized by the Board of
Directors. This authority may be general or confined to specific instances.
7.3 Checks, Drafts, Etc. All checks, drafts or other orders for the payment
of money and notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed in the manner and by the officers or agents of the
Corporation designated by the Board of Directors.
7.4 Deposits. All funds of the Corporation not otherwise employed shall be
deposited to the credit of the Corporation in those banks, trust companies or
other depositaries as the Board of Directors or officers of the Corporation
designated by the Board of Directors select, or be invested as authorized by the
Board of Directors.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Severability. A determination that any provision of these Bylaws is for
any reason inapplicable, invalid, illegal or otherwise ineffective shall not
affect or invalidate any other provision of these Bylaws.
8.2 Amendments. These Bylaws may be amended or repealed and new Bylaws may
be adopted by the Board of Directors or the shareholders of the Corporation.
Adopted: March 30, 1994
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Amended: July 22, 1994
September 23, 1996
March 25, 1997
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MERIX CORPORATION
BYLAW AMENDMENTS
DATE SECTIONS COMMENT
07/22/94 Art. I, Section 1.1 Changed Date of
Annual Meeting
09/23/96 Art. I, Sections 1.2, 1.12 and 1.13 Changed Chairman to
Chair
Art. II, Sections 2.9 and 2.14
Art. IV, Sections 4.1, 4.2, 4.4, 4.5,
4.6, 4.7, 4.8(1) and (2) and 4.9
Art. VI, Section 6.2(1)
3/25/97 Art. I, Sections 1.4, 1.8(2), 1.12, Clarified meeting
1.13(1), (2) procedures and
and (4) notice requirements
Art. II, Section 2.5
15
AMENDED EXECUTIVE SEVERANCE AGREEMENT
December 5, 1996
Deborah A. Coleman
1414 SW Third Avenue, #2701
Portland, Oregon 97201 Executive
Merix Corporation
an Oregon corporation
PO Box 3000
Forest Grove, Oregon 97116 Merix
Merix considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of
Merix and its shareholders. In this connection, Merix recognizes that, as is the
case with many publicly held corporations, the possibility of a change of
control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of Merix and its shareholders. In order
to induce Executive to remain employed by Merix in the face of uncertainties
about the long-term strategies of Merix and possible change of control of Merix
and their potential impact on Executive's position with Merix, this Agreement,
which has been approved by the Board of Directors of Merix, sets forth the
severance benefits that Merix will provide to Executive in the event Executive's
employment by Merix is terminated under the circumstances described in this
Agreement.
1. Employment Relationship. Executive is currently employed by Merix as
Chair of the Board and Chief Executive Officer. Executive and Merix acknowledge
that either party may terminate this employment relationship at any time and for
any or no reason, subject to the obligation of Merix to provide the severance
benefits specified in this Agreement in accordance with the terms hereof.
2. Release of Claims. In consideration for and as a condition precedent to
receiving the severance benefits outlined in this Agreement, Executive agrees to
execute a Release of Claims in the appropriate form attached as Exhibit A
("Release of Claims"). Executive promises to execute and deliver the Release of
Claims to Merix within the later of (a) 45 days from the date Executive receives
the Release of Claims or (b) the last day of Executive's active employment.
<PAGE>
3. Compensation Upon Termination. In the event of a Termination of
Executive's Employment (as defined in Section 8.1) at any time other than for
Cause (as defined in Section 8.2 of this Agreement), death or Disability (as
defined in Section 8.4 of this Agreement), and contingent upon Executive's
execution of the Release of Claims and compliance with Section 10, Executive
shall be entitled to the following benefits:
3.1 As severance pay and in lieu of any other compensation for periods
subsequent to the date of termination, Merix shall pay Executive, in a single
payment after employment has entered and eight days have passed following
execution of the Release of Claims without revocation, an amount in cash equal
to two years of Executive's annual base pay at the rate in effect immediately
prior to the date of termination .
3.2 Executive is entitled to extend coverage under any group health
plan in which Executive and Executive's dependents are enrolled at the time of
termination of employment under the COBRA continuation laws for the 18-month
statutory period, or so long as Executive remains eligible under COBRA, plus six
months. Merix will pay Executive a lump sum payment in an amount equivalent to
the reasonably estimated cost Executive may incur to extend for a period of 18
months under the COBRA continuation laws (plus an additional six months)
Executive's group health and dental plan coverage in effect at the time of
termination. Executive may use this payment, as well as any payment made under
Section 3.1, for such continuation coverage or for any other purpose.
3.3 Executive shall be entitled to a portion of the benefits under any
annual cash incentive plans in effect at the time of termination equal to the
greater of (a) 50% of Executive's target benefit under such plan for the year or
(b) a prorated amount representing the portion of the plan year during which
Executive was a participant. For purposes of this Agreement, Executive's
participation in any such plan will be considered to have ended on Executive's
last day of active employment. In making the proration calculation, the amount
of Executive's award if Executive had been a participant for the full incentive
period shall be divided by the total number of days in the incentive period and
the result multiplied by the actual number of days Executive participated in the
plan. The payment amount shall be calculated at the end of the incentive period
and the amount shall not be due and payable by Merix to Executive until the date
that all awards are payable to other eligible employees after the close of the
incentive period, except that Executive may elect at any time after termination,
by written notice to Merix, to receive 50% of Executive's target benefit instead
of the prorated amount, in which case the payment shall be made within 20 days
of such election. If the applicable plan provides for a greater payment for a
participant whose employment terminates prior to the end of an incentive period,
the applicable plan payment shall be made.
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3.4 Merix will pay up to $12,500 to a third party outplacement firm
selected by Executive to provide career counseling assistance to Executive for a
period of one year following Executive's termination date. Executive may elect
to receive the $12,500 in cash in lieu of payment to a third party outplacement
firm.
3.5 All outstanding stock options, restricted stock, stock bonuses or
other stock awards shall be governed by the terms of the applicable agreement or
plan.
3.6 In the event that Executive's employment with Merix terminates for
any reason prior to a Change of Control (as defined in Section 8.3), other than
at the direction of a person who has entered into an agreement with Merix, the
consummation of which will constitute a Change of Control, Executive shall not
be entitled to benefits under Section 4 of this Agreement.
4. Additional Compensation Upon Termination Following A Change of Control.
In the event of a Termination of Executive's Employment other than for Cause,
death or Disability within 24 months following a Change of Control, or prior to
a Change of Control at the direction of a person who has entered into an
agreement with Merix, the consummation of which will constitute a Change of
Control, and contingent upon Executive's execution of the Release of Claims and
compliance with Sections 5 and 10, Executive shall be entitled to the following
benefits, which benefits shall be in addition to the benefits provided in
Section 3:
4.1 Executive shall be entitled to receive an amount such that the
amount payable pursuant to Section 3.3 plus the amount payable pursuant to this
Section 4.1 equals 100% of the Executive's target benefit for the year under
annual cash incentive plans in effect at the time of termination. The amount
payable pursuant to this Section 4.1 shall be paid within the latter of (a)
eight days after the last day of employment, including employment during the up
to the six months employment period referred to in Section 5 if Merix or the
surviving company has requested Executive to continue employment during such
period and (b) eight days after execution of the Release of Claims without
revocation.
4.2 Merix shall maintain in full force and effect, at its sole cost
and expense, for Executive's continued benefit for a period terminating 18
months after the date of termination a life insurance policy insuring
Executive's life with coverage equal to two times Executive's annual base pay in
effect immediately prior to termination, provided that Executive's continued
participation is possible under the general terms and provisions of such policy.
At Executive's election or in the event that Executive's continued participation
in such policy is barred, Merix shall make a lump sum payment to Executive equal
to the total premiums that would have been paid by Merix for such 18 month
period. The maximum amount that Merix shall be obligated to pay pursuant to this
Section 4.2 in premiums and payments to Executive shall be $5,000.
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4.3 The possibility of forfeiture to Merix of all stock issued to
Executive under all Executive Stock Bonus Agreements shall immediately lapse.
4.4 All outstanding stock options held by Executive under all stock
option and stock incentive plans of Merix shall become immediately exercisable
in full and shall remain exercisable until the earlier of (a) two years after
termination of employment or (b) the option expiration date as set forth in the
applicable option agreement.
4.5 Notwithstanding any provision in this Agreement, in the event that
Executive would receive a greater after-tax benefit from the Capped Benefit (as
defined in the next sentence) than from the payments pursuant to this Agreement
(the "Specified Benefits"), the Capped Benefit shall be paid to Executive and
the Specified Benefits shall not be paid. The Capped Benefit is the Specified
Benefits, reduced by the amount necessary to prevent any portion of the
Specified Benefits from being "parachute payments" as defined in section
280G(b)(2) of the Internal Revenue Code of 1986, as amended ("IRC"), or any
successor provision. For purposes of determining whether Executive would receive
a greater after-tax benefit from the Capped Benefit than from the Specified
Benefits, there shall be taken into account all payments and benefits Executive
will receive upon a change in control of the Company (collectively, excluding
the Specified Benefits, the "Change of Control Payments"). To determine whether
Executive's after-tax benefit from the Capped Benefit would be greater than
Executive's after-tax benefit from the Specified Benefits, there shall be
subtracted from the sum of the before-tax Specified Benefits and the Change of
Control Payments (including the monetary value of any non-cash benefits) any
excise tax that would be imposed under IRC ss. 4999 and all federal, state and
local taxes required to be paid by Executive in respect of the receipt of such
payments, assuming that such payments would be taxed at the highest marginal
rate applicable to individuals in the year in which the Specified Benefits are
to be paid or such lower rate as Executive advises Merix in writing is
applicable to Executive.
5. Additional Service. Executive agrees that, if requested by Merix or the
surviving company following a Change of Control, Executive will continue his or
her employment with Merix or the surviving company for a period of up to six
months following the Change of Control in any capacity requested by Merix or the
surviving company consistent with Executive's areas of professional expertise.
During this period Executive shall receive the same salary and substantially the
same benefits as in effect prior to the Change of Control. Executive shall not
be entitled to any benefits provided by Section 4 if Executive fails to perform
in accordance with this Section 5.
6. Tax Withholding; Subsequent Employment.
6.1 All payments provided for in this Agreement are subject to
applicable tax withholding obligations imposed by federal, state and local laws
and regulations.
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6.2 The amount of any payment provided for in this Agreement shall not
be reduced, offset or subject to recovery by Merix by reason of any compensation
earned by Executive as the result of employment by another employer after
termination.
7. Other Agreements. This Agreement replaces and supersedes the Executive
Severance Agreement dated June 1, 1994 between Executive and Merix. In the event
that severance benefits are payable to Executive under any other agreement with
Merix in effect at the time of termination (including but not limited to any
employment agreement, but excluding for this purpose any stock option agreement
or stock bonus agreement or stock appreciation right agreement that may provide
for accelerated vesting or related benefits upon the occurrence of a change in
control), the benefits provided in this Agreement shall not be payable to
Executive. Executive may, however, elect to receive all of the benefits provided
for in this Agreement in lieu of all of the benefits provided in all such other
agreements. Any such election shall be made with respect to the agreements as a
whole, and Executive cannot select some benefits from one agreement and other
benefits from this Agreement.
8. Definitions.
8.1 Termination of Executive's Employment. Termination of Executive's
Employment means that Merix has terminated Executive's employment with Merix
(including any subsidiary of Merix). For purposes of Sections 3 and 4, if
Executive is removed as Chief Executive Officer of Merix, such circumstances
shall constitute a Termination of Executive's Employment. For purposes of
Section 4, Termination of Executive's Employment shall also include termination
by Executive, within 24 months of a Change of Control, by written notice to
Merix referring to the applicable paragraph of Section 8.1, for "Good Reason"
based on:
(A) a reduction by Merix or the surviving company in Executive's
base pay as in effect immediately prior to the Change of Control;
(B) a significant reduction by Merix or the surviving company in
total benefits available to Executive under cash incentive, stock
incentive and other employee benefit plans after the Change of Control
compared to the total package of such benefits as in effect prior to
the Change of Control;
(C) Merix or the surviving company requires Executive to be based
more than 50 miles from where Executive's office is located
immediately prior to the Change of Control except for required travel
on company business to an extent substantially consistent with the
business travel obligations which Executive undertook on behalf of
Merix prior to the Change of Control; or
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(D) the failure by Merix to obtain from any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of Merix
("Successor") the assent to this Agreement contemplated by Section 9
hereof.
8.2 Cause. Termination of Executive's Employment for "Cause" shall
mean termination upon (a) the willful and continued failure by Executive to
perform substantially Executive's reasonably assigned duties with Merix (other
than any such failure resulting from Executive's incapacity due to physical or
mental illness) after a demand for substantial performance is delivered to
Executive by the Board, the Chief Executive Officer or the President of Merix
which specifically identifies the manner in which the Board or Merix believes
that Executive has not substantially performed Executive's duties or (b) the
willful engaging by Executive in illegal conduct which is materially and
demonstrably injurious to Merix. No act, or failure to act, on Executive's part
shall be considered "willful" unless done, or omitted to be done, by Executive
without reasonable belief that Executive's action or omission was in, or not
opposed to, the best interests of Merix. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for Merix shall be conclusively presumed to be done, or
omitted to be done, by Executive in the best interests of Merix.
8.3 Change of Control. A Change of Control shall mean that one of the
following events has taken place:
(A) The shareholders of Merix approve one of the following
("Approved Transactions"):
(i) Any merger or statutory plan of exchange involving Merix
("Merger") in which Merix is not the continuing or surviving
corporation or pursuant to which Common Stock would be converted into
cash, securities or other property, other than a Merger involving
Merix in which the holders of Common Stock immediately prior to the
Merger have the same proportionate ownership of Common Stock of the
surviving corporation after the Merger; or
(ii) Any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of Merix or the adoption of any plan
or proposal for the liquidation or dissolution;
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(B) A tender or exchange offer, other than one made by (i) Merix
or (ii) Tektronix, Inc. at a time when Merix is in default under any
of the Supply Agreements between Tektronix or any of its subsidiaries
and Merix, is made for Common Stock (or securities convertible into
Common Stock) and such offer results in a portion of those securities
being purchased and the offeror after the consummation of the offer is
the beneficial owner (as determined pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
directly or indirectly, of securities representing at least 20 percent
of the voting power of outstanding securities of Merix;
(C) Merix receives a report on Schedule 13D of the Exchange Act
reporting the beneficial ownership by any person (other than
Tektronix, Inc. or any of its affiliates) of securities representing
20 percent or more of the voting power of outstanding securities of
Merix, except that (i) if such receipt shall occur as the result of
sale of Common Stock (or securities convertible into Common Stock) by
Tektronix, Inc. or any of its affiliates, it shall not constitute a
Change of Control, or (ii) if such receipt shall occur during a tender
offer or exchange offer described in (B) above, a Change of Control
shall not take place until the conclusion of such offer; or
(D) During any period of 12 months or less, individuals who at
the beginning of such period constituted a majority of the Board of
Directors cease for any reason to constitute a majority thereof unless
the nomination or election of such new directors was approved by a
vote of at least two-thirds of the directors then still in office who
were directors at the beginning of such period.
Notwithstanding anything in the foregoing to the contrary, no Change of Control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in Executive, or a group of persons which includes
Executive, acquiring, directly or indirectly, securities representing 20 percent
or more of the voting power of outstanding securities of Merix.
8.4 Disability. Termination of Executive's Employment based on
"Disability" shall mean termination without further compensation under this
Agreement, due to Executive's absence from Executive's full-time duties with
Merix for 180 consecutive days as a result of Executive's incapacity due to
physical or mental illness, unless within 30 days after notice of termination by
Merix following such absence Executive shall have returned to the full-time
performance of Executive's duties.
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9. Successors; Binding Agreement.
9.1 This Agreement shall be binding on and inure to the benefit of
Merix and its Successors and assigns. Upon Executive's written request, Merix
will seek to have any Successor by agreement, assent to the fulfillment by Merix
of its obligations under this Agreement. If such a request is made, failure of
Merix to obtain such assent prior to or at the time a company becomes a
Successor shall constitute Good Reason for termination by Executive of his or
her employment and, if a Change of Control of the Company has occurred, shall
entitle Executive to the benefits pursuant to Section 4.
9.2 This Agreement shall inure to the benefit of and be enforceable by
Executive and Executive's legal representatives, executors, administrators and
heirs.
10. Resignation of Corporate Offices. Executive will resign Executive's
office, if any, as a director, officer or trustee of Merix, its subsidiaries or
affiliates and of any other corporation or trust of which Executive serves as
such at the request of Merix, effective as of the date of termination of
employment. Executive agrees to provide Merix such written resignation(s) upon
request and that no severance will be paid until after such resignation(s) are
provided.
11. Governing Law, Arbitration. This Agreement shall be construed in
accordance with and governed by the laws of the State of Oregon. Any dispute or
controversy arising under or in connection with this Agreement or the breach
thereof, shall be settled exclusively by arbitration under the Mutual Agreement
to Arbitrate Claims signed by the Executive, and judgment upon the award
rendered by the Arbitrator may be entered in any Court having jurisdiction
thereof. Notwithstanding any provision in the Mutual Agreement to Arbitrate
Claims, Merix shall pay all arbitration fees and reasonable attorney's fees and
expenses (including at trial and on appeal) of Executive in enforcing its rights
under this Agreement in the event of a Termination of Executive's Employment
within 24 months following a Change of Control.
12. Amendment. No provision of this Agreement may be modified unless such
modification is agreed to in a writing signed by Executive and Merix.
13. Severability. If any of the provisions or terms of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other terms of this Agreement, and this
Agreement shall be construed as if such unenforceable term had never been
contained in this Agreement.
MERIX CORPORATION
By: TERRI TIMBERMAN DEBRA COLEMAN
----------------------------------- ------------------------------------
Title: Vice President Executive
Human Resources
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EXHIBIT A
RELEASE OF CLAIMS
1. PARTIES.
The parties to Release of Claims (hereinafter "Release") are ______________
__________________ and Merix Corporation, an Oregon corporation, as hereinafter
defined.
1.1 EXECUTIVE.
For the purposes of this Release, "Executive" means __________________
___________________, and his or her attorneys, heirs, executors, administrators,
assigns, and spouse.
1.2 THE COMPANY.
For purposes of this Release the "Company" means Merix Corporation, an
Oregon corporation, its predecessors and successors, corporate affiliates, and
all of each corporation's officers, directors, employees, insurers, agents, or
assigns, in their individual and representative capacities.
2. BACKGROUND AND PURPOSE.
Executive was employed by Company. Executive's employment is ending
effective __________ [following a Change in Control as defined in Section 8.3
("Change in Control") of Amended Executive Severance Agreement ("Agreement")].
Executive has elected pursuant to the terms of Section 3.3 of the [Amended
Executive Severance Agreement ("Agreement")/Agreement] to receive [50 percent of
target/the applicable prorated amount] of Executive's annual cash incentive and
elected pursuant to Section 3.4 of the Agreement to [receive $12,500 (less
proper withholding) in lieu of outplacement services/have payments up to $12,500
paid directly to a third party outplacement firm.] [Pursuant to Section 4.2 of
the Agreement, Merix shall pay [the cash equivalent not exceeding $5,000 (less
proper withholding) of] the cost and expense of maintaining a life insurance
policy for the Executive's benefit for 18 months.]
The purpose of this Release is to settle, and the parties hereby settle,
fully and finally, any and all claims Executive may have against Company,
whether asserted or not, known or unknown, including, but not limited to, claims
arising out of or related to Executive's employment, any claim for reemployment,
or any other claims whether
A-1
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asserted or not, known or unknown, past or future, that relate to Executive's
employment, reemployment, or application for reemployment.
3. RELEASE.
Except as reserved in paragraphs 3 or 3.1, Executive waives, acquits and
forever discharges Company from any obligations Company has and all claims
Executive may have including but not limited to obligations and/or claims
arising from the Agreement or any other document or oral agreement relating to
employment compensation, benefits severance or post-employment issues. Except as
reserved in Paragraph 3.1, Executive hereby releases Company from any and all
claims, demands, actions, or causes of action, whether known or unknown, arising
from or related in any way to any employment of or past or future failure or
refusal to employ Executive by Company, or any other past or future claim
(except as reserved by this Release or where expressly prohibited by law) that
relates in any way to Executive's employment, compensation, benefits,
reemployment, or application for employment, with the exception of any claim
Executive may have against Company for enforcement of this Release. This release
includes any and all claims, direct or indirect, which might otherwise be made
under any applicable local, state or federal authority, including but not
limited to any claim arising under the Oregon statutes dealing with employment,
discrimination in employment, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and
Medical Leave Act of 1993, the Equal Pay Act of 1963, Executive Order 11246, the
Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Age Discrimination in Employment Act, the Fair Labor
Standards Act, Oregon wage and hour statutes, all as amended, any regulations
under such authorities, and any applicable contract, tort, or common law
theories.
3.1 Reservations of Rights.
This Release shall not affect any rights which Executive may have
under any medical insurance, disability plan, workers' compensation,
unemployment compensation, applicable company stock incentive plan(s),
indemnifications, or the 401(k) plan maintained by the Company.
3.2 No Admission of Liability.
It is understood and agreed that the acts done and evidenced hereby
and the release granted hereunder is not an admission of liability on the part
of Executive or Company, by whom liability has been and is expressly denied.
A-2
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4. CONSIDERATION TO EXECUTIVE.
After receipt of this Release fully endorsed by Executive, and the
expiration of the seven- (7) day revocation period provided by the Older Workers
Benefit Protection Act without Executive's revocation, Company shall pay:
a) the lump sum of ___________ DOLLARS ($__________ )to Executive
(less proper withholding) for severance and the reasonable estimate of COBRA
continuation coverage as provided in Section[s] 3.1, 3.2 [and 4.5] of the
Agreement;
b) Company will pay [up to $12,500 directly to the third party
outplacement firm selected by Executive for up to one year's outplacement
services as needed/$12,500 (less proper withholding) in lieu of outplacement
services;]
c) the amount of annual cash incentive when due based on the terms of
Section[s] 3.3 [and 4.1] of the Agreement [as elected by Executive];[and]
[d) [the cash equivalent (less proper withholding) of] the premium to
maintain Executive's life insurance plan for 18 months as provided in Section
4.3 of the Agreement.]
5. NO DISPARAGEMENT.
Executive agrees that henceforth Executive will not disparage or make false
or adverse statements about Company. The Company should report to Executive any
actions or statements that are attributed to Executive that the Company believes
are disparaging. The Company may take actions consistent with breach of this
Release should it determine that Executive has disparaged or made false or
adverse statements about Company. The Company agrees to follow the applicable
policy(ies) regarding release of employment reference information.
6. CONFIDENTIALITY, PROPRIETARY, TRADE SECRET AND RELATED INFORMATION.
Executive acknowledges the duty and agrees not to make unauthorized use or
disclosure of any confidential, proprietary or trade secret information learned
as an employee about Company, its products, customers and suppliers, and
covenants not to breach that duty. Moreover, Executive acknowledges that,
subject to the enforcement limitations of applicable law, the Company reserves
the right to enforce the terms of Executive's Employment Agreement with Company
and any paragraph(s) therein. Should Executive, Executive's attorney or agents
be requested in any judicial, administrative, or other proceeding to disclose
confidential, proprietary or trade secret information Executive
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learned as an employee of Company, Executive shall promptly notify the Company
of such request by the most expeditious means in order to enable the Company to
take any reasonable and appropriate action to limit such disclosure.
7. ARBITRATION OF CERTAIN DISPUTES.
Executive and Company agree that should the issue arise of whether either
party to this Agreement has failed to satisfy or has breached the terms of this
Agreement, any dispute regarding the issue, except for any claim excepted under
the Mutual Agreement to Arbitration Claims, shall be submitted to arbitration
pursuant to the Mutual Agreement to Arbitrate Claims signed by Executive. In
such event, [each party shall pay its own costs and attorneys'
fees/notwithstanding contrary language in the Mutual Agreement to Arbitrate
Claims, because this Release follows a Change in Control, the reasonable
attorneys fees incurred by Executive to seek enforcement of this Release shall
be paid by the Company].
8. SCOPE OF RELEASE.
The provisions of this Release shall be deemed to obligate, extend to, and
inure to the benefit of the parties; Company's parents, subsidiaries,
affiliates, successors, predecessors, assigns, directors, officers, and
employees; and each parties insurers, transferees, grantees, legatees, agents
and heirs, including those who may assume any and all of the above-described
capacities subsequent to the execution and effective date of this Release.
9. OPPORTUNITY FOR ADVICE OF COUNSEL.
Executive acknowledges that Executive has been encouraged to seek advice of
counsel with respect to this Release and has had the opportunity to do so.
10. ENTIRE RELEASE.
This Release, the Mutual Agreement to Arbitrate Claims, [as modified
herein] and the Employment Agreement signed by Executive contain the entire
agreement and understanding between the parties and, except as reserved in
paragraph 3 and 3.1, supersede and replace all prior agreements written or oral
including but not limited to the Agreement and the Executive Stock Bonus
Agreement, prior negotiations and proposed agreements, written or oral.
Executive and Company acknowledge that no other party, nor agent nor attorney of
any other party, has made any promise, representation, or
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<PAGE>
warranty, express or implied, not contained in this Release concerning the
subject matter of this Release to induce this Release, and Executive and Company
acknowledge that they have not executed this Release in reliance upon any such
promise, representation, or warranty not contained in this Release.
11. SEVERABILITY.
Every provision of this Release is intended to be severable. In the event
any term or provision of this Release is declared to be illegal or invalid for
any reason whatsoever by a court of competent jurisdiction or by final and
unappealed order of an administrative agency of competent jurisdiction, such
illegality or invalidity should not affect the balance of the terms and
provisions of this Release, which terms and provisions shall remain binding and
enforceable.
12. PARTIES MAY ENFORCE RELEASE.
Nothing in this Release shall operate to release or discharge any parties
to this Release or their successors, assigns, legatees, heirs, or personal
representatives from any rights, claims, or causes of action arising out of,
relating to, or connected with a breach of any obligation of any party contained
in this Release .
13. COSTS AND ATTORNEY'S FEES.
[The parties each agree to bear their own costs and attorneys' fees which
have been or may be incurred in connection with any matters released herein or
in connection with the negotiation and consummation of this Release. In the
event of any administrative or civil action to enforce the provisions of this
Release, the prevailing party shall be entitled to attorney fees and costs
through trial and/or on appeal. /Because this Release follows a Change of
Control, reasonable attorneys' fees which have been or may be incurred in
connection with any matters released herein or in connection with the
negotiation and consummation of this Release shall be paid by Company. In the
event of any administrative or civil action to enforce the provisions of this
Release, the Company shall pay Executive's reasonable attorneys' fees through
trial and/or on appeal.]
14. ACKNOWLEDGMENTS.
Executive acknowledges that the Release provides severance pay and benefits
which the Company would otherwise have no obligation to provide.
Executive acknowledges that Company has provided the following information:
(a) the class or group of employees offered the opportunity to obtain severance
benefits similar to those in the Release, (b) the eligibility factors required
to
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obtain severance benefits similar to those in the Release, (c) the time limits
required to obtain severance benefits similar to those in the Release, (d) the
job titles and ages of employees eligible or selected for severance benefits
similar to those in the Release, and (e) the ages of employees in the same
classification either not eligible or not selected.
15. REVOCATION.
As provided by the Older Workers Benefit Protection Act, Executive's is
entitled to have forty-five (45) days to consider this Release. For a period of
seven (7) days from execution of this Release, Executive may revoke this
Release. Upon receipt of Executive's signed Release and the end of the
revocation period, payment by Company as described in paragraph 4 above will be
forwarded by mail in a timely manner as provided herein.
_______________________________________ Dated: __________ __, 199_
[Name of Executive]
STATE OF OREGON )
) ss.
County of _________ )
Personally appeared the above named and acknowledged the foregoing
instrument to be his or her voluntary act and deed.
Before me: ____________________________________
Notary Public for __________________
My commission expires: _____________
MERIX CORPORATION
By: ___________________________________ Dated: _______________________
Its: __________________________________
On Behalf of "Company"
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<PAGE>
AMENDMENT NO. 1 TO
EXECUTIVE NONSTATUTORY STOCK OPTION AGREEMENT
In connection with the approval of an Amended Executive Severance
Agreement by the Board of Directors of Merix Corporation (the "Company") and the
execution of such agreement by the Company and Deborah A. Coleman ("Optionee"),
the Company and Optionee agree to amend as follows all Executive Nonstatutory
Stock Option Agreements between the Company and Optionee in effect on the date
hereof:
1. Paragraph 10 of Exhibit A is amended to read in its entirety as follows:
"The terms of the Option are subject to the special
acceleration provisions set forth in the Amended Executive
Severance Agreement between the Company and Optionee."
2. All references in Exhibit A to "paragraph 10" are deleted.
DATED: December 5, 1996 MERIX CORPORATION
By TERRI TIMBERMAN
--------------------------------------
Title V.P. Human Resources
-----------------------------------
DEBRA COLEMAN
-----------------------------------------
Optionee
<PAGE>
AMENDMENT NO. 1 TO
EXECUTIVE STOCK BONUS AGREEMENT
In connection with the approval of an Amended Executive Severance
Agreement by the Board of Directors of Merix Corporation ("Merix") and the
execution of such agreement by Merix and Deborah A. Coleman ("Executive"), Merix
and Executive agree to amend as follows all Executive Stock Bonus Agreements
between Merix and Executive in effect on the date hereof:
1. The last sentence of Section 1 is amended to read in its entirety as follows:
"The Bonus Shares are also subject to the special
acceleration provisions set forth in the Amended Executive
Severance Agreement between Merix and Executive (the
"Severance Agreement")."
2. In the first sentence of Section 2.1, the words "except as otherwise provided
in Section 6 below" are amended to read as "except as otherwise provided in the
Severance Agreement".
3. Section 6 is deleted in its entirety, and Sections 7 and 8 are renumbered as
Sections 6 and 7, respectively.
DATED: December 5, 1996 MERIX CORPORATION
By TERRI TIMBERMAN
--------------------------------------
Title V.P. Human Resources
--------------------------------
DEBRA COLEMAN
-----------------------------------------
Executive
AMENDED EXECUTIVE SEVERANCE AGREEMENT
December 5, 1996
Teri L. Timberman
3920 SW 96th Street
Portland, Oregon 97225 Executive
Merix Corporation
an Oregon corporation
PO Box 3000
Forest Grove, Oregon 97116 Merix
Merix considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of
Merix and its shareholders. In this connection, Merix recognizes that, as is the
case with many publicly held corporations, the possibility of a change of
control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of Merix and its shareholders. In order
to induce Executive to remain employed by Merix in the face of uncertainties
about the long-term strategies of Merix and possible change of control of Merix
and their potential impact on Executive's position with Merix, this Agreement,
which has been approved by the Board of Directors of Merix, sets forth the
severance benefits that Merix will provide to Executive in the event Executive's
employment by Merix is terminated under the circumstances described in this
Agreement.
1. Employment Relationship. Executive is currently employed by Merix as
Vice President, Human Resources. Executive and Merix acknowledge that either
party may terminate this employment relationship at any time and for any or no
reason, subject to the obligation of Merix to provide the severance benefits
specified in this Agreement in accordance with the terms hereof.
2. Release of Claims. In consideration for and as a condition precedent to
receiving the severance benefits outlined in this Agreement, Executive agrees to
execute a Release of Claims in the appropriate form attached as Exhibit A
("Release of Claims"). Executive promises to execute and deliver the Release of
Claims to Merix within the later of (a) 45 days from the date Executive receives
the Release of Claims or (b) the last day of Executive's active employment.
<PAGE>
3. Compensation Upon Termination. In the event of a Termination of
Executive's Employment (as defined in Section 8.1) at any time other than for
Cause (as defined in Section 8.2 of this Agreement), death or Disability (as
defined in Section 8.4 of this Agreement), and contingent upon Executive's
execution of the Release of Claims and compliance with Section 10, Executive
shall be entitled to the following benefits:
3.1 As severance pay and in lieu of any other compensation for periods
subsequent to the date of termination, Merix shall pay Executive, in a single
payment after employment has entered and eight days have passed following
execution of the Release of Claims without revocation, an amount in cash equal
to one year of Executive's annual base pay at the rate in effect immediately
prior to the date of termination .
3.2 Executive is entitled to extend coverage under any group health
plan in which Executive and Executive's dependents are enrolled at the time of
termination of employment under the COBRA continuation laws for the 18-month
statutory period, or so long as Executive remains eligible under COBRA. Merix
will pay Executive a lump sum payment in an amount equivalent to the reasonably
estimated cost Executive may incur to extend for a period of 18 months under the
COBRA continuation laws Executive's group health and dental plan coverage in
effect at the time of termination. Executive may use this payment, as well as
any payment made under Section 3.1, for such COBRA continuation coverage or for
any other purpose.
3.3 Executive shall be entitled to a portion of the benefits under any
annual cash incentive plans in effect at the time of termination equal to the
greater of (a) 50% of Executive's target benefit under such plan for the year or
(b) a prorated amount representing the portion of the plan year during which
Executive was a participant. For purposes of this Agreement, Executive's
participation in any such plan will be considered to have ended on Executive's
last day of active employment. In making the proration calculation, the amount
of Executive's award if Executive had been a participant for the full incentive
period shall be divided by the total number of days in the incentive period and
the result multiplied by the actual number of days Executive participated in the
plan. The payment amount shall be calculated at the end of the incentive period
and the amount shall not be due and payable by Merix to Executive until the date
that all awards are payable to other eligible employees after the close of the
incentive period, except that Executive may elect at any time after termination,
by written notice to Merix, to receive 50% of Executive's target benefit instead
of the prorated amount, in which case the payment shall be made within 20 days
of such election. If the applicable plan provides for a greater payment for a
participant whose employment terminates prior to the end of an incentive period,
the applicable plan payment shall be made.
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3.4 Merix will pay up to $12,500 to a third party outplacement firm
selected by Executive to provide career counseling assistance to Executive for a
period of one year following Executive's termination date. Executive may elect
to receive the $12,500 in cash in lieu of payment to a third party outplacement
firm.
3.5 All outstanding stock options, restricted stock, stock bonuses or
other stock awards shall be governed by the terms of the applicable agreement or
plan.
3.6 In the event that Executive's employment with Merix terminates for
any reason prior to a Change of Control (as defined in Section 8.3), other than
at the direction of a person who has entered into an agreement with Merix, the
consummation of which will constitute a Change of Control, Executive shall not
be entitled to benefits under Section 4 of this Agreement.
4. Additional Compensation Upon Termination Following A Change of Control.
In the event of a Termination of Executive's Employment other than for Cause,
death or Disability within 24 months following a Change of Control, or prior to
a Change of Control at the direction of a person who has entered into an
agreement with Merix, the consummation of which will constitute a Change of
Control, and contingent upon Executive's execution of the Release of Claims and
compliance with Sections 5 and 10, Executive shall be entitled to the following
benefits, which benefits shall be in addition to the benefits provided in
Section 3:
4.1 Merix shall pay Executive, in a single payment within the latter
of (a) eight days after the last day of employment, including employment during
the up to the six months employment period referred to in Section 5 if Merix or
the surviving company has requested Executive to continue employment during such
period and (b) eight days after execution of the Release of Claims without
revocation, an amount in cash equal to one year of Executive's annual base
compensation at the rate in effect immediately prior to the date of termination.
4.2 Executive shall be entitled to receive an amount such that the
amount payable pursuant to Section 3.3 plus the amount payable pursuant to this
Section 4.2 equals 100% of the Executive's target benefit for the year under
annual cash incentive plans in effect at the time of termination. The amount
payable pursuant to Section 4.2 shall be paid on the same date that the Section
4.1 payment is payable.
4.3 Merix shall maintain in full force and effect, at its sole cost
and expense, for Executive's continued benefit for a period terminating 18
months after the date of termination a life insurance policy insuring
Executive's life with coverage equal to two times Executive's annual base pay in
effect immediately prior to termination, provided that Executive's continued
participation is possible under the general terms and provisions of such policy.
At Executive's election or in the event that Executive's continued participation
in such policy is barred, Merix shall make a lump sum payment to
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Executive equal to the total premiums that would have been paid by Merix for
such 18 month period. The maximum amount that Merix shall be obligated to pay
pursuant to this Section 4.3 in premiums and payments to Executive shall be
$5,000.
4.4 The possibility of forfeiture to Merix of all stock issued to
Executive under all Executive Stock Bonus Agreements shall immediately lapse.
4.5 All outstanding stock options held by Executive under all stock
option and stock incentive plans of Merix shall become immediately exercisable
in full and shall remain exercisable until the earlier of (a) two years after
termination of employment or (b) the option expiration date as set forth in the
applicable option agreement.
4.6 Notwithstanding any provision in this Agreement, in the event that
Executive would receive a greater after-tax benefit from the Capped Benefit (as
defined in the next sentence) than from the payments pursuant to this Agreement
(the "Specified Benefits"), the Capped Benefit shall be paid to Executive and
the Specified Benefits shall not be paid. The Capped Benefit is the Specified
Benefits, reduced by the amount necessary to prevent any portion of the
Specified Benefits from being "parachute payments" as defined in section
280G(b)(2) of the Internal Revenue Code of 1986, as amended ("IRC"), or any
successor provision. For purposes of determining whether Executive would receive
a greater after-tax benefit from the Capped Benefit than from the Specified
Benefits, there shall be taken into account all payments and benefits Executive
will receive upon a change in control of the Company (collectively, excluding
the Specified Benefits, the "Change of Control Payments"). To determine whether
Executive's after-tax benefit from the Capped Benefit would be greater than
Executive's after-tax benefit from the Specified Benefits, there shall be
subtracted from the sum of the before-tax Specified Benefits and the Change of
Control Payments (including the monetary value of any non-cash benefits) any
excise tax that would be imposed under IRC ss. 4999 and all federal, state and
local taxes required to be paid by Executive in respect of the receipt of such
payments, assuming that such payments would be taxed at the highest marginal
rate applicable to individuals in the year in which the Specified Benefits are
to be paid or such lower rate as Executive advises Merix in writing is
applicable to Executive.
5. Additional Service. Executive agrees that, if requested by Merix or the
surviving company following a Change of Control, Executive will continue his or
her employment with Merix or the surviving company for a period of up to six
months following the Change of Control in any capacity requested by Merix or the
surviving company consistent with Executive's areas of professional expertise.
During this period Executive shall receive the same salary and substantially the
same benefits as in effect prior to the Change of Control. Executive shall not
be entitled to any benefits provided by Section 4 if Executive fails to perform
in accordance with this Section 5.
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6. Tax Withholding; Subsequent Employment.
6.1 All payments provided for in this Agreement are subject to
applicable tax withholding obligations imposed by federal, state and local laws
and regulations.
6.2 The amount of any payment provided for in this Agreement shall not
be reduced, offset or subject to recovery by Merix by reason of any compensation
earned by Executive as the result of employment by another employer after
termination.
7. Other Agreements. This Agreement replaces and supersedes the Executive
Severance Agreement dated June 1, 1994 between Executive and Merix. In the event
that severance benefits are payable to Executive under any other agreement with
Merix in effect at the time of termination (including but not limited to any
employment agreement, but excluding for this purpose any stock option agreement
or stock bonus agreement or stock appreciation right agreement that may provide
for accelerated vesting or related benefits upon the occurrence of a change in
control), the benefits provided in this Agreement shall not be payable to
Executive. Executive may, however, elect to receive all of the benefits provided
for in this Agreement in lieu of all of the benefits provided in all such other
agreements. Any such election shall be made with respect to the agreements as a
whole, and Executive cannot select some benefits from one agreement and other
benefits from this Agreement.
8. Definitions.
8.1 Termination of Executive's Employment. Termination of Executive's
Employment means that Merix has terminated Executive's employment with Merix
(including any subsidiary of Merix). For purposes of Section 3, if Executive is
assigned additional or different titles, tasks or responsibilities from those
currently held or assigned, consistent with Executive's areas of professional
expertise and with no decrease in annual base compensation, whether at Merix or
any subsidiary of Merix, such circumstances shall not constitute a Termination
of Executive's Employment. For purposes of Section 4, Termination of Executive's
Employment shall include termination by Executive, within 24 months of a Change
of Control, by written notice to Merix referring to the applicable paragraph of
Section 8.1, for "Good Reason" based on:
(A) the assignment to Executive of a different title, job or
responsibilities that results in a decrease in the level of
responsibility of Executive with respect to the surviving company
after the Change of Control when compared to Executive's level of
responsibility for Merix' operations prior to the Change of Control;
provided that Good Reason shall not exist if Executive continues to
have the same
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or a greater general level of responsibility for the former Merix
operations after the Change of Control as Executive had prior to the
Change of Control even if the former Merix operations are a subsidiary
or division of the surviving company;
(B) a reduction by Merix or the surviving company in Executive's
base pay as in effect immediately prior to the Change of Control;
(C) a significant reduction by Merix or the surviving company in
total benefits available to Executive under cash incentive, stock
incentive and other employee benefit plans after the Change of Control
compared to the total package of such benefits as in effect prior to
the Change of Control;
(D) Merix or the surviving company requires Executive to be based
more than 50 miles from where Executive's office is located
immediately prior to the Change of Control except for required travel
on company business to an extent substantially consistent with the
business travel obligations which Executive undertook on behalf of
Merix prior to the Change of Control; or
(E) the failure by Merix to obtain from any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of Merix
("Successor") the assent to this Agreement contemplated by Section 9
hereof.
8.2 Cause. Termination of Executive's Employment for "Cause" shall
mean termination upon (a) the willful and continued failure by Executive to
perform substantially Executive's reasonably assigned duties with Merix (other
than any such failure resulting from Executive's incapacity due to physical or
mental illness) after a demand for substantial performance is delivered to
Executive by the Board, the Chief Executive Officer or the President of Merix
which specifically identifies the manner in which the Board or Merix believes
that Executive has not substantially performed Executive's duties or (b) the
willful engaging by Executive in illegal conduct which is materially and
demonstrably injurious to Merix. No act, or failure to act, on Executive's part
shall be considered "willful" unless done, or omitted to be done, by Executive
without reasonable belief that Executive's action or omission was in, or not
opposed to, the best interests of Merix. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for Merix shall be conclusively presumed to be done, or
omitted to be done, by Executive in the best interests of Merix.
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8.3 Change of Control. A Change of Control shall mean that one of the
following events has taken place:
(A) The shareholders of Merix approve one of the following
("Approved Transactions"):
(i) Any merger or statutory plan of exchange involving Merix
("Merger") in which Merix is not the continuing or surviving
corporation or pursuant to which Common Stock would be converted into
cash, securities or other property, other than a Merger involving
Merix in which the holders of Common Stock immediately prior to the
Merger have the same proportionate ownership of Common Stock of the
surviving corporation after the Merger; or
(ii) Any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of Merix or the adoption of any plan
or proposal for the liquidation or dissolution;
(B) A tender or exchange offer, other than one made by (i) Merix
or (ii) Tektronix, Inc. at a time when Merix is in default under any
of the Supply Agreements between Tektronix or any of its subsidiaries
and Merix, is made for Common Stock (or securities convertible into
Common Stock) and such offer results in a portion of those securities
being purchased and the offeror after the consummation of the offer is
the beneficial owner (as determined pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
directly or indirectly, of securities representing at least 20 percent
of the voting power of outstanding securities of Merix;
(C) Merix receives a report on Schedule 13D of the Exchange Act
reporting the beneficial ownership by any person (other than
Tektronix, Inc. or any of its affiliates) of securities representing
20 percent or more of the voting power of outstanding securities of
Merix, except that (i) if such receipt shall occur as the result of
sale of Common Stock (or securities convertible into Common Stock) by
Tektronix, Inc. or any of its affiliates, it shall not constitute a
Change of Control, or (ii) if such receipt shall occur during a tender
offer or exchange offer described in (B) above, a Change of Control
shall not take place until the conclusion of such offer; or
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(D) During any period of 12 months or less, individuals who at
the beginning of such period constituted a majority of the Board of
Directors cease for any reason to constitute a majority thereof unless
the nomination or election of such new directors was approved by a
vote of at least two-thirds of the directors then still in office who
were directors at the beginning of such period.
Notwithstanding anything in the foregoing to the contrary, no Change of Control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in Executive, or a group of persons which includes
Executive, acquiring, directly or indirectly, securities representing 20 percent
or more of the voting power of outstanding securities of Merix.
8.4 Disability. Termination of Executive's Employment based on
"Disability" shall mean termination without further compensation under this
Agreement, due to Executive's absence from Executive's full-time duties with
Merix for 180 consecutive days as a result of Executive's incapacity due to
physical or mental illness, unless within 30 days after notice of termination by
Merix following such absence Executive shall have returned to the full-time
performance of Executive's duties.
9. Successors; Binding Agreement.
9.1 This Agreement shall be binding on and inure to the benefit of
Merix and its Successors and assigns. Upon Executive's written request, Merix
will seek to have any Successor by agreement, assent to the fulfillment by Merix
of its obligations under this Agreement. If such a request is made, failure of
Merix to obtain such assent prior to or at the time a company becomes a
Successor shall constitute Good Reason for termination by Executive of his or
her employment and, if a Change of Control of the Company has occurred, shall
entitle Executive to the benefits pursuant to Section 4.
9.2 This Agreement shall inure to the benefit of and be enforceable by
Executive and Executive's legal representatives, executors, administrators and
heirs.
10. Resignation of Corporate Offices. Executive will resign Executive's
office, if any, as a director, officer or trustee of Merix, its subsidiaries or
affiliates and of any other corporation or trust of which Executive serves as
such at the request of Merix, effective as of the date of termination of
employment. Executive agrees to provide Merix such written resignation(s) upon
request and that no severance will be paid until after such resignation(s) are
provided.
11. Governing Law, Arbitration. This Agreement shall be construed in
accordance with and governed by the laws of the State of Oregon. Any dispute or
controversy arising under or in connection with this Agreement or the breach
thereof, shall be settled exclusively by arbitration under the Mutual Agreement
to Arbitrate Claims
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signed by the Executive, and judgment upon the award rendered by the Arbitrator
may be entered in any Court having jurisdiction thereof. Notwithstanding any
provision in the Mutual Agreement to Arbitrate Claims, Merix shall pay all
arbitration fees and reasonable attorney's fees and expenses (including at trial
and on appeal) of Executive in enforcing its rights under this Agreement in the
event of a Termination of Executive's Employment within 24 months following a
Change of Control.
12. Amendment. No provision of this Agreement may be modified unless such
modification is agreed to in a writing signed by Executive and Merix.
13. Severability. If any of the provisions or terms of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other terms of this Agreement, and this
Agreement shall be construed as if such unenforceable term had never been
contained in this Agreement.
MERIX CORPORATION
By: SAMUEL R. DESIMONE, JR. TERRI TIMBERMAN
------------------------------ ------------------------------
Title: V.P. CORP. DEV. Executive
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EXHIBIT A
RELEASE OF CLAIMS
1. PARTIES.
The parties to Release of Claims (hereinafter "Release") are ______________
_________________ and Merix Corporation, an Oregon corporation, as hereinafter
defined.
1.1 EXECUTIVE.
For the purposes of this Release, "Executive" means __________________
__________________, and his or her attorneys, heirs, executors, administrators,
assigns, and spouse.
1.2 THE COMPANY.
For purposes of this Release the "Company" means Merix Corporation, an
Oregon corporation, its predecessors and successors, corporate affiliates, and
all of each corporation's officers, directors, employees, insurers, agents, or
assigns, in their individual and representative capacities.
2. BACKGROUND AND PURPOSE.
Executive was employed by Company. Executive's employment is ending
effective __________ [following a Change in Control as defined in Section 8.3
("Change in Control") of Amended Executive Severance Agreement ("Agreement")].
Executive has elected pursuant to the terms of Section 3.3 of the [Amended
Executive Severance Agreement ("Agreement")/Agreement] to receive [50 percent of
target/the applicable prorated amount] of Executive's annual cash incentive and
elected pursuant to Section 3.4 of the Agreement to [receive $12,500 (less
proper withholding) in lieu of outplacement services/have payments up to $12,500
paid directly to a third party outplacement firm.] [Pursuant to Section 4.3 of
the Agreement, Merix shall pay [the cash equivalent not exceeding $5,000 (less
proper withholding) of] the cost and expense of maintaining a life insurance
policy for the Executive's benefit for 18 months.]
The purpose of this Release is to settle, and the parties hereby
settle, fully and finally, any and all claims Executive may have against
Company, whether asserted or not, known or unknown, including, but not limited
to, claims arising out of or related to Executive's employment, any claim for
reemployment, or any other claims whether
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asserted or not, known or unknown, past or future, that relate to Executive's
employment, reemployment, or application for reemployment.
3. RELEASE.
Except as reserved in paragraphs 3 or 3.1, Executive waives, acquits and
forever discharges Company from any obligations Company has and all claims
Executive may have including but not limited to obligations and/or claims
arising from the Agreement or any other document or oral agreement relating to
employment compensation, benefits severance or post-employment issues. Except as
reserved in Paragraph 3.1, Executive hereby releases Company from any and all
claims, demands, actions, or causes of action, whether known or unknown, arising
from or related in any way to any employment of or past or future failure or
refusal to employ Executive by Company, or any other past or future claim
(except as reserved by this Release or where expressly prohibited by law) that
relates in any way to Executive's employment, compensation, benefits,
reemployment, or application for employment, with the exception of any claim
Executive may have against Company for enforcement of this Release. This release
includes any and all claims, direct or indirect, which might otherwise be made
under any applicable local, state or federal authority, including but not
limited to any claim arising under the Oregon statutes dealing with employment,
discrimination in employment, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and
Medical Leave Act of 1993, the Equal Pay Act of 1963, Executive Order 11246, the
Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Age Discrimination in Employment Act, the Fair Labor
Standards Act, Oregon wage and hour statutes, all as amended, any regulations
under such authorities, and any applicable contract, tort, or common law
theories.
3.1 Reservations of Rights.
This Release shall not affect any rights which Executive may have
under any medical insurance, disability plan, workers' compensation,
unemployment compensation, applicable company stock incentive plan(s),
indemnifications, or the 401(k) plan maintained by the Company.
3.2 No Admission of Liability.
It is understood and agreed that the acts done and evidenced hereby
and the release granted hereunder is not an admission of liability on the part
of Executive or Company, by whom liability has been and is expressly denied.
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4. CONSIDERATION TO EXECUTIVE.
After receipt of this Release fully endorsed by Executive, and the
expiration of the seven- (7) day revocation period provided by the Older Workers
Benefit Protection Act without Executive's revocation, Company shall pay:
a) the lump sum of ___________ DOLLARS ($__________ )to Executive
(less proper withholding) for severance and the reasonable estimate of COBRA
continuation coverage as provided in Section[s] 3.1, 3.2 [and 4.1 and 4.6] of
the Agreement;
b) Company will pay [up to $12,500 directly to the third party
outplacement firm selected by Executive for up to one year's outplacement
services as needed/$12,500 (less proper withholding) in lieu of outplacement
services;]
c) the amount of annual cash incentive when due based on the terms of
Section[s] 3.3 [and 4.2] of the Agreement [as elected by Executive];[and]
[d) [the cash equivalent (less proper withholding) of] the premium to
maintain Executive's life insurance plan for 18 months as provided in Section
4.3 of the Agreement.]
5. NO DISPARAGEMENT.
Executive agrees that henceforth Executive will not disparage or make
false or adverse statements about Company. The Company should report to
Executive any actions or statements that are attributed to Executive that the
Company believes are disparaging. The Company may take actions consistent with
breach of this Release should it determine that Executive has disparaged or made
false or adverse statements about Company. The Company agrees to follow the
applicable policy(ies) regarding release of employment reference information.
6. CONFIDENTIALITY, PROPRIETARY, TRADE SECRET AND RELATED
INFORMATION.
Executive acknowledges the duty and agrees not to make unauthorized
use or disclosure of any confidential, proprietary or trade secret information
learned as an employee about Company, its products, customers and suppliers, and
covenants not to breach that duty. Moreover, Executive acknowledges that,
subject to the enforcement limitations of applicable law, the Company reserves
the right to enforce the terms of Executive's Employment Agreement with Company
and any paragraph(s) therein. Should Executive, Executive's attorney or agents
be requested in any judicial, administrative, or
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other proceeding to disclose confidential, proprietary or trade secret
information Executive learned as an employee of Company, Executive shall
promptly notify the Company of such request by the most expeditious means in
order to enable the Company to take any reasonable and appropriate action to
limit such disclosure.
7. ARBITRATION OF CERTAIN DISPUTES.
Executive and Company agree that should the issue arise of whether
either party to this Agreement has failed to satisfy or has breached the terms
of this Agreement, any dispute regarding the issue, except for any claim
excepted under the Mutual Agreement to Arbitration Claims, shall be submitted to
arbitration pursuant to the Mutual Agreement to Arbitrate Claims signed by
Executive. In such event, [each party shall pay its own costs and attorneys'
fees/notwithstanding contrary language in the Mutual Agreement to Arbitrate
Claims, because this Release follows a Change in Control, the reasonable
attorneys fees incurred by Executive to seek enforcement of this Release shall
be paid by the Company].
8. SCOPE OF RELEASE.
The provisions of this Release shall be deemed to obligate, extend to,
and inure to the benefit of the parties; Company's parents, subsidiaries,
affiliates, successors, predecessors, assigns, directors, officers, and
employees; and each parties insurers, transferees, grantees, legatees, agents
and heirs, including those who may assume any and all of the above-described
capacities subsequent to the execution and effective date of this Release.
9. OPPORTUNITY FOR ADVICE OF COUNSEL.
Executive acknowledges that Executive has been encouraged to seek
advice of counsel with respect to this Release and has had the opportunity to do
so.
10. ENTIRE RELEASE.
This Release, the Mutual Agreement to Arbitrate Claims, [as modified
herein] and the Employment Agreement signed by Executive contain the entire
agreement and understanding between the parties and, except as reserved in
paragraph 3 and 3.1, supersede and replace all prior agreements written or oral
including but not limited to the Agreement and the Executive Stock Bonus
Agreement, prior negotiations and proposed agreements, written or oral.
Executive and Company acknowledge that no other party, nor agent nor attorney of
any other party, has made any promise, representation, or
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warranty, express or implied, not contained in this Release concerning the
subject matter of this Release to induce this Release, and Executive and Company
acknowledge that they have not executed this Release in reliance upon any such
promise, representation, or warranty not contained in this Release.
11. SEVERABILITY.
Every provision of this Release is intended to be severable. In the
event any term or provision of this Release is declared to be illegal or invalid
for any reason whatsoever by a court of competent jurisdiction or by final and
unappealed order of an administrative agency of competent jurisdiction, such
illegality or invalidity should not affect the balance of the terms and
provisions of this Release, which terms and provisions shall remain binding and
enforceable.
12. PARTIES MAY ENFORCE RELEASE.
Nothing in this Release shall operate to release or discharge any
parties to this Release or their successors, assigns, legatees, heirs, or
personal representatives from any rights, claims, or causes of action arising
out of, relating to, or connected with a breach of any obligation of any party
contained in this Release .
13. COSTS AND ATTORNEY'S FEES.
[The parties each agree to bear their own costs and attorneys' fees
which have been or may be incurred in connection with any matters released
herein or in connection with the negotiation and consummation of this Release.
In the event of any administrative or civil action to enforce the provisions of
this Release, the prevailing party shall be entitled to attorney fees and costs
through trial and/or on appeal. /Because this Release follows a Change of
Control, reasonable attorneys' fees which have been or may be incurred in
connection with any matters released herein or in connection with the
negotiation and consummation of this Release shall be paid by Company. In the
event of any administrative or civil action to enforce the provisions of this
Release, the Company shall pay Executive's reasonable attorneys' fees through
trial and/or on appeal.]
14. ACKNOWLEDGMENTS.
Executive acknowledges that the Release provides severance pay and
benefits which the Company would otherwise have no obligation to provide.
Executive acknowledges that Company has provided the following
information: (a) the class or group of employees offered the opportunity to
obtain severance benefits similar to those in the Release, (b) the eligibility
factors required to
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obtain severance benefits similar to those in the Release, (c) the time limits
required to obtain severance benefits similar to those in the Release, (d) the
job titles and ages of employees eligible or selected for severance benefits
similar to those in the Release, and (e) the ages of employees in the same
classification either not eligible or not selected.
15. REVOCATION.
As provided by the Older Workers Benefit Protection Act, Executive's
is entitled to have forty-five (45) days to consider this Release. For a period
of seven (7) days from execution of this Release, Executive may revoke this
Release. Upon receipt of Executive's signed Release and the end of the
revocation period, payment by Company as described in paragraph 4 above will be
forwarded by mail in a timely manner as provided herein.
_______________________________________ Dated: __________ __, 199_
[Name of Executive]
STATE OF OREGON )
) ss.
County of _________ )
Personally appeared the above named and acknowledged the foregoing
instrument to be his or her voluntary act and deed.
Before me: ___________________________________
Notary Public for _________________
My commission expires: ____________
MERIX CORPORATION
By: ______________________________ Dated: ____________________________
Its: _____________________________
On Behalf of "Company"
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<PAGE>
AMENDMENT NO. 1 TO
EXECUTIVE NONSTATUTORY STOCK OPTION AGREEMENT
In connection with the approval of an Amended Executive Severance
Agreement by the Board of Directors of Merix Corporation (the "Company") and the
execution of such agreement by the Company and Teri L. Timberman ("Optionee"),
the Company and Optionee agree to amend as follows all Executive Nonstatutory
Stock Option Agreements between the Company and Optionee in effect on the date
hereof:
1. Paragraph 10 of Exhibit A is amended to read in its entirety as follows:
"The terms of the Option are subject to the special
acceleration provisions set forth in the Amended Executive
Severance Agreement between the Company and Optionee."
2. All references in Exhibit A to "paragraph 10" are deleted.
DATED: December 5, 1996 MERIX CORPORATION
By SAMUEL R. DESIMONE, JR.
--------------------------------------
Title V.P. CORP. DEV.
-----------------------------------
TERRI TIMBERMAN
-----------------------------------------
Optionee
<PAGE>
AMENDMENT NO. 1 TO
EXECUTIVE STOCK BONUS AGREEMENT
In connection with the approval of an Amended Executive Severance
Agreement by the Board of Directors of Merix Corporation ("Merix") and the
execution of such agreement by Merix and Teri L. Timberman ("Executive"), Merix
and Executive agree to amend as follows all Executive Stock Bonus Agreements
between Merix and Executive in effect on the date hereof:
1. The last sentence of Section 1 is amended to read in its entirety as follows:
"The Bonus Shares are also subject to the special
acceleration provisions set forth in the Amended Executive
Severance Agreement between Merix and Executive (the
"Severance Agreement")."
2. In the first sentence of Section 2.1, the words "except as otherwise provided
in Section 6 below" are amended to read as "except as otherwise provided in the
Severance Agreement".
3. Section 6 is deleted in its entirety, and Sections 7 and 8 are renumbered as
Sections 6 and 7, respectively.
DATED: December 5, 1996 MERIX CORPORATION
By SAMUEL R. DESIMONE, JR.
--------------------------------------
Title V.P. CORP. DEV.
-----------------------------------
TERRI TIMBERMAN
-----------------------------------------
Executive
AMENDED EXECUTIVE SEVERANCE AGREEMENT
December 5, 1996
Joseph H. Howell
11360 NW Ridge Road
Portland, Oregon 97229 Executive
Merix Corporation
an Oregon corporation
PO Box 3000
Forest Grove, Oregon 97116 Merix
Merix considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of
Merix and its shareholders. In this connection, Merix recognizes that, as is the
case with many publicly held corporations, the possibility of a change of
control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of Merix and its shareholders. In order
to induce Executive to remain employed by Merix in the face of uncertainties
about the long-term strategies of Merix and possible change of control of Merix
and their potential impact on Executive's position with Merix, this Agreement,
which has been approved by the Board of Directors of Merix, sets forth the
severance benefits that Merix will provide to Executive in the event Executive's
employment by Merix is terminated under the circumstances described in this
Agreement.
1. Employment Relationship. Executive is currently employed by Merix as
Senior Vice President and Chief Financial Officer. Executive and Merix
acknowledge that either party may terminate this employment relationship at any
time and for any or no reason, subject to the obligation of Merix to provide the
severance benefits specified in this Agreement in accordance with the terms
hereof.
2. Release of Claims. In consideration for and as a condition precedent to
receiving the severance benefits outlined in this Agreement, Executive agrees to
execute a Release of Claims in the appropriate form attached as Exhibit A
("Release of Claims"). Executive promises to execute and deliver the Release of
Claims to Merix within the later of (a) 45 days from the date Executive receives
the Release of Claims or (b) the last day of Executive's active employment.
<PAGE>
3. Compensation Upon Termination. In the event of a Termination of
Executive's Employment (as defined in Section 8.1) at any time other than for
Cause (as defined in Section 8.2 of this Agreement), death or Disability (as
defined in Section 8.4 of this Agreement), and contingent upon Executive's
execution of the Release of Claims and compliance with Section 10, Executive
shall be entitled to the following benefits:
3.1 As severance pay and in lieu of any other compensation for periods
subsequent to the date of termination, Merix shall pay Executive, in a single
payment after employment has entered and eight days have passed following
execution of the Release of Claims without revocation, an amount in cash equal
to one year of Executive's annual base pay at the rate in effect immediately
prior to the date of termination .
3.2 Executive is entitled to extend coverage under any group health
plan in which Executive and Executive's dependents are enrolled at the time of
termination of employment under the COBRA continuation laws for the 18-month
statutory period, or so long as Executive remains eligible under COBRA. Merix
will pay Executive a lump sum payment in an amount equivalent to the reasonably
estimated cost Executive may incur to extend for a period of 18 months under the
COBRA continuation laws Executive's group health and dental plan coverage in
effect at the time of termination. Executive may use this payment, as well as
any payment made under Section 3.1, for such COBRA continuation coverage or for
any other purpose.
3.3 Executive shall be entitled to a portion of the benefits under any
annual cash incentive plans in effect at the time of termination equal to the
greater of (a) 50% of Executive's target benefit under such plan for the year or
(b) a prorated amount representing the portion of the plan year during which
Executive was a participant. For purposes of this Agreement, Executive's
participation in any such plan will be considered to have ended on Executive's
last day of active employment. In making the proration calculation, the amount
of Executive's award if Executive had been a participant for the full incentive
period shall be divided by the total number of days in the incentive period and
the result multiplied by the actual number of days Executive participated in the
plan. The payment amount shall be calculated at the end of the incentive period
and the amount shall not be due and payable by Merix to Executive until the date
that all awards are payable to other eligible employees after the close of the
incentive period, except that Executive may elect at any time after termination,
by written notice to Merix, to receive 50% of Executive's target benefit instead
of the prorated amount, in which case the payment shall be made within 20 days
of such election. If the applicable plan provides for a greater payment for a
participant whose employment terminates prior to the end of an incentive period,
the applicable plan payment shall be made.
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3.4 Merix will pay up to $12,500 to a third party outplacement firm
selected by Executive to provide career counseling assistance to Executive for a
period of one year following Executive's termination date. Executive may elect
to receive the $12,500 in cash in lieu of payment to a third party outplacement
firm.
3.5 All outstanding stock options, restricted stock, stock bonuses or
other stock awards shall be governed by the terms of the applicable agreement or
plan.
3.6 In the event that Executive's employment with Merix terminates for
any reason prior to a Change of Control (as defined in Section 8.3), other than
at the direction of a person who has entered into an agreement with Merix, the
consummation of which will constitute a Change of Control, Executive shall not
be entitled to benefits under Section 4 of this Agreement.
4. Additional Compensation Upon Termination Following A Change of Control.
In the event of a Termination of Executive's Employment other than for Cause,
death or Disability within 24 months following a Change of Control, or prior to
a Change of Control at the direction of a person who has entered into an
agreement with Merix, the consummation of which will constitute a Change of
Control, and contingent upon Executive's execution of the Release of Claims and
compliance with Sections 5 and 10, Executive shall be entitled to the following
benefits, which benefits shall be in addition to the benefits provided in
Section 3:
4.1 Merix shall pay Executive, in a single payment within the latter
of (a) eight days after the last day of employment, including employment during
the up to the six months employment period referred to in Section 5 if Merix or
the surviving company has requested Executive to continue employment during such
period and (b) eight days after execution of the Release of Claims without
revocation, an amount in cash equal to one year of Executive's annual base
compensation at the rate in effect immediately prior to the date of termination.
4.2 Executive shall be entitled to receive an amount such that the
amount payable pursuant to Section 3.3 plus the amount payable pursuant to this
Section 4.2 equals 100% of the Executive's target benefit for the year under
annual cash incentive plans in effect at the time of termination. The amount
payable pursuant to Section 4.2 shall be paid on the same date that the Section
4.1 payment is payable.
4.3 Merix shall maintain in full force and effect, at its sole cost
and expense, for Executive's continued benefit for a period terminating 18
months after the date of termination a life insurance policy insuring
Executive's life with coverage equal to two times Executive's annual base pay in
effect immediately prior to termination, provided that Executive's continued
participation is possible under the general terms and provisions of such policy.
At Executive's election or in the event that Executive's continued participation
in such policy is barred, Merix shall make a lump sum payment to
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Executive equal to the total premiums that would have been paid by Merix for
such 18 month period. The maximum amount that Merix shall be obligated to pay
pursuant to this Section 4.3 in premiums and payments to Executive shall be
$5,000.
4.4 The possibility of forfeiture to Merix of all stock issued to
Executive under all Executive Stock Bonus Agreements shall immediately lapse.
4.5 All outstanding stock options held by Executive under all stock
option and stock incentive plans of Merix shall become immediately exercisable
in full and shall remain exercisable until the earlier of (a) two years after
termination of employment or (b) the option expiration date as set forth in the
applicable option agreement.
4.6 Notwithstanding any provision in this Agreement, in the event that
Executive would receive a greater after-tax benefit from the Capped Benefit (as
defined in the next sentence) than from the payments pursuant to this Agreement
(the "Specified Benefits"), the Capped Benefit shall be paid to Executive and
the Specified Benefits shall not be paid. The Capped Benefit is the Specified
Benefits, reduced by the amount necessary to prevent any portion of the
Specified Benefits from being "parachute payments" as defined in section
280G(b)(2) of the Internal Revenue Code of 1986, as amended ("IRC"), or any
successor provision. For purposes of determining whether Executive would receive
a greater after-tax benefit from the Capped Benefit than from the Specified
Benefits, there shall be taken into account all payments and benefits Executive
will receive upon a change in control of the Company (collectively, excluding
the Specified Benefits, the "Change of Control Payments"). To determine whether
Executive's after-tax benefit from the Capped Benefit would be greater than
Executive's after-tax benefit from the Specified Benefits, there shall be
subtracted from the sum of the before-tax Specified Benefits and the Change of
Control Payments (including the monetary value of any non-cash benefits) any
excise tax that would be imposed under IRC ss. 4999 and all federal, state and
local taxes required to be paid by Executive in respect of the receipt of such
payments, assuming that such payments would be taxed at the highest marginal
rate applicable to individuals in the year in which the Specified Benefits are
to be paid or such lower rate as Executive advises Merix in writing is
applicable to Executive.
5. Additional Service. Executive agrees that, if requested by Merix or the
surviving company following a Change of Control, Executive will continue his or
her employment with Merix or the surviving company for a period of up to six
months following the Change of Control in any capacity requested by Merix or the
surviving company consistent with Executive's areas of professional expertise.
During this period Executive shall receive the same salary and substantially the
same benefits as in effect prior to the Change of Control. Executive shall not
be entitled to any benefits provided by Section 4 if Executive fails to perform
in accordance with this Section 5.
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<PAGE>
6. Tax Withholding; Subsequent Employment.
6.1 All payments provided for in this Agreement are subject to
applicable tax withholding obligations imposed by federal, state and local laws
and regulations.
6.2 The amount of any payment provided for in this Agreement shall not
be reduced, offset or subject to recovery by Merix by reason of any compensation
earned by Executive as the result of employment by another employer after
termination.
7. Other Agreements. This Agreement replaces and supersedes the Executive
Severance Agreement dated March 20, 1995 between Executive and Merix. In the
event that severance benefits are payable to Executive under any other agreement
with Merix in effect at the time of termination (including but not limited to
any employment agreement, but excluding for this purpose any stock option
agreement or stock bonus agreement or stock appreciation right agreement that
may provide for accelerated vesting or related benefits upon the occurrence of a
change in control), the benefits provided in this Agreement shall not be payable
to Executive. Executive may, however, elect to receive all of the benefits
provided for in this Agreement in lieu of all of the benefits provided in all
such other agreements. Any such election shall be made with respect to the
agreements as a whole, and Executive cannot select some benefits from one
agreement and other benefits from this Agreement.
8. Definitions.
8.1 Termination of Executive's Employment. Termination of Executive's
Employment means that Merix has terminated Executive's employment with Merix
(including any subsidiary of Merix). For purposes of Section 3, if Executive is
assigned additional or different titles, tasks or responsibilities from those
currently held or assigned, consistent with Executive's areas of professional
expertise and with no decrease in annual base compensation, whether at Merix or
any subsidiary of Merix, such circumstances shall not constitute a Termination
of Executive's Employment. For purposes of Section 4, Termination of Executive's
Employment shall include termination by Executive, within 24 months of a Change
of Control, by written notice to Merix referring to the applicable paragraph of
Section 8.1, for "Good Reason" based on:
(A) the assignment to Executive of a different title, job or
responsibilities that results in a decrease in the level of
responsibility of Executive with respect to the surviving company
after the Change of Control when compared to Executive's level of
responsibility for Merix' operations prior to the Change of Control;
provided that Good Reason shall not exist if Executive continues to
have the same
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or a greater general level of responsibility for the former Merix
operations after the Change of Control as Executive had prior to the
Change of Control even if the former Merix operations are a subsidiary
or division of the surviving company;
(B) a reduction by Merix or the surviving company in Executive's
base pay as in effect immediately prior to the Change of Control;
(C) a significant reduction by Merix or the surviving company in
total benefits available to Executive under cash incentive, stock
incentive and other employee benefit plans after the Change of Control
compared to the total package of such benefits as in effect prior to
the Change of Control;
(D) Merix or the surviving company requires Executive to be based
more than 50 miles from where Executive's office is located
immediately prior to the Change of Control except for required travel
on company business to an extent substantially consistent with the
business travel obligations which Executive undertook on behalf of
Merix prior to the Change of Control; or
(E) the failure by Merix to obtain from any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of Merix
("Successor") the assent to this Agreement contemplated by Section 9
hereof.
8.2 Cause. Termination of Executive's Employment for "Cause" shall
mean termination upon (a) the willful and continued failure by Executive to
perform substantially Executive's reasonably assigned duties with Merix (other
than any such failure resulting from Executive's incapacity due to physical or
mental illness) after a demand for substantial performance is delivered to
Executive by the Board, the Chief Executive Officer or the President of Merix
which specifically identifies the manner in which the Board or Merix believes
that Executive has not substantially performed Executive's duties or (b) the
willful engaging by Executive in illegal conduct which is materially and
demonstrably injurious to Merix. No act, or failure to act, on Executive's part
shall be considered "willful" unless done, or omitted to be done, by Executive
without reasonable belief that Executive's action or omission was in, or not
opposed to, the best interests of Merix. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for Merix shall be conclusively presumed to be done, or
omitted to be done, by Executive in the best interests of Merix.
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8.3 Change of Control. A Change of Control shall mean that one of the
following events has taken place:
(A) The shareholders of Merix approve one of the following
("Approved Transactions"):
(i) Any merger or statutory plan of exchange involving Merix
("Merger") in which Merix is not the continuing or surviving
corporation or pursuant to which Common Stock would be converted into
cash, securities or other property, other than a Merger involving
Merix in which the holders of Common Stock immediately prior to the
Merger have the same proportionate ownership of Common Stock of the
surviving corporation after the Merger; or
(ii) Any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of Merix or the adoption of any plan
or proposal for the liquidation or dissolution;
(B) A tender or exchange offer, other than one made by (i) Merix
or (ii) Tektronix, Inc. at a time when Merix is in default under any
of the Supply Agreements between Tektronix or any of its subsidiaries
and Merix, is made for Common Stock (or securities convertible into
Common Stock) and such offer results in a portion of those securities
being purchased and the offeror after the consummation of the offer is
the beneficial owner (as determined pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
directly or indirectly, of securities representing at least 20 percent
of the voting power of outstanding securities of Merix;
(C) Merix receives a report on Schedule 13D of the Exchange Act
reporting the beneficial ownership by any person (other than
Tektronix, Inc. or any of its affiliates) of securities representing
20 percent or more of the voting power of outstanding securities of
Merix, except that (i) if such receipt shall occur as the result of
sale of Common Stock (or securities convertible into Common Stock) by
Tektronix, Inc. or any of its affiliates, it shall not constitute a
Change of Control, or (ii) if such receipt shall occur during a tender
offer or exchange offer described in (B) above, a Change of Control
shall not take place until the conclusion of such offer; or
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(D) During any period of 12 months or less, individuals who at
the beginning of such period constituted a majority of the Board of
Directors cease for any reason to constitute a majority thereof unless
the nomination or election of such new directors was approved by a
vote of at least two-thirds of the directors then still in office who
were directors at the beginning of such period.
Notwithstanding anything in the foregoing to the contrary, no Change of Control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in Executive, or a group of persons which includes
Executive, acquiring, directly or indirectly, securities representing 20 percent
or more of the voting power of outstanding securities of Merix.
8.4 Disability. Termination of Executive's Employment based on
"Disability" shall mean termination without further compensation under this
Agreement, due to Executive's absence from Executive's full-time duties with
Merix for 180 consecutive days as a result of Executive's incapacity due to
physical or mental illness, unless within 30 days after notice of termination by
Merix following such absence Executive shall have returned to the full-time
performance of Executive's duties.
9. Successors; Binding Agreement.
9.1 This Agreement shall be binding on and inure to the benefit of
Merix and its Successors and assigns. Upon Executive's written request, Merix
will seek to have any Successor by agreement, assent to the fulfillment by Merix
of its obligations under this Agreement. If such a request is made, failure of
Merix to obtain such assent prior to or at the time a company becomes a
Successor shall constitute Good Reason for termination by Executive of his or
her employment and, if a Change of Control of the Company has occurred, shall
entitle Executive to the benefits pursuant to Section 4.
9.2 This Agreement shall inure to the benefit of and be enforceable by
Executive and Executive's legal representatives, executors, administrators and
heirs.
10. Resignation of Corporate Offices. Executive will resign Executive's
office, if any, as a director, officer or trustee of Merix, its subsidiaries or
affiliates and of any other corporation or trust of which Executive serves as
such at the request of Merix, effective as of the date of termination of
employment. Executive agrees to provide Merix such written resignation(s) upon
request and that no severance will be paid until after such resignation(s) are
provided.
11. Governing Law, Arbitration. This Agreement shall be construed in
accordance with and governed by the laws of the State of Oregon. Any dispute or
controversy arising under or in connection with this Agreement or the breach
thereof, shall be settled exclusively by arbitration under the Mutual Agreement
to Arbitrate Claims
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signed by the Executive, and judgment upon the award rendered by the Arbitrator
may be entered in any Court having jurisdiction thereof. Notwithstanding any
provision in the Mutual Agreement to Arbitrate Claims, Merix shall pay all
arbitration fees and reasonable attorney's fees and expenses (including at trial
and on appeal) of Executive in enforcing its rights under this Agreement in the
event of a Termination of Executive's Employment within 24 months following a
Change of Control.
12. Amendment. No provision of this Agreement may be modified unless such
modification is agreed to in a writing signed by Executive and Merix.
13. Severability. If any of the provisions or terms of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other terms of this Agreement, and this
Agreement shall be construed as if such unenforceable term had never been
contained in this Agreement.
MERIX CORPORATION
By: TERRI TIMBERMAN JOSEPH H. HOWELL
------------------------------ ------------------------------
Title: Vice President Executive
Human Resources
9
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EXHIBIT A
RELEASE OF CLAIMS
1. PARTIES.
The parties to Release of Claims (hereinafter "Release") are ______________
________________ and Merix Corporation, an Oregon corporation, as hereinafter
defined.
1.1 EXECUTIVE.
For the purposes of this Release, "Executive" means __________________
________________, and his or her attorneys, heirs, executors, administrators,
assigns, and spouse.
1.2 THE COMPANY.
For purposes of this Release the "Company" means Merix Corporation, an
Oregon corporation, its predecessors and successors, corporate affiliates, and
all of each corporation's officers, directors, employees, insurers, agents, or
assigns, in their individual and representative capacities.
2. BACKGROUND AND PURPOSE.
Executive was employed by Company. Executive's employment is ending
effective __________ [following a Change in Control as defined in Section 8.3
("Change in Control") of Amended Executive Severance Agreement ("Agreement")].
Executive has elected pursuant to the terms of Section 3.3 of the [Amended
Executive Severance Agreement ("Agreement")/Agreement] to receive [50 percent of
target/the applicable prorated amount] of Executive's annual cash incentive and
elected pursuant to Section 3.4 of the Agreement to [receive $12,500 (less
proper withholding) in lieu of outplacement services/have payments up to $12,500
paid directly to a third party outplacement firm.] [Pursuant to Section 4.3 of
the Agreement, Merix shall pay [the cash equivalent not exceeding $5,000 (less
proper withholding) of] the cost and expense of maintaining a life insurance
policy for the Executive's benefit for 18 months.]
The purpose of this Release is to settle, and the parties hereby
settle, fully and finally, any and all claims Executive may have against
Company, whether asserted or not, known or unknown, including, but not limited
to, claims arising out of or related to Executive's employment, any claim for
reemployment, or any other claims whether
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asserted or not, known or unknown, past or future, that relate to Executive's
employment, reemployment, or application for reemployment.
3. RELEASE.
Except as reserved in paragraphs 3 or 3.1, Executive waives, acquits
and forever discharges Company from any obligations Company has and all claims
Executive may have including but not limited to obligations and/or claims
arising from the Agreement or any other document or oral agreement relating to
employment compensation, benefits severance or post-employment issues. Except as
reserved in Paragraph 3.1, Executive hereby releases Company from any and all
claims, demands, actions, or causes of action, whether known or unknown, arising
from or related in any way to any employment of or past or future failure or
refusal to employ Executive by Company, or any other past or future claim
(except as reserved by this Release or where expressly prohibited by law) that
relates in any way to Executive's employment, compensation, benefits,
reemployment, or application for employment, with the exception of any claim
Executive may have against Company for enforcement of this Release. This release
includes any and all claims, direct or indirect, which might otherwise be made
under any applicable local, state or federal authority, including but not
limited to any claim arising under the Oregon statutes dealing with employment,
discrimination in employment, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and
Medical Leave Act of 1993, the Equal Pay Act of 1963, Executive Order 11246, the
Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Age Discrimination in Employment Act, the Fair Labor
Standards Act, Oregon wage and hour statutes, all as amended, any regulations
under such authorities, and any applicable contract, tort, or common law
theories.
3.1 Reservations of Rights.
This Release shall not affect any rights which Executive may have
under any medical insurance, disability plan, workers' compensation,
unemployment compensation, applicable company stock incentive plan(s),
indemnifications, or the 401(k) plan maintained by the Company.
3.2 No Admission of Liability.
It is understood and agreed that the acts done and evidenced
hereby and the release granted hereunder is not an admission of liability on the
part of Executive or Company, by whom liability has been and is expressly
denied.
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4. CONSIDERATION TO EXECUTIVE.
After receipt of this Release fully endorsed by Executive, and the
expiration of the seven- (7) day revocation period provided by the Older Workers
Benefit Protection Act without Executive's revocation, Company shall pay:
a) the lump sum of ___________ DOLLARS ($__________ )to Executive
(less proper withholding) for severance and the reasonable estimate of COBRA
continuation coverage as provided in Section[s] 3.1, 3.2 [and 4.1 and 4.6] of
the Agreement;
b) Company will pay [up to $12,500 directly to the third party
outplacement firm selected by Executive for up to one year's outplacement
services as needed/$12,500 (less proper withholding) in lieu of outplacement
services;]
c) the amount of annual cash incentive when due based on the terms of
Section[s] 3.3 [and 4.2] of the Agreement [as elected by Executive];[and]
[d) [the cash equivalent (less proper withholding) of] the premium to
maintain Executive's life insurance plan for 18 months as provided in Section
4.3 of the Agreement.]
5. NO DISPARAGEMENT.
Executive agrees that henceforth Executive will not disparage or make
false or adverse statements about Company. The Company should report to
Executive any actions or statements that are attributed to Executive that the
Company believes are disparaging. The Company may take actions consistent with
breach of this Release should it determine that Executive has disparaged or made
false or adverse statements about Company. The Company agrees to follow the
applicable policy(ies) regarding release of employment reference information.
6. CONFIDENTIALITY, PROPRIETARY, TRADE SECRET AND RELATED
INFORMATION.
Executive acknowledges the duty and agrees not to make unauthorized
use or disclosure of any confidential, proprietary or trade secret information
learned as an employee about Company, its products, customers and suppliers, and
covenants not to breach that duty. Moreover, Executive acknowledges that,
subject to the enforcement limitations of applicable law, the Company reserves
the right to enforce the terms of Executive's Employment Agreement with Company
and any paragraph(s) therein. Should Executive, Executive's attorney or agents
be requested in any judicial, administrative, or
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other proceeding to disclose confidential, proprietary or trade secret
information Executive learned as an employee of Company, Executive shall
promptly notify the Company of such request by the most expeditious means in
order to enable the Company to take any reasonable and appropriate action to
limit such disclosure.
7. ARBITRATION OF CERTAIN DISPUTES.
Executive and Company agree that should the issue arise of whether
either party to this Agreement has failed to satisfy or has breached the terms
of this Agreement, any dispute regarding the issue, except for any claim
excepted under the Mutual Agreement to Arbitration Claims, shall be submitted to
arbitration pursuant to the Mutual Agreement to Arbitrate Claims signed by
Executive. In such event, [each party shall pay its own costs and attorneys'
fees/notwithstanding contrary language in the Mutual Agreement to Arbitrate
Claims, because this Release follows a Change in Control, the reasonable
attorneys fees incurred by Executive to seek enforcement of this Release shall
be paid by the Company].
8. SCOPE OF RELEASE.
The provisions of this Release shall be deemed to obligate, extend to,
and inure to the benefit of the parties; Company's parents, subsidiaries,
affiliates, successors, predecessors, assigns, directors, officers, and
employees; and each parties insurers, transferees, grantees, legatees, agents
and heirs, including those who may assume any and all of the above-described
capacities subsequent to the execution and effective date of this Release.
9. OPPORTUNITY FOR ADVICE OF COUNSEL.
Executive acknowledges that Executive has been encouraged to seek
advice of counsel with respect to this Release and has had the opportunity to do
so.
10. ENTIRE RELEASE.
This Release, the Mutual Agreement to Arbitrate Claims, [as modified
herein] and the Employment Agreement signed by Executive contain the entire
agreement and understanding between the parties and, except as reserved in
paragraph 3 and 3.1, supersede and replace all prior agreements written or oral
including but not limited to the Agreement and the Executive Stock Bonus
Agreement, prior negotiations and proposed agreements, written or oral.
Executive and Company acknowledge that no other party, nor agent nor attorney of
any other party, has made any promise, representation, or
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warranty, express or implied, not contained in this Release concerning the
subject matter of this Release to induce this Release, and Executive and Company
acknowledge that they have not executed this Release in reliance upon any such
promise, representation, or warranty not contained in this Release.
11. SEVERABILITY.
Every provision of this Release is intended to be severable. In the
event any term or provision of this Release is declared to be illegal or invalid
for any reason whatsoever by a court of competent jurisdiction or by final and
unappealed order of an administrative agency of competent jurisdiction, such
illegality or invalidity should not affect the balance of the terms and
provisions of this Release, which terms and provisions shall remain binding and
enforceable.
12. PARTIES MAY ENFORCE RELEASE.
Nothing in this Release shall operate to release or discharge any
parties to this Release or their successors, assigns, legatees, heirs, or
personal representatives from any rights, claims, or causes of action arising
out of, relating to, or connected with a breach of any obligation of any party
contained in this Release .
13. COSTS AND ATTORNEY'S FEES.
[The parties each agree to bear their own costs and attorneys' fees
which have been or may be incurred in connection with any matters released
herein or in connection with the negotiation and consummation of this Release.
In the event of any administrative or civil action to enforce the provisions of
this Release, the prevailing party shall be entitled to attorney fees and costs
through trial and/or on appeal. /Because this Release follows a Change of
Control, reasonable attorneys' fees which have been or may be incurred in
connection with any matters released herein or in connection with the
negotiation and consummation of this Release shall be paid by Company. In the
event of any administrative or civil action to enforce the provisions of this
Release, the Company shall pay Executive's reasonable attorneys' fees through
trial and/or on appeal.]
14. ACKNOWLEDGMENTS.
Executive acknowledges that the Release provides severance pay and
benefits which the Company would otherwise have no obligation to provide.
Executive acknowledges that Company has provided the following
information: (a) the class or group of employees offered the opportunity to
obtain severance benefits similar to those in the Release, (b) the eligibility
factors required to
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obtain severance benefits similar to those in the Release, (c) the time limits
required to obtain severance benefits similar to those in the Release, (d) the
job titles and ages of employees eligible or selected for severance benefits
similar to those in the Release, and (e) the ages of employees in the same
classification either not eligible or not selected.
15. REVOCATION.
As provided by the Older Workers Benefit Protection Act, Executive's
is entitled to have forty-five (45) days to consider this Release. For a period
of seven (7) days from execution of this Release, Executive may revoke this
Release. Upon receipt of Executive's signed Release and the end of the
revocation period, payment by Company as described in paragraph 4 above will be
forwarded by mail in a timely manner as provided herein.
_______________________________________ Dated: __________ __, 199_
[Name of Executive]
STATE OF OREGON )
) ss.
County of _________ )
Personally appeared the above named and acknowledged the foregoing
instrument to be his or her voluntary act and deed.
Before me: ___________________________________
Notary Public for _________________
My commission expires: ____________
MERIX CORPORATION
By: ______________________________ Dated: ____________________________
Its: _____________________________
On Behalf of "Company"
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<PAGE>
AMENDMENT NO. 1 TO
EXECUTIVE NONSTATUTORY STOCK OPTION AGREEMENT
In connection with the approval of an Amended Executive Severance
Agreement by the Board of Directors of Merix Corporation (the "Company") and the
execution of such agreement by the Company and Joseph H. Howell ("Optionee"),
the Company and Optionee agree to amend as follows all Executive Nonstatutory
Stock Option Agreements between the Company and Optionee in effect on the date
hereof:
1. Paragraph 10 of Exhibit A is amended to read in its entirety as follows:
"The terms of the Option are subject to the special
acceleration provisions set forth in the Amended Executive
Severance Agreement between the Company and Optionee."
2. All references in Exhibit A to "paragraph 10" are deleted.
DATED: December 5, 1996 MERIX CORPORATION
By TERRI TIMBERMAN
--------------------------------------
Title Vice President
Human Resources
-----------------------------------
JOSEPH H. HOWELL
-----------------------------------------
Optionee
<PAGE>
AMENDMENT NO. 1 TO
EXECUTIVE STOCK BONUS AGREEMENT
In connection with the approval of an Amended Executive Severance
Agreement by the Board of Directors of Merix Corporation ("Merix") and the
execution of such agreement by Merix and Joseph H. Howell ("Executive"), Merix
and Executive agree to amend as follows all Executive Stock Bonus Agreements
between Merix and Executive in effect on the date hereof:
1. The last sentence of Section 1 is amended to read in its entirety as follows:
"The Bonus Shares are also subject to the special
acceleration provisions set forth in the Amended Executive
Severance Agreement between Merix and Executive (the
"Severance Agreement")."
2. In the first sentence of Section 2.1, the words "except as otherwise provided
in Section 6 below" are amended to read as "except as otherwise provided in the
Severance Agreement".
3. Section 6 is deleted in its entirety, and Sections 7 and 8 are renumbered as
Sections 6 and 7, respectively.
DATED: December 5, 1996 MERIX CORPORATION
By TERRI TIMBERMAN
--------------------------------------
Title Vice President
Human Resources
-----------------------------------
JOSEPH H. HOWELL
-----------------------------------------
Executive
AMENDED EXECUTIVE SEVERANCE AGREEMENT
December 5, 1996
Samuel R. DeSimone, Jr.
710 NW Winchester Terrace
Portland, Oregon 97210 Executive
Merix Corporation
an Oregon corporation
PO Box 3000
Forest Grove, Oregon 97116 Merix
Merix considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of
Merix and its shareholders. In this connection, Merix recognizes that, as is the
case with many publicly held corporations, the possibility of a change of
control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of Merix and its shareholders. In order
to induce Executive to remain employed by Merix in the face of uncertainties
about the long-term strategies of Merix and possible change of control of Merix
and their potential impact on Executive's position with Merix, this Agreement,
which has been approved by the Board of Directors of Merix, sets forth the
severance benefits that Merix will provide to Executive in the event Executive's
employment by Merix is terminated under the circumstances described in this
Agreement.
1. Employment Relationship. Executive is currently employed by Merix as
Vice President, Corporate Development, General Counsel and Secretary. Executive
and Merix acknowledge that either party may terminate this employment
relationship at any time and for any or no reason, subject to the obligation of
Merix to provide the severance benefits specified in this Agreement in
accordance with the terms hereof.
2. Release of Claims. In consideration for and as a condition precedent to
receiving the severance benefits outlined in this Agreement, Executive agrees to
execute a Release of Claims in the appropriate form attached as Exhibit A
("Release of Claims"). Executive promises to execute and deliver the Release of
Claims to Merix within the later of (a) 45 days from the date Executive receives
the Release of Claims or (b) the last day of Executive's active employment.
<PAGE>
3. Compensation Upon Termination. In the event of a Termination of
Executive's Employment (as defined in Section 8.1) at any time other than for
Cause (as defined in Section 8.2 of this Agreement), death or Disability (as
defined in Section 8.4 of this Agreement), and contingent upon Executive's
execution of the Release of Claims and compliance with Section 10, Executive
shall be entitled to the following benefits:
3.1 As severance pay and in lieu of any other compensation for periods
subsequent to the date of termination, Merix shall pay Executive, in a single
payment after employment has entered and eight days have passed following
execution of the Release of Claims without revocation, an amount in cash equal
to one year of Executive's annual base pay at the rate in effect immediately
prior to the date of termination .
3.2 Executive is entitled to extend coverage under any group health
plan in which Executive and Executive's dependents are enrolled at the time of
termination of employment under the COBRA continuation laws for the 18-month
statutory period, or so long as Executive remains eligible under COBRA. Merix
will pay Executive a lump sum payment in an amount equivalent to the reasonably
estimated cost Executive may incur to extend for a period of 18 months under the
COBRA continuation laws Executive's group health and dental plan coverage in
effect at the time of termination. Executive may use this payment, as well as
any payment made under Section 3.1, for such COBRA continuation coverage or for
any other purpose.
3.3 Executive shall be entitled to a portion of the benefits under any
annual cash incentive plans in effect at the time of termination equal to the
greater of (a) 50% of Executive's target benefit under such plan for the year or
(b) a prorated amount representing the portion of the plan year during which
Executive was a participant. For purposes of this Agreement, Executive's
participation in any such plan will be considered to have ended on Executive's
last day of active employment. In making the proration calculation, the amount
of Executive's award if Executive had been a participant for the full incentive
period shall be divided by the total number of days in the incentive period and
the result multiplied by the actual number of days Executive participated in the
plan. The payment amount shall be calculated at the end of the incentive period
and the amount shall not be due and payable by Merix to Executive until the date
that all awards are payable to other eligible employees after the close of the
incentive period, except that Executive may elect at any time after termination,
by written notice to Merix, to receive 50% of Executive's target benefit instead
of the prorated amount, in which case the payment shall be made within 20 days
of such election. If the applicable plan provides for a greater payment for a
participant whose employment terminates prior to the end of an incentive period,
the applicable plan payment shall be made.
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3.4 Merix will pay up to $12,500 to a third party outplacement firm
selected by Executive to provide career counseling assistance to Executive for a
period of one year following Executive's termination date. Executive may elect
to receive the $12,500 in cash in lieu of payment to a third party outplacement
firm.
3.5 All outstanding stock options, restricted stock, stock bonuses or
other stock awards shall be governed by the terms of the applicable agreement or
plan.
3.6 In the event that Executive's employment with Merix terminates for
any reason prior to a Change of Control (as defined in Section 8.3), other than
at the direction of a person who has entered into an agreement with Merix, the
consummation of which will constitute a Change of Control, Executive shall not
be entitled to benefits under Section 4 of this Agreement.
4. Additional Compensation Upon Termination Following A Change of Control.
In the event of a Termination of Executive's Employment other than for Cause,
death or Disability within 24 months following a Change of Control, or prior to
a Change of Control at the direction of a person who has entered into an
agreement with Merix, the consummation of which will constitute a Change of
Control, and contingent upon Executive's execution of the Release of Claims and
compliance with Sections 5 and 10, Executive shall be entitled to the following
benefits, which benefits shall be in addition to the benefits provided in
Section 3:
4.1 Merix shall pay Executive, in a single payment within the latter
of (a) eight days after the last day of employment, including employment during
the up to the six months employment period referred to in Section 5 if Merix or
the surviving company has requested Executive to continue employment during such
period and (b) eight days after execution of the Release of Claims without
revocation, an amount in cash equal to one year of Executive's annual base
compensation at the rate in effect immediately prior to the date of termination.
4.2 Executive shall be entitled to receive an amount such that the
amount payable pursuant to Section 3.3 plus the amount payable pursuant to this
Section 4.2 equals 100% of the Executive's target benefit for the year under
annual cash incentive plans in effect at the time of termination. The amount
payable pursuant to Section 4.2 shall be paid on the same date that the Section
4.1 payment is payable.
4.3 Merix shall maintain in full force and effect, at its sole cost
and expense, for Executive's continued benefit for a period terminating 18
months after the date of termination a life insurance policy insuring
Executive's life with coverage equal to two times Executive's annual base pay in
effect immediately prior to termination, provided that Executive's continued
participation is possible under the general terms and provisions of such policy.
At Executive's election or in the event that Executive's continued participation
in such policy is barred, Merix shall make a lump sum payment to
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Executive equal to the total premiums that would have been paid by Merix for
such 18 month period. The maximum amount that Merix shall be obligated to pay
pursuant to this Section 4.3 in premiums and payments to Executive shall be
$5,000.
4.4 The possibility of forfeiture to Merix of all stock issued to
Executive under all Executive Stock Bonus Agreements shall immediately lapse.
4.5 All outstanding stock options held by Executive under all stock
option and stock incentive plans of Merix shall become immediately exercisable
in full and shall remain exercisable until the earlier of (a) two years after
termination of employment or (b) the option expiration date as set forth in the
applicable option agreement.
4.6 Notwithstanding any provision in this Agreement, in the event that
Executive would receive a greater after-tax benefit from the Capped Benefit (as
defined in the next sentence) than from the payments pursuant to this Agreement
(the "Specified Benefits"), the Capped Benefit shall be paid to Executive and
the Specified Benefits shall not be paid. The Capped Benefit is the Specified
Benefits, reduced by the amount necessary to prevent any portion of the
Specified Benefits from being "parachute payments" as defined in section
280G(b)(2) of the Internal Revenue Code of 1986, as amended ("IRC"), or any
successor provision. For purposes of determining whether Executive would receive
a greater after-tax benefit from the Capped Benefit than from the Specified
Benefits, there shall be taken into account all payments and benefits Executive
will receive upon a change in control of the Company (collectively, excluding
the Specified Benefits, the "Change of Control Payments"). To determine whether
Executive's after-tax benefit from the Capped Benefit would be greater than
Executive's after-tax benefit from the Specified Benefits, there shall be
subtracted from the sum of the before-tax Specified Benefits and the Change of
Control Payments (including the monetary value of any non-cash benefits) any
excise tax that would be imposed under IRC ss. 4999 and all federal, state and
local taxes required to be paid by Executive in respect of the receipt of such
payments, assuming that such payments would be taxed at the highest marginal
rate applicable to individuals in the year in which the Specified Benefits are
to be paid or such lower rate as Executive advises Merix in writing is
applicable to Executive.
5. Additional Service. Executive agrees that, if requested by Merix or the
surviving company following a Change of Control, Executive will continue his or
her employment with Merix or the surviving company for a period of up to six
months following the Change of Control in any capacity requested by Merix or the
surviving company consistent with Executive's areas of professional expertise.
During this period Executive shall receive the same salary and substantially the
same benefits as in effect prior to the Change of Control. Executive shall not
be entitled to any benefits provided by Section 4 if Executive fails to perform
in accordance with this Section 5.
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6. Tax Withholding; Subsequent Employment.
6.1 All payments provided for in this Agreement are subject to
applicable tax withholding obligations imposed by federal, state and local laws
and regulations.
6.2 The amount of any payment provided for in this Agreement shall not
be reduced, offset or subject to recovery by Merix by reason of any compensation
earned by Executive as the result of employment by another employer after
termination.
7. Other Agreements. This Agreement replaces and supersedes the Executive
Severance Agreement dated September 11, 1995 between Executive and Merix. In the
event that severance benefits are payable to Executive under any other agreement
with Merix in effect at the time of termination (including but not limited to
any employment agreement, but excluding for this purpose any stock option
agreement or stock bonus agreement or stock appreciation right agreement that
may provide for accelerated vesting or related benefits upon the occurrence of a
change in control), the benefits provided in this Agreement shall not be payable
to Executive. Executive may, however, elect to receive all of the benefits
provided for in this Agreement in lieu of all of the benefits provided in all
such other agreements. Any such election shall be made with respect to the
agreements as a whole, and Executive cannot select some benefits from one
agreement and other benefits from this Agreement.
8. Definitions.
8.1 Termination of Executive's Employment. Termination of Executive's
Employment means that Merix has terminated Executive's employment with Merix
(including any subsidiary of Merix). For purposes of Section 3, if Executive is
assigned additional or different titles, tasks or responsibilities from those
currently held or assigned, consistent with Executive's areas of professional
expertise and with no decrease in annual base compensation, whether at Merix or
any subsidiary of Merix, such circumstances shall not constitute a Termination
of Executive's Employment. For purposes of Section 4, Termination of Executive's
Employment shall include termination by Executive, within 24 months of a Change
of Control, by written notice to Merix referring to the applicable paragraph of
Section 8.1, for "Good Reason" based on:
(A) the assignment to Executive of a different title, job or
responsibilities that results in a decrease in the level of
responsibility of Executive with respect to the surviving company
after the Change of Control when compared to Executive's level of
responsibility for Merix' operations prior to the Change of Control;
provided that Good Reason shall not exist if Executive continues to
have the same
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or a greater general level of responsibility for the former Merix
operations after the Change of Control as Executive had prior to the
Change of Control even if the former Merix operations are a subsidiary
or division of the surviving company;
(B) a reduction by Merix or the surviving company in Executive's
base pay as in effect immediately prior to the Change of Control;
(C) a significant reduction by Merix or the surviving company in
total benefits available to Executive under cash incentive, stock
incentive and other employee benefit plans after the Change of Control
compared to the total package of such benefits as in effect prior to
the Change of Control;
(D) Merix or the surviving company requires Executive to be based
more than 50 miles from where Executive's office is located
immediately prior to the Change of Control except for required travel
on company business to an extent substantially consistent with the
business travel obligations which Executive undertook on behalf of
Merix prior to the Change of Control; or
(E) the failure by Merix to obtain from any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of Merix
("Successor") the assent to this Agreement contemplated by Section 9
hereof.
8.2 Cause. Termination of Executive's Employment for "Cause" shall
mean termination upon (a) the willful and continued failure by Executive to
perform substantially Executive's reasonably assigned duties with Merix (other
than any such failure resulting from Executive's incapacity due to physical or
mental illness) after a demand for substantial performance is delivered to
Executive by the Board, the Chief Executive Officer or the President of Merix
which specifically identifies the manner in which the Board or Merix believes
that Executive has not substantially performed Executive's duties or (b) the
willful engaging by Executive in illegal conduct which is materially and
demonstrably injurious to Merix. No act, or failure to act, on Executive's part
shall be considered "willful" unless done, or omitted to be done, by Executive
without reasonable belief that Executive's action or omission was in, or not
opposed to, the best interests of Merix. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for Merix shall be conclusively presumed to be done, or
omitted to be done, by Executive in the best interests of Merix.
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8.3 Change of Control. A Change of Control shall mean that one of the
following events has taken place:
(A) The shareholders of Merix approve one of the following
("Approved Transactions"):
(i) Any merger or statutory plan of exchange involving Merix
("Merger") in which Merix is not the continuing or surviving
corporation or pursuant to which Common Stock would be converted into
cash, securities or other property, other than a Merger involving
Merix in which the holders of Common Stock immediately prior to the
Merger have the same proportionate ownership of Common Stock of the
surviving corporation after the Merger; or
(ii) Any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of Merix or the adoption of any plan
or proposal for the liquidation or dissolution;
(B) A tender or exchange offer, other than one made by (i) Merix
or (ii) Tektronix, Inc. at a time when Merix is in default under any
of the Supply Agreements between Tektronix or any of its subsidiaries
and Merix, is made for Common Stock (or securities convertible into
Common Stock) and such offer results in a portion of those securities
being purchased and the offeror after the consummation of the offer is
the beneficial owner (as determined pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
directly or indirectly, of securities representing at least 20 percent
of the voting power of outstanding securities of Merix;
(C) Merix receives a report on Schedule 13D of the Exchange Act
reporting the beneficial ownership by any person (other than
Tektronix, Inc. or any of its affiliates) of securities representing
20 percent or more of the voting power of outstanding securities of
Merix, except that (i) if such receipt shall occur as the result of
sale of Common Stock (or securities convertible into Common Stock) by
Tektronix, Inc. or any of its affiliates, it shall not constitute a
Change of Control, or (ii) if such receipt shall occur during a tender
offer or exchange offer described in (B) above, a Change of Control
shall not take place until the conclusion of such offer; or
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(D) During any period of 12 months or less, individuals who at
the beginning of such period constituted a majority of the Board of
Directors cease for any reason to constitute a majority thereof unless
the nomination or election of such new directors was approved by a
vote of at least two-thirds of the directors then still in office who
were directors at the beginning of such period.
Notwithstanding anything in the foregoing to the contrary, no Change of Control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in Executive, or a group of persons which includes
Executive, acquiring, directly or indirectly, securities representing 20 percent
or more of the voting power of outstanding securities of Merix.
8.4 Disability. Termination of Executive's Employment based on
"Disability" shall mean termination without further compensation under this
Agreement, due to Executive's absence from Executive's full-time duties with
Merix for 180 consecutive days as a result of Executive's incapacity due to
physical or mental illness, unless within 30 days after notice of termination by
Merix following such absence Executive shall have returned to the full-time
performance of Executive's duties.
9. Successors; Binding Agreement.
9.1 This Agreement shall be binding on and inure to the benefit of
Merix and its Successors and assigns. Upon Executive's written request, Merix
will seek to have any Successor by agreement, assent to the fulfillment by Merix
of its obligations under this Agreement. If such a request is made, failure of
Merix to obtain such assent prior to or at the time a company becomes a
Successor shall constitute Good Reason for termination by Executive of his or
her employment and, if a Change of Control of the Company has occurred, shall
entitle Executive to the benefits pursuant to Section 4.
9.2 This Agreement shall inure to the benefit of and be enforceable by
Executive and Executive's legal representatives, executors, administrators and
heirs.
10. Resignation of Corporate Offices. Executive will resign Executive's
office, if any, as a director, officer or trustee of Merix, its subsidiaries or
affiliates and of any other corporation or trust of which Executive serves as
such at the request of Merix, effective as of the date of termination of
employment. Executive agrees to provide Merix such written resignation(s) upon
request and that no severance will be paid until after such resignation(s) are
provided.
11. Governing Law, Arbitration. This Agreement shall be construed in
accordance with and governed by the laws of the State of Oregon. Any dispute or
controversy arising under or in connection with this Agreement or the breach
thereof, shall be settled exclusively by arbitration under the Mutual Agreement
to Arbitrate Claims
8
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signed by the Executive, and judgment upon the award rendered by the Arbitrator
may be entered in any Court having jurisdiction thereof. Notwithstanding any
provision in the Mutual Agreement to Arbitrate Claims, Merix shall pay all
arbitration fees and reasonable attorney's fees and expenses (including at trial
and on appeal) of Executive in enforcing its rights under this Agreement in the
event of a Termination of Executive's Employment within 24 months following a
Change of Control.
12. Amendment. No provision of this Agreement may be modified unless such
modification is agreed to in a writing signed by Executive and Merix.
13. Severability. If any of the provisions or terms of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other terms of this Agreement, and this
Agreement shall be construed as if such unenforceable term had never been
contained in this Agreement.
MERIX CORPORATION
By: TERRI TIMBERMAN SAMUEL R. DESIMONE, JR.
------------------------------ ------------------------------
Title: Vice President Executive
Human Resources
9
<PAGE>
EXHIBIT A
RELEASE OF CLAIMS
1. PARTIES.
The parties to Release of Claims (hereinafter "Release") are ______________
________________ and Merix Corporation, an Oregon corporation, as hereinafter
defined.
1.1 EXECUTIVE.
For the purposes of this Release, "Executive" means __________________
___________________, and his or her attorneys, heirs, executors, administrators,
assigns, and spouse.
1.2 THE COMPANY.
For purposes of this Release the "Company" means Merix Corporation, an
Oregon corporation, its predecessors and successors, corporate affiliates, and
all of each corporation's officers, directors, employees, insurers, agents, or
assigns, in their individual and representative capacities.
2. BACKGROUND AND PURPOSE.
Executive was employed by Company. Executive's employment is ending
effective __________ [following a Change in Control as defined in Section 8.3
("Change in Control") of Amended Executive Severance Agreement ("Agreement")].
Executive has elected pursuant to the terms of Section 3.3 of the [Amended
Executive Severance Agreement ("Agreement")/Agreement] to receive [50 percent of
target/the applicable prorated amount] of Executive's annual cash incentive and
elected pursuant to Section 3.4 of the Agreement to [receive $12,500 (less
proper withholding) in lieu of outplacement services/have payments up to $12,500
paid directly to a third party outplacement firm.] [Pursuant to Section 4.3 of
the Agreement, Merix shall pay [the cash equivalent not exceeding $5,000 (less
proper withholding) of] the cost and expense of maintaining a life insurance
policy for the Executive's benefit for 18 months.]
The purpose of this Release is to settle, and the parties hereby
settle, fully and finally, any and all claims Executive may have against
Company, whether asserted or not, known or unknown, including, but not limited
to, claims arising out of or related to Executive's employment, any claim for
reemployment, or any other claims whether
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asserted or not, known or unknown, past or future, that relate to Executive's
employment, reemployment, or application for reemployment.
3. RELEASE.
Except as reserved in paragraphs 3 or 3.1, Executive waives, acquits
and forever discharges Company from any obligations Company has and all claims
Executive may have including but not limited to obligations and/or claims
arising from the Agreement or any other document or oral agreement relating to
employment compensation, benefits severance or post-employment issues. Except as
reserved in Paragraph 3.1, Executive hereby releases Company from any and all
claims, demands, actions, or causes of action, whether known or unknown, arising
from or related in any way to any employment of or past or future failure or
refusal to employ Executive by Company, or any other past or future claim
(except as reserved by this Release or where expressly prohibited by law) that
relates in any way to Executive's employment, compensation, benefits,
reemployment, or application for employment, with the exception of any claim
Executive may have against Company for enforcement of this Release. This release
includes any and all claims, direct or indirect, which might otherwise be made
under any applicable local, state or federal authority, including but not
limited to any claim arising under the Oregon statutes dealing with employment,
discrimination in employment, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and
Medical Leave Act of 1993, the Equal Pay Act of 1963, Executive Order 11246, the
Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Age Discrimination in Employment Act, the Fair Labor
Standards Act, Oregon wage and hour statutes, all as amended, any regulations
under such authorities, and any applicable contract, tort, or common law
theories.
3.1 Reservations of Rights.
This Release shall not affect any rights which Executive may have
under any medical insurance, disability plan, workers' compensation,
unemployment compensation, applicable company stock incentive plan(s),
indemnifications, or the 401(k) plan maintained by the Company.
3.2 No Admission of Liability.
It is understood and agreed that the acts done and evidenced hereby
and the release granted hereunder is not an admission of liability on the part
of Executive or Company, by whom liability has been and is expressly denied.
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4. CONSIDERATION TO EXECUTIVE.
After receipt of this Release fully endorsed by Executive, and the
expiration of the seven- (7) day revocation period provided by the Older Workers
Benefit Protection Act without Executive's revocation, Company shall pay:
a) the lump sum of ___________ DOLLARS ($__________ )to Executive
(less proper withholding) for severance and the reasonable estimate of COBRA
continuation coverage as provided in Section[s] 3.1, 3.2 [and 4.1 and 4.6] of
the Agreement;
b) Company will pay [up to $12,500 directly to the third party
outplacement firm selected by Executive for up to one year's outplacement
services as needed/$12,500 (less proper withholding) in lieu of outplacement
services;]
c) the amount of annual cash incentive when due based on the terms of
Section[s] 3.3 [and 4.2] of the Agreement [as elected by Executive];[and]
[d) [the cash equivalent (less proper withholding) of] the premium to
maintain Executive's life insurance plan for 18 months as provided in Section
4.3 of the Agreement.]
5. NO DISPARAGEMENT.
Executive agrees that henceforth Executive will not disparage
or make false or adverse statements about Company. The Company should report to
Executive any actions or statements that are attributed to Executive that the
Company believes are disparaging. The Company may take actions consistent with
breach of this Release should it determine that Executive has disparaged or made
false or adverse statements about Company. The Company agrees to follow the
applicable policy(ies) regarding release of employment reference information.
6. CONFIDENTIALITY, PROPRIETARY, TRADE SECRET AND RELATED
INFORMATION.
Executive acknowledges the duty and agrees not to make unauthorized
use or disclosure of any confidential, proprietary or trade secret information
learned as an employee about Company, its products, customers and suppliers, and
covenants not to breach that duty. Moreover, Executive acknowledges that,
subject to the enforcement limitations of applicable law, the Company reserves
the right to enforce the terms of Executive's Employment Agreement with Company
and any paragraph(s) therein. Should Executive, Executive's attorney or agents
be requested in any judicial, administrative, or
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other proceeding to disclose confidential, proprietary or trade secret
information Executive learned as an employee of Company, Executive shall
promptly notify the Company of such request by the most expeditious means in
order to enable the Company to take any reasonable and appropriate action to
limit such disclosure.
7. ARBITRATION OF CERTAIN DISPUTES.
Executive and Company agree that should the issue arise of whether
either party to this Agreement has failed to satisfy or has breached the terms
of this Agreement, any dispute regarding the issue, except for any claim
excepted under the Mutual Agreement to Arbitration Claims, shall be submitted to
arbitration pursuant to the Mutual Agreement to Arbitrate Claims signed by
Executive. In such event, [each party shall pay its own costs and attorneys'
fees/notwithstanding contrary language in the Mutual Agreement to Arbitrate
Claims, because this Release follows a Change in Control, the reasonable
attorneys fees incurred by Executive to seek enforcement of this Release shall
be paid by the Company].
8. SCOPE OF RELEASE.
The provisions of this Release shall be deemed to obligate, extend to,
and inure to the benefit of the parties; Company's parents, subsidiaries,
affiliates, successors, predecessors, assigns, directors, officers, and
employees; and each parties insurers, transferees, grantees, legatees, agents
and heirs, including those who may assume any and all of the above-described
capacities subsequent to the execution and effective date of this Release.
9. OPPORTUNITY FOR ADVICE OF COUNSEL.
Executive acknowledges that Executive has been encouraged to seek
advice of counsel with respect to this Release and has had the opportunity to do
so.
10. ENTIRE RELEASE.
This Release, the Mutual Agreement to Arbitrate Claims, [as modified
herein] and the Employment Agreement signed by Executive contain the entire
agreement and understanding between the parties and, except as reserved in
paragraph 3 and 3.1, supersede and replace all prior agreements written or oral
including but not limited to the Agreement and the Executive Stock Bonus
Agreement, prior negotiations and proposed agreements, written or oral.
Executive and Company acknowledge that no other party, nor agent nor attorney of
any other party, has made any promise, representation, or
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<PAGE>
warranty, express or implied, not contained in this Release concerning the
subject matter of this Release to induce this Release, and Executive and Company
acknowledge that they have not executed this Release in reliance upon any such
promise, representation, or warranty not contained in this Release.
11. SEVERABILITY.
Every provision of this Release is intended to be severable. In the
event any term or provision of this Release is declared to be illegal or invalid
for any reason whatsoever by a court of competent jurisdiction or by final and
unappealed order of an administrative agency of competent jurisdiction, such
illegality or invalidity should not affect the balance of the terms and
provisions of this Release, which terms and provisions shall remain binding and
enforceable.
12. PARTIES MAY ENFORCE RELEASE.
Nothing in this Release shall operate to release or discharge any
parties to this Release or their successors, assigns, legatees, heirs, or
personal representatives from any rights, claims, or causes of action arising
out of, relating to, or connected with a breach of any obligation of any party
contained in this Release .
13. COSTS AND ATTORNEY'S FEES.
[The parties each agree to bear their own costs and attorneys' fees
which have been or may be incurred in connection with any matters released
herein or in connection with the negotiation and consummation of this Release.
In the event of any administrative or civil action to enforce the provisions of
this Release, the prevailing party shall be entitled to attorney fees and costs
through trial and/or on appeal. /Because this Release follows a Change of
Control, reasonable attorneys' fees which have been or may be incurred in
connection with any matters released herein or in connection with the
negotiation and consummation of this Release shall be paid by Company. In the
event of any administrative or civil action to enforce the provisions of this
Release, the Company shall pay Executive's reasonable attorneys' fees through
trial and/or on appeal.]
14. ACKNOWLEDGMENTS.
Executive acknowledges that the Release provides severance pay and
benefits which the Company would otherwise have no obligation to provide.
Executive acknowledges that Company has provided the following
information: (a) the class or group of employees offered the opportunity to
obtain severance benefits similar to those in the Release, (b) the eligibility
factors required to
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obtain severance benefits similar to those in the Release, (c) the time limits
required to obtain severance benefits similar to those in the Release, (d) the
job titles and ages of employees eligible or selected for severance benefits
similar to those in the Release, and (e) the ages of employees in the same
classification either not eligible or not selected.
15. REVOCATION.
As provided by the Older Workers Benefit Protection Act, Executive's
is entitled to have forty-five (45) days to consider this Release. For a period
of seven (7) days from execution of this Release, Executive may revoke this
Release. Upon receipt of Executive's signed Release and the end of the
revocation period, payment by Company as described in paragraph 4 above will be
forwarded by mail in a timely manner as provided herein.
_______________________________________ Dated: __________ __, 199_
[Name of Executive]
STATE OF OREGON )
) ss.
County of _________ )
Personally appeared the above named and acknowledged the foregoing
instrument to be his or her voluntary act and deed.
Before me: ____________________________________
Notary Public for __________________
My commission expires: _____________
MERIX CORPORATION
By: ___________________________________ Dated: _______________________
Its: __________________________________
On Behalf of "Company"
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<PAGE>
AMENDMENT NO. 1 TO
EXECUTIVE NONSTATUTORY STOCK OPTION AGREEMENT
In connection with the approval of an Amended Executive Severance
Agreement by the Board of Directors of Merix Corporation (the "Company") and the
execution of such agreement by the Company and Samuel R. DeSimone, Jr.
("Optionee"), the Company and Optionee agree to amend as follows all Executive
Nonstatutory Stock Option Agreements between the Company and Optionee in effect
on the date hereof:
1. Paragraph 10 of Exhibit A is amended to read in its entirety as follows:
"The terms of the Option are subject to the special
acceleration provisions set forth in the Amended Executive
Severance Agreement between the Company and Optionee."
2. All references in Exhibit A to "paragraph 10" are deleted.
DATED: December 5, 1996 MERIX CORPORATION
By TERRI TIMBERMAN
--------------------------------------
Title V.P. Human Resources
-----------------------------------
SAMUEL R. DESIMONE, JR.
-----------------------------------------
Optionee
<PAGE>
AMENDMENT NO. 1 TO
EXECUTIVE STOCK BONUS AGREEMENT
In connection with the approval of an Amended Executive Severance
Agreement by the Board of Directors of Merix Corporation ("Merix") and the
execution of such agreement by Merix and Samuel R. DeSimone, Jr. ("Executive"),
Merix and Executive agree to amend as follows all Executive Stock Bonus
Agreements between Merix and Executive in effect on the date hereof:
1. The last sentence of Section 1 is amended to read in its entirety as follows:
"The Bonus Shares are also subject to the special
acceleration provisions set forth in the Amended Executive
Severance Agreement between Merix and Executive (the
"Severance Agreement")."
2. In the first sentence of Section 2.1, the words "except as otherwise provided
in Section 6 below" are amended to read as "except as otherwise provided in the
Severance Agreement".
3. Section 6 is deleted in its entirety, and Sections 7 and 8 are renumbered as
Sections 6 and 7, respectively.
DATED: December 5, 1996 MERIX CORPORATION
By TERRI TIMBERMAN
--------------------------------------
Title V.P. Human Resources
--------------------------------
SAMUEL R. DESIMONE, JR.
-----------------------------------------
Executive
EXECUTIVE SEVERANCE AGREEMENT
February 3, 1997
Joe Reichbach
c/o Merix Corporation
P.O. Box 3000
Forest Grove, Oregon 97116
Merix Corporation
an Oregon corporation
PO Box 3000
Forest Grove, Oregon 97116
Merix considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of
Merix and its shareholders. In this connection, Merix recognizes that, as is the
case with many publicly held corporations, the possibility of a change of
control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of Merix and its shareholders. In order
to induce Executive to remain employed by Merix in the face of uncertainties
about the long-term strategies of Merix and possible change of control of Merix
and their potential impact on Executive's position with Merix, this Executive
Severance Agreement ("Agreement"), which has been approved by the Board of
Directors of Merix, sets forth the severance benefits that Merix will provide to
Executive in the event Executive's employment by Merix is terminated under the
circumstances described in this Agreement.
1. Employment Relationship. Executive is currently employed by Merix as
Senior Vice President Sales and Marketing. Executive and Merix acknowledge that
either party may terminate this employment relationship at any time and for any
or no reason, subject to the obligation of Merix to provide the severance
benefits specified in this Agreement in accordance with the terms hereof.
2. Release of Claims. In consideration for and as a condition precedent to
receiving the severance benefits outlined in this Agreement, Executive agrees to
execute a Release of Claims in the appropriate form attached as Exhibit A
("Release of Claims"). Executive promises to execute and deliver the Release of
Claims to Merix within the later of (a) 45 days from the date Executive receives
the Release of Claims or (b) the last day of Executive's active employment.
<PAGE>
3. Compensation Upon Termination. In the event of a Termination of
Executive's Employment (as defined in Section 8.1) at any time other than for
Cause (as defined in Section 8.2 of this Agreement), death or Disability (as
defined in Section 8.4 of this Agreement), and contingent upon Executive's
execution of the Release of Claims and compliance with Section 10, Executive
shall be entitled to the following benefits:
3.1 As severance pay and in lieu of any other compensation for periods
subsequent to the date of termination, Merix shall pay Executive, in a single
payment after employment has ended and eight days have passed following
execution of the Release of Claims without revocation, an amount in cash at the
rate in effect immediately prior to the date of termination equal to two years
of Executive's annual base pay if termination occurs on or before the first
anniversary of this employment. If termination occurs after the first
anniversary date but on or before the second anniversary of employment, Merix
shall pay Executive one and one half years annual base pay. If termination
occurs any time after the second anniversary of employment, Merix shall pay
executive one year annual base pay.
3.2 Executive is entitled to extend coverage under any group health
plan in which Executive and Executive's dependents are enrolled at the time of
termination of employment under the COBRA continuation laws for the 18-month
statutory period, or so long as Executive remains eligible under COBRA. Merix
will pay Executive a lump sum payment in an amount equivalent to the reasonably
estimated cost Executive may incur to extend for a period of 18 months under the
COBRA continuation laws Executive's group health and dental plan coverage in
effect at the time of termination. Executive may use this payment, as well as
any payment made under Section 3.1, for such COBRA continuation coverage or for
any other purpose.
3.3 Executive shall be entitled to a portion of the benefits under any
annual cash incentive plans in effect at the time of termination equal to the
prorated amount representing the portion of the plan year during which Executive
was a participant. For purposes of this Agreement, Executive's participation in
any such plan will be considered to have ended on Executive's last day of active
employment. In making the proration calculation, the amount of Executive's award
if Executive had been a participant for the full incentive period shall be
divided by the total number of days in the incentive period and the result
multiplied by the actual number of days Executive participated in the plan. The
payment amount shall be calculated at the end of the incentive period and the
amount shall not be due and payable by Merix to Executive until the date that
all awards are payable to other eligible employees after the close of the
incentive period. If the applicable plan provides for a greater payment for a
participant whose employment terminates prior to the end of an incentive period,
the applicable plan payment shall be made.
3.4 Merix will pay up to $12,500 to a third party outplacement firm
selected by Executive to provide career counseling assistance to Executive for a
period of
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one year following Executive's termination date. Executive may elect to receive
the $12,500 in cash in lieu of payment to a third party outplacement firm.
3.5 All outstanding stock options, restricted stock, stock bonuses or
other stock awards shall be governed by the terms of the applicable agreement or
plan, as amended, except that (a) any outstanding options held under Executive's
new hire stock option grant for 75,000 shares shall become immediately
exercisable in full and (b) the possibility of forfeiture to Merix of stock
issued to Executive under Executive's new hire restricted stock award for 15,000
shares shall immediately lapse.
3.6 In the event that Executive's employment with Merix terminates for
any reason prior to a Change of Control (as defined in Section 8.3), other than
at the direction of a person who has entered into an agreement with Merix, the
consummation of which will constitute a Change of Control, Executive shall not
be entitled to benefits under Section 4 of this Agreement.
4. Additional Compensation Upon Termination Following A Change of Control.
In the event of a Termination of Executive's Employment other than for Cause,
death or Disability within 24 months following a Change of Control, or prior to
a Change of Control at the direction of a person who has entered into an
agreement with Merix, the consummation of which will constitute a Change of
Control, and contingent upon Executive's execution of the Release of Claims and
compliance with Sections 5 and 10, Executive shall be entitled to the following
benefits, which benefits shall be in addition to the benefits provided in
Section 3:
4.1 Merix shall pay Executive, in a single payment within the latter
of (a) eight days after the last day of employment, including employment during
the up to the six months employment period referred to in Section 5 if Merix or
the surviving company has requested Executive to continue employment during such
period and (b) eight days after execution of the Release of Claims without
revocation, an amount in cash equal to one year of Executive's annual base
compensation at the rate in effect immediately prior to the date of termination.
4.2 Executive shall be entitled to receive an amount such that the
amount payable pursuant to Section 3.3 plus the amount payable pursuant to this
Section 4.2 equals 100% of the Executive's target benefit for the year under
annual cash incentive plans in effect at the time of termination. The amount
payable pursuant to Section 4.2 shall be paid on the same date that the Section
4.1 payment is payable.
4.3 Merix shall maintain in full force and effect, at its sole cost
and expense, for Executive's continued benefit for a period terminating 18
months after the date of termination a life insurance policy insuring
Executive's life with coverage equal to two times Executive's annual base pay in
effect immediately prior to termination, provided that
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Executive's continued participation is possible under the general terms and
provisions of such policy. At Executive's election or in the event that
Executive's continued participation in such policy is barred, Merix shall make a
lump sum payment to Executive equal to the total premiums that would have been
paid by Merix for such 18 month period. The maximum amount that Merix shall be
obligated to pay pursuant to this Section 4.3 in premiums and payments to
Executive shall be $5,000.
4.4 The possibility of forfeiture to Merix of all stock issued to
Executive under all Executive Stock Bonus Agreements shall immediately lapse.
4.5 All outstanding stock options held by Executive under all stock
option and stock incentive plans of Merix shall become immediately exercisable
in full and shall remain exercisable until the earlier of (a) two years after
termination of employment or (b) the option expiration date as set forth in the
applicable option agreement, as amended.
4.6 Notwithstanding any provision in this Agreement, in the event that
Executive would receive a greater after-tax benefit from the Capped Benefit (as
defined in the next sentence) than from the payments pursuant to this Agreement
(the "Specified Benefits"), the Capped Benefit shall be paid to Executive and
the Specified Benefits shall not be paid. The Capped Benefit is the Specified
Benefits, reduced by the amount necessary to prevent any portion of the
Specified Benefits from being "parachute payments" as defined in section
280G(b)(2) of the Internal Revenue Code of 1986, as amended ("IRC"), or any
successor provision. For purposes of determining whether Executive would receive
a greater after-tax benefit from the Capped Benefit than from the Specified
Benefits, there shall be taken into account all payments and benefits Executive
will receive upon a change in control of the Company (collectively, excluding
the Specified Benefits, the "Change of Control Payments"). To determine whether
Executive's after-tax benefit from the Capped Benefit would be greater than
Executive's after-tax benefit from the Specified Benefits, there shall be
subtracted from the sum of the before-tax Specified Benefits and the Change of
Control Payments (including the monetary value of any non-cash benefits) any
excise tax that would be imposed under IRC ss. 4999 and all federal, state and
local taxes required to be paid by Executive in respect of the receipt of such
payments, assuming that such payments would be taxed at the highest marginal
rate applicable to individuals in the year in which the Specified Benefits are
to be paid or such lower rate as Executive advises Merix in writing is
applicable to Executive.
5. Additional Service. Executive agrees that, if requested by Merix or the
surviving company following a Change of Control, Executive will continue his or
her employment with Merix or the surviving company for a period of up to six
months following the Change of Control in any capacity requested by Merix or the
surviving company consistent with Executive's areas of professional expertise.
During this period Executive shall receive the same salary and substantially the
same benefits as in effect prior
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to the Change of Control. Executive shall not be entitled to any benefits
provided by Section 4 if Executive fails to perform in accordance with this
Section 5.
6. Tax Withholding; Subsequent Employment.
6.1 All payments provided for in this Agreement are subject to
applicable tax withholding obligations imposed by federal, state and local laws
and regulations.
6.2 The amount of any payment provided for in this Agreement shall not
be reduced, offset or subject to recovery by Merix by reason of any compensation
earned by Executive as the result of employment by another employer after
termination.
7. Other Agreements. In the event that severance benefits are payable to
Executive under any other agreement with Merix in effect at the time of
termination (including but not limited to any employment agreement, but
excluding for this purpose any stock option agreement or stock bonus agreement
or stock appreciation right agreement that may provide for accelerated vesting
or related benefits upon the occurrence of a change in control), the benefits
provided in this Agreement shall not be payable to Executive. Executive may,
however, elect to receive all of the benefits provided for in this Agreement in
lieu of all of the benefits provided in all such other agreements. Any such
election shall be made with respect to the agreements as a whole, and Executive
cannot select some benefits from one agreement and other benefits from this
Agreement.
8. Definitions.
8.1 Termination of Executive's Employment. Termination of Executive's
Employment means that Merix has terminated Executive's employment with Merix
(including any subsidiary of Merix). For purposes of Section 3, if Executive is
assigned additional or different titles, tasks or responsibilities from those
currently held or assigned, consistent with Executive's areas of professional
expertise and with no decrease in annual base compensation, whether at Merix or
any subsidiary of Merix, such circumstances shall not constitute a Termination
of Executive's Employment. For purposes of Section 4, Termination of Executive's
Employment shall include termination by Executive, within 24 months of a Change
of Control, by written notice to Merix referring to the applicable paragraph of
Section 8.1, for "Good Reason" based on:
(A) the assignment to Executive of a different title, job or
responsibilities that results in a decrease in the level of
responsibility of Executive with respect to the surviving company
after the Change of Control when compared to Executive's level of
responsibility for Merix' operations prior to the Change of Control;
provided that Good Reason shall not exist if Executive continues to
have the same or a greater general level of responsibility for the
former Merix operations
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after the Change of Control as Executive had prior to the Change of
Control even if the former Merix operations are a subsidiary or
division of the surviving company;
(B) a reduction by Merix or the surviving company in Executive's
base pay as in effect immediately prior to the Change of Control;
(C) a significant reduction by Merix or the surviving company in
total benefits available to Executive under cash incentive, stock
incentive and other employee benefit plans after the Change of Control
compared to the total package of such benefits as in effect prior to
the Change of Control;
(D) Merix or the surviving company requires Executive to be based
more than 50 miles from where Executive's office is located
immediately prior to the Change of Control except for required travel
on company business to an extent substantially consistent with the
business travel obligations which Executive undertook on behalf of
Merix prior to the Change of Control; or
(E) the failure by Merix to obtain from any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of Merix
("Successor") the assent to this Agreement contemplated by Section 9
hereof.
8.2 Cause. Termination of Executive's Employment for "Cause" shall
mean termination upon (a) the willful and continued failure by Executive to
perform substantially Executive's reasonably assigned duties with Merix (other
than any such failure resulting from Executive's incapacity due to physical or
mental illness) after a demand for substantial performance is delivered to
Executive by the Board, the Chief Executive Officer or the President of Merix
which specifically identifies the manner in which the Board or Merix believes
that Executive has not substantially performed Executive's duties or (b) the
willful engaging by Executive in illegal conduct which is materially and
demonstrably injurious to Merix. No act, or failure to act, on Executive's part
shall be considered "willful" unless done, or omitted to be done, by Executive
without reasonable belief that Executive's action or omission was in, or not
opposed to, the best interests of Merix. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for Merix shall be conclusively presumed to be done, or
omitted to be done, by Executive in the best interests of Merix.
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8.3 Change of Control. A Change of Control shall mean that one of the
following events has taken place:
(A) The shareholders of Merix approve one of the following
("Approved Transactions"):
(i) Any merger or statutory plan of exchange involving Merix
("Merger") in which Merix is not the continuing or surviving
corporation or pursuant to which Common Stock would be converted into
cash, securities or other property, other than a Merger involving
Merix in which the holders of Common Stock immediately prior to the
Merger have the same proportionate ownership of Common Stock of the
surviving corporation after the Merger; or
(ii) Any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of Merix or the adoption of any plan
or proposal for the liquidation or dissolution;
(B) A tender or exchange offer, other than one made by (i) Merix
or (ii) Tektronix, Inc. at a time when Merix is in default under any
of the Supply Agreements between Tektronix or any of its subsidiaries
and Merix, is made for Common Stock (or securities convertible into
Common Stock) and such offer results in a portion of those securities
being purchased and the offeror after the consummation of the offer is
the beneficial owner (as determined pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
directly or indirectly, of securities representing at least 20 percent
of the voting power of outstanding securities of Merix;
(C) Merix receives a report on Schedule 13D of the Exchange Act
reporting the beneficial ownership by any person (other than
Tektronix, Inc. or any of its affiliates) of securities representing
20 percent or more of the voting power of outstanding securities of
Merix, except that (i) if such receipt shall occur as the result of
sale of Common Stock (or securities convertible into Common Stock) by
Tektronix, Inc. or any of its affiliates, it shall not constitute a
Change of Control, or (ii) if such receipt shall occur during a tender
offer or exchange offer described in (B) above, a Change of Control
shall not take place until the conclusion of such offer; or
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(D) During any period of 12 months or less, individuals who at
the beginning of such period constituted a majority of the Board of
Directors cease for any reason to constitute a majority thereof unless
the nomination or election of such new directors was approved by a
vote of at least two-thirds of the directors then still in office who
were directors at the beginning of such period.
Notwithstanding anything in the foregoing to the contrary, no Change of Control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in Executive, or a group of persons which includes
Executive, acquiring, directly or indirectly, securities representing 20 percent
or more of the voting power of outstanding securities of Merix.
8.4 Disability. Termination of Executive's Employment based on
"Disability" shall mean termination without further compensation under this
Agreement, due to Executive's absence from Executive's full-time duties with
Merix for 180 consecutive days as a result of Executive's incapacity due to
physical or mental illness, unless within 30 days after notice of termination by
Merix following such absence Executive shall have returned to the full-time
performance of Executive's duties.
9. Successors; Binding Agreement.
9.1 This Agreement shall be binding on and inure to the benefit of
Merix and its Successors and assigns. Upon Executive's written request, Merix
will seek to have any Successor by agreement, assent to the fulfillment by Merix
of its obligations under this Agreement. If such a request is made, failure of
Merix to obtain such assent prior to or at the time a company becomes a
Successor shall constitute Good Reason for termination by Executive of his or
her employment and, if a Change of Control of the Company has occurred, shall
entitle Executive to the benefits pursuant to Section 4.
9.2 This Agreement shall inure to the benefit of and be enforceable by
Executive and Executive's legal representatives, executors, administrators and
heirs.
10. Resignation of Corporate Offices. Executive will resign Executive's
office, if any, as a director, officer or trustee of Merix, its subsidiaries or
affiliates and of any other corporation or trust of which Executive serves as
such at the request of Merix, effective as of the date of termination of
employment. Executive agrees to provide Merix such written resignation(s) upon
request and that no severance will be paid until after such resignation(s) are
provided.
11. Governing Law, Arbitration. This Agreement shall be construed in
accordance with and governed by the laws of the State of Oregon. Any dispute or
controversy arising under or in connection with this Agreement or the breach
thereof, shall
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be settled exclusively by arbitration under the Mutual Agreement to Arbitrate
Claims signed by the Executive, and judgment upon the award rendered by the
Arbitrator may be entered in any Court having jurisdiction thereof.
Notwithstanding any provision in the Mutual Agreement to Arbitrate Claims, Merix
shall pay all arbitration fees and reasonable attorney's fees and expenses
(including at trial and on appeal) of Executive in enforcing its rights under
this Agreement in the event of a Termination of Executive's Employment within 24
months following a Change of Control.
12. Amendment. No provision of this Agreement may be modified unless such
modification is agreed to in a writing signed by Executive and Merix.
13. Severability. If any of the provisions or terms of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other terms of this Agreement, and this
Agreement shall be construed as if such unenforceable term had never been
contained in this Agreement.
MERIX CORPORATION
By: TERRI TIMBERMAN JOE REICHBACH
------------------------------ ------------------------------
Title: V.P. Human Resources Executive
-----------------------
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EXHIBIT A
RELEASE OF CLAIMS
1. PARTIES.
The parties to Release of Claims (hereinafter "Release") are Joe Reichbach
and Merix Corporation, an Oregon corporation, as hereinafter defined.
1.1 EXECUTIVE.
For the purposes of this Release, "Executive" means Joe Reichbach, and
his attorneys, heirs, executors, administrators, assigns, and spouse.
1.2 THE COMPANY.
For purposes of this Release the "Company" means Merix Corporation, an
Oregon corporation, its predecessors and successors, corporate affiliates, and
all of each corporation's officers, directors, employees, insurers, agents, or
assigns, in their individual and representative capacities.
2. BACKGROUND AND PURPOSE.
Executive was employed by Company. Executive's employment is ending
effective __________ [following a Change in Control as defined in Section 8.3
("Change in Control") of Amended Executive Severance Agreement ("Agreement")].
Executive has elected pursuant to the terms of Section 3.3 of the [Amended
Executive Severance Agreement ("Agreement")/Agreement] to receive [50 percent of
target/the applicable prorated amount] of Executive's annual cash incentive and
elected pursuant to Section 3.4 of the Agreement to [receive $12,500 (less
proper withholding) in lieu of outplacement services/have payments up to $12,500
paid directly to a third party outplacement firm.] [Pursuant to Section 4.3 of
the Agreement, Merix shall pay [the cash equivalent not exceeding $5,000 (less
proper withholding) of] the cost and expense of maintaining a life insurance
policy for the Executive's benefit for 18 months.]
The purpose of this Release is to settle, and the parties hereby
settle, fully and finally, any and all claims Executive may have against
Company, whether asserted or not, known or unknown, including, but not limited
to, claims arising out of or related to Executive's employment, any claim for
reemployment, or any other claims whether
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asserted or not, known or unknown, past or future, that relate to Executive's
employment, reemployment, or application for reemployment.
3. RELEASE.
Except as reserved in paragraphs 3 or 3.1, Executive waives, acquits
and forever discharges Company from any obligations Company has and all claims
Executive may have including but not limited to obligations and/or claims
arising from the Agreement or any other document or oral agreement relating to
employment compensation, benefits severance or post-employment issues. Except as
reserved in Paragraph 3.1, Executive hereby releases Company from any and all
claims, demands, actions, or causes of action, whether known or unknown, arising
from or related in any way to any employment of or past or future failure or
refusal to employ Executive by Company, or any other past or future claim
(except as reserved by this Release or where expressly prohibited by law) that
relates in any way to Executive's employment, compensation, benefits,
reemployment, or application for employment, with the exception of any claim
Executive may have against Company for enforcement of this Release. This release
includes any and all claims, direct or indirect, which might otherwise be made
under any applicable local, state or federal authority, including but not
limited to any claim arising under the Oregon statutes dealing with employment,
discrimination in employment, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and
Medical Leave Act of 1993, the Equal Pay Act of 1963, Executive Order 11246, the
Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Age Discrimination in Employment Act, the Fair Labor
Standards Act, Oregon wage and hour statutes, all as amended, any regulations
under such authorities, and any applicable contract, tort, or common law
theories.
3.1 Reservations of Rights.
This Release shall not affect any rights which Executive may have
under any medical insurance, disability plan, workers' compensation,
unemployment compensation, applicable company stock incentive plan(s),
indemnifications, or the 401(k) plan maintained by the Company.
3.2 No Admission of Liability.
It is understood and agreed that the acts done and evidenced hereby
and the release granted hereunder is not an admission of liability on the part
of Executive or Company, by whom liability has been and is expressly denied.
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4. CONSIDERATION TO EXECUTIVE.
After receipt of this Release fully endorsed by Executive, and the
expiration of the seven- (7) day revocation period provided by the Older Workers
Benefit Protection Act without Executive's revocation, Company shall pay:
a) the lump sum of ___________ DOLLARS ($__________ )to Executive
(less proper withholding) for severance and the reasonable estimate of COBRA
continuation coverage as provided in Section[s] 3.1, 3.2 [and 4.1 and 4.6] of
the Agreement;
b) Company will pay [up to $12,500 directly to the third party
outplacement firm selected by Executive for up to one year's outplacement
services as needed/$12,500 (less proper withholding) in lieu of outplacement
services;]
c) the amount of annual cash incentive when due based on the terms of
Section[s] 3.3 [and 4.2] of the Agreement;[and]
[d) [the cash equivalent (less proper withholding) of] the premium to
maintain Executive's life insurance plan for 18 months as provided in Section
4.3 of the Agreement.]
5. NO DISPARAGEMENT.
Executive agrees that henceforth Executive will not disparage or make
false or adverse statements about Company. The Company should report to
Executive any actions or statements that are attributed to Executive that the
Company believes are disparaging. The Company may take actions consistent with
breach of this Release should it determine that Executive has disparaged or made
false or adverse statements about Company. The Company agrees to follow the
applicable policy(ies) regarding release of employment reference information.
6. CONFIDENTIALITY, PROPRIETARY, TRADE SECRET AND RELATED
INFORMATION.
Executive acknowledges the duty and agrees not to make unauthorized
use or disclosure of any confidential, proprietary or trade secret information
learned as an employee about Company, its products, customers and suppliers, and
covenants not to breach that duty. Moreover, Executive acknowledges that,
subject to the enforcement limitations of applicable law, the Company reserves
the right to enforce the terms of Executive's Employment Agreement with Company
and any paragraph(s) therein. Should Executive, Executive's attorney or agents
be requested in any judicial, administrative, or other proceeding to disclose
confidential, proprietary or trade secret information Executive
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learned as an employee of Company, Executive shall promptly notify the Company
of such request by the most expeditious means in order to enable the Company to
take any reasonable and appropriate action to limit such disclosure.
7. ARBITRATION OF CERTAIN DISPUTES.
Executive and Company agree that should the issue arise of whether
either party to this Agreement has failed to satisfy or has breached the terms
of this Agreement, any dispute regarding the issue, except for any claim
excepted under the Mutual Agreement to Arbitration Claims, shall be submitted to
arbitration pursuant to the Mutual Agreement to Arbitrate Claims signed by
Executive. In such event, [each party shall pay its own costs and attorneys'
fees/notwithstanding contrary language in the Mutual Agreement to Arbitrate
Claims, because this Release follows a Change in Control, the reasonable
attorneys fees incurred by Executive to seek enforcement of this Release shall
be paid by the Company].
8. SCOPE OF RELEASE.
The provisions of this Release shall be deemed to obligate, extend to,
and inure to the benefit of the parties; Company's parents, subsidiaries,
affiliates, successors, predecessors, assigns, directors, officers, and
employees; and each parties insurers, transferees, grantees, legatees, agents
and heirs, including those who may assume any and all of the above-described
capacities subsequent to the execution and effective date of this Release.
9. OPPORTUNITY FOR ADVICE OF COUNSEL.
Executive acknowledges that Executive has been encouraged to seek
advice of counsel with respect to this Release and has had the opportunity to do
so.
10. ENTIRE RELEASE.
This Release, the Mutual Agreement to Arbitrate Claims, [as modified
herein] and the Employment Agreement signed by Executive contain the entire
agreement and understanding between the parties and, except as reserved in
paragraph 3 and 3.1, supersede and replace all prior agreements written or oral
including but not limited to the Agreement and the Executive Stock Bonus
Agreement, prior negotiations and proposed agreements, written or oral.
Executive and Company acknowledge that no other party, nor agent nor attorney of
any other party, has made any promise, representation, or warranty,
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express or implied, not contained in this Release concerning the subject matter
of this Release to induce this Release, and Executive and Company acknowledge
that they have not executed this Release in reliance upon any such promise,
representation, or warranty not contained in this Release.
11. SEVERABILITY.
Every provision of this Release is intended to be severable.
In the event any term or provision of this Release is declared to be illegal or
invalid for any reason whatsoever by a court of competent jurisdiction or by
final and unappealed order of an administrative agency of competent
jurisdiction, such illegality or invalidity should not affect the balance of the
terms and provisions of this Release, which terms and provisions shall remain
binding and enforceable.
12. PARTIES MAY ENFORCE RELEASE.
Nothing in this Release shall operate to release or discharge any
parties to this Release or their successors, assigns, legatees, heirs, or
personal representatives from any rights, claims, or causes of action arising
out of, relating to, or connected with a breach of any obligation of any party
contained in this Release .
13. COSTS AND ATTORNEY'S FEES.
[The parties each agree to bear their own costs and attorneys' fees
which have been or may be incurred in connection with any matters released
herein or in connection with the negotiation and consummation of this Release.
In the event of any administrative or civil action to enforce the provisions of
this Release, the prevailing party shall be entitled to attorney fees and costs
through trial and/or on appeal. /Because this Release follows a Change of
Control, reasonable attorneys' fees which have been or may be incurred in
connection with any matters released herein or in connection with the
negotiation and consummation of this Release shall be paid by Company. In the
event of any administrative or civil action to enforce the provisions of this
Release, the Company shall pay Executive's reasonable attorneys' fees through
trial and/or on appeal.]
14. ACKNOWLEDGMENTS.
Executive acknowledges that the Release provides severance pay and
benefits which the Company would otherwise have no obligation to provide.
Executive acknowledges that Company has provided the following
information: (a) the class or group of employees offered the opportunity to
obtain severance benefits similar to those in the Release, (b) the eligibility
factors required to obtain
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severance benefits similar to those in the Release, (c) the time limits required
to obtain severance benefits similar to those in the Release, (d) the job titles
and ages of employees eligible or selected for severance benefits similar to
those in the Release, and (e) the ages of employees in the same classification
either not eligible or not selected.
15. REVOCATION.
As provided by the Older Workers Benefit Protection Act, Executive's
is entitled to have forty-five (45) days to consider this Release. For a period
of seven (7) days from execution of this Release, Executive may revoke this
Release. Upon receipt of Executive's signed Release and the end of the
revocation period, payment by Company as described in paragraph 4 above will be
forwarded by mail in a timely manner as provided herein.
_______________________________________ Dated: __________ __, 199_
Jose Reichbach
STATE OF OREGON )
) ss.
County of _________ )
Personally appeared the above named Joe Reichbach and acknowledged the
foregoing instrument to be his or her voluntary act and deed.
Before me: ____________________________________
Notary Public for __________________
My commission expires: _____________
MERIX CORPORATION
By: ___________________________________ Dated: _______________________
Its: __________________________________
On Behalf of "Company"
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EXECUTIVE SEVERANCE AGREEMENT
July 1, 1997
Charles William Payne
524 Ballad Lane
Forest Grove, Oregon 97116 Executive
Merix Corporation
an Oregon corporation
PO Box 3000
Forest Grove, Oregon 97116 Merix
Merix considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of
Merix and its shareholders. In this connection, Merix recognizes that, as is the
case with many publicly held corporations, the possibility of a change of
control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of Merix and its shareholders. In order
to induce Executive to remain employed by Merix in the face of uncertainties
about the long-term strategies of Merix and possible change of control of Merix
and their potential impact on Executive's position with Merix, this Agreement,
which has been approved by the Board of Directors of Merix, sets forth the
severance benefits that Merix will provide to Executive in the event Executive's
employment by Merix is terminated under the circumstances described in this
Agreement.
1. Employment Relationship. Executive is currently employed by Merix as
Vice President, Engineering and Chief Technology Officer. Executive and Merix
acknowledge that either party may terminate this employment relationship at any
time and for any or no reason, subject to the obligation of Merix to provide the
severance benefits specified in this Agreement in accordance with the terms
hereof.
2. Release of Claims. In consideration for and as a condition precedent to
receiving the severance benefits outlined in this Agreement, Executive agrees to
execute a Release of Claims in the appropriate form attached as Exhibit A
("Release of Claims"). Executive promises to execute and deliver the Release of
Claims to Merix within the later of (a) 45 days from the date Executive receives
the Release of Claims or (b) the last day of Executive's active employment.
<PAGE>
3. Compensation Upon Termination. In the event of a Termination of
Executive's Employment (as defined in Section 8.1) at any time other than for
Cause (as defined in Section 8.2 of this Agreement), death or Disability (as
defined in Section 8.4 of this Agreement), and contingent upon Executive's
execution of the Release of Claims and compliance with Section 10, Executive
shall be entitled to the following benefits:
3.1 As severance pay and in lieu of any other compensation for periods
subsequent to the date of termination, Merix shall pay Executive, in a single
payment after employment has entered and eight days have passed following
execution of the Release of Claims without revocation, an amount in cash equal
to one year of Executive's annual base pay at the rate in effect immediately
prior to the date of termination .
3.2 Executive is entitled to extend coverage under any group health
plan in which Executive and Executive's dependents are enrolled at the time of
termination of employment under the COBRA continuation laws for the 18-month
statutory period, or so long as Executive remains eligible under COBRA. Merix
will pay Executive a lump sum payment in an amount equivalent to the reasonably
estimated cost Executive may incur to extend for a period of 18 months under the
COBRA continuation laws Executive's group health and dental plan coverage in
effect at the time of termination. Executive may use this payment, as well as
any payment made under Section 3.1, for such COBRA continuation coverage or for
any other purpose.
3.3 Executive shall be entitled to a portion of the benefits under any
annual cash incentive plans in effect at the time of termination equal to the
greater of (a) 50% of Executive's target benefit under such plan for the year or
(b) a prorated amount representing the portion of the plan year during which
Executive was a participant. For purposes of this Agreement, Executive's
participation in any such plan will be considered to have ended on Executive's
last day of active employment. In making the proration calculation, the amount
of Executive's award if Executive had been a participant for the full incentive
period shall be divided by the total number of days in the incentive period and
the result multiplied by the actual number of days Executive participated in the
plan. The payment amount shall be calculated at the end of the incentive period
and the amount shall not be due and payable by Merix to Executive until the date
that all awards are payable to other eligible employees after the close of the
incentive period, except that Executive may elect at any time after termination,
by written notice to Merix, to receive 50% of Executive's target benefit instead
of the prorated amount, in which case the payment shall be made within 20 days
of such election. If the applicable plan provides for a greater payment for a
participant whose employment terminates prior to the end of an incentive period,
the applicable plan payment shall be made.
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3.4 Merix will pay up to $12,500 to a third party outplacement firm
selected by Executive to provide career counseling assistance to Executive for a
period of one year following Executive's termination date. Executive may elect
to receive the $12,500 in cash in lieu of payment to a third party outplacement
firm.
3.5 All outstanding stock options, restricted stock, stock bonuses or
other stock awards shall be governed by the terms of the applicable agreement or
plan.
3.6 In the event that Executive's employment with Merix terminates for
any reason prior to a Change of Control (as defined in Section 8.3), other than
at the direction of a person who has entered into an agreement with Merix, the
consummation of which will constitute a Change of Control, Executive shall not
be entitled to benefits under Section 4 of this Agreement.
4. Additional Compensation Upon Termination Following A Change of Control.
In the event of a Termination of Executive's Employment other than for Cause,
death or Disability within 24 months following a Change of Control, or prior to
a Change of Control at the direction of a person who has entered into an
agreement with Merix, the consummation of which will constitute a Change of
Control, and contingent upon Executive's execution of the Release of Claims and
compliance with Sections 5 and 10, Executive shall be entitled to the following
benefits, which benefits shall be in addition to the benefits provided in
Section 3:
4.1 Merix shall pay Executive, in a single payment within the latter
of (a) eight days after the last day of employment, including employment during
the up to the six months employment period referred to in Section 5 if Merix or
the surviving company has requested Executive to continue employment during such
period and (b) eight days after execution of the Release of Claims without
revocation, an amount in cash equal to one year of Executive's annual base
compensation at the rate in effect immediately prior to the date of termination.
4.2 Executive shall be entitled to receive an amount such that the
amount payable pursuant to Section 3.3 plus the amount payable pursuant to this
Section 4.2 equals 100% of the Executive's target benefit for the year under
annual cash incentive plans in effect at the time of termination. The amount
payable pursuant to Section 4.2 shall be paid on the same date that the Section
4.1 payment is payable.
4.3 Merix shall maintain in full force and effect, at its sole cost
and expense, for Executive's continued benefit for a period terminating 18
months after the date of termination a life insurance policy insuring
Executive's life with coverage equal to two times Executive's annual base pay in
effect immediately prior to termination, provided that Executive's continued
participation is possible under the general terms and provisions of such policy.
At Executive's election or in the event that Executive's continued participation
in such policy is barred, Merix shall make a lump sum payment to
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Executive equal to the total premiums that would have been paid by Merix for
such 18 month period. The maximum amount that Merix shall be obligated to pay
pursuant to this Section 4.3 in premiums and payments to Executive shall be
$5,000.
4.4 The possibility of forfeiture to Merix of all stock issued to
Executive under all Executive Stock Bonus Agreements shall immediately lapse.
4.5 All outstanding stock options held by Executive under all stock
option and stock incentive plans of Merix shall become immediately exercisable
in full and shall remain exercisable until the earlier of (a) two years after
termination of employment or (b) the option expiration date as set forth in the
applicable option agreement.
4.6 Notwithstanding any provision in this Agreement, in the event that
Executive would receive a greater after-tax benefit from the Capped Benefit (as
defined in the next sentence) than from the payments pursuant to this Agreement
(the "Specified Benefits"), the Capped Benefit shall be paid to Executive and
the Specified Benefits shall not be paid. The Capped Benefit is the Specified
Benefits, reduced by the amount necessary to prevent any portion of the
Specified Benefits from being "parachute payments" as defined in section
280G(b)(2) of the Internal Revenue Code of 1986, as amended ("IRC"), or any
successor provision. For purposes of determining whether Executive would receive
a greater after-tax benefit from the Capped Benefit than from the Specified
Benefits, there shall be taken into account all payments and benefits Executive
will receive upon a change in control of the Company (collectively, excluding
the Specified Benefits, the "Change of Control Payments"). To determine whether
Executive's after-tax benefit from the Capped Benefit would be greater than
Executive's after-tax benefit from the Specified Benefits, there shall be
subtracted from the sum of the before-tax Specified Benefits and the Change of
Control Payments (including the monetary value of any non-cash benefits) any
excise tax that would be imposed under IRC ss. 4999 and all federal, state and
local taxes required to be paid by Executive in respect of the receipt of such
payments, assuming that such payments would be taxed at the highest marginal
rate applicable to individuals in the year in which the Specified Benefits are
to be paid or such lower rate as Executive advises Merix in writing is
applicable to Executive.
5. Additional Service. Executive agrees that, if requested by Merix or the
surviving company following a Change of Control, Executive will continue his or
her employment with Merix or the surviving company for a period of up to six
months following the Change of Control in any capacity requested by Merix or the
surviving company consistent with Executive's areas of professional expertise.
During this period Executive shall receive the same salary and substantially the
same benefits as in effect prior to the Change of Control. Executive shall not
be entitled to any benefits provided by Section 4 if Executive fails to perform
in accordance with this Section 5.
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6. Tax Withholding; Subsequent Employment.
6.1 All payments provided for in this Agreement are subject to
applicable tax withholding obligations imposed by federal, state and local laws
and regulations.
6.2 The amount of any payment provided for in this Agreement shall not
be reduced, offset or subject to recovery by Merix by reason of any compensation
earned by Executive as the result of employment by another employer after
termination.
7. Other Agreements. In the event that severance benefits are payable to
Executive under any other agreement with Merix in effect at the time of
termination (including but not limited to any employment agreement, but
excluding for this purpose any stock option agreement or stock bonus agreement
or stock appreciation right agreement that may provide for accelerated vesting
or related benefits upon the occurrence of a change in control), the benefits
provided in this Agreement shall not be payable to Executive. Executive may,
however, elect to receive all of the benefits provided for in this Agreement in
lieu of all of the benefits provided in all such other agreements. Any such
election shall be made with respect to the agreements as a whole, and Executive
cannot select some benefits from one agreement and other benefits from this
Agreement.
8. Definitions.
8.1 Termination of Executive's Employment. Termination of Executive's
Employment means that Merix has terminated Executive's employment with Merix
(including any subsidiary of Merix). For purposes of Section 3, if Executive is
assigned additional or different titles, tasks or responsibilities from those
currently held or assigned, consistent with Executive's areas of professional
expertise and with no decrease in annual base compensation, whether at Merix or
any subsidiary of Merix, such circumstances shall not constitute a Termination
of Executive's Employment. For purposes of Section 4, Termination of Executive's
Employment shall include termination by Executive, within 24 months of a Change
of Control, by written notice to Merix referring to the applicable paragraph of
Section 8.1, for "Good Reason" based on:
(A) the assignment to Executive of a different title, job or
responsibilities that results in a decrease in the level of
responsibility of Executive with respect to the surviving company
after the Change of Control when compared to Executive's level of
responsibility for Merix' operations prior to the Change of Control;
provided that Good Reason shall not exist if Executive continues to
have the same or a greater general level of responsibility for the
former Merix
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operations after the Change of Control as Executive had prior to the
Change of Control even if the former Merix operations are a subsidiary
or division of the surviving company;
(B) a reduction by Merix or the surviving company in Executive's
base pay as in effect immediately prior to the Change of Control;
(C) a significant reduction by Merix or the surviving company in
total benefits available to Executive under cash incentive, stock
incentive and other employee benefit plans after the Change of Control
compared to the total package of such benefits as in effect prior to
the Change of Control;
(D) Merix or the surviving company requires Executive to be based
more than 50 miles from where Executive's office is located
immediately prior to the Change of Control except for required travel
on company business to an extent substantially consistent with the
business travel obligations which Executive undertook on behalf of
Merix prior to the Change of Control; or
(E) the failure by Merix to obtain from any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of Merix
("Successor") the assent to this Agreement contemplated by Section 9
hereof.
8.2 Cause. Termination of Executive's Employment for "Cause" shall
mean termination upon (a) the willful and continued failure by Executive to
perform substantially Executive's reasonably assigned duties with Merix (other
than any such failure resulting from Executive's incapacity due to physical or
mental illness) after a demand for substantial performance is delivered to
Executive by the Board, the Chief Executive Officer or the President of Merix
which specifically identifies the manner in which the Board or Merix believes
that Executive has not substantially performed Executive's duties or (b) the
willful engaging by Executive in illegal conduct which is materially and
demonstrably injurious to Merix. No act, or failure to act, on Executive's part
shall be considered "willful" unless done, or omitted to be done, by Executive
without reasonable belief that Executive's action or omission was in, or not
opposed to, the best interests of Merix. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for Merix shall be conclusively presumed to be done, or
omitted to be done, by Executive in the best interests of Merix.
6
<PAGE>
8.3 Change of Control. A Change of Control shall mean that one of the
following events has taken place:
(A) The shareholders of Merix approve one of the following
("Approved Transactions"):
(i) Any merger or statutory plan of exchange involving Merix
("Merger") in which Merix is not the continuing or surviving
corporation or pursuant to which Common Stock would be converted into
cash, securities or other property, other than a Merger involving
Merix in which the holders of Common Stock immediately prior to the
Merger have the same proportionate ownership of Common Stock of the
surviving corporation after the Merger; or
(ii) Any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of Merix or the adoption of any plan
or proposal for the liquidation or dissolution;
(B) A tender or exchange offer, other than one made by Merix is
made for Common Stock (or securities convertible into Common Stock)
and such offer results in a portion of those securities being
purchased and the offeror after the consummation of the offer is the
beneficial owner (as determined pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
directly or indirectly, of securities representing at least 20 percent
of the voting power of outstanding securities of Merix;
(C) Merix receives a report on Schedule 13D of the Exchange Act
reporting the beneficial ownership by any person (other than
Tektronix, Inc. or any of its affiliates) of securities representing
20 percent or more of the voting power of outstanding securities of
Merix, except that (i) if such receipt shall occur as the result of
sale of Common Stock (or securities convertible into Common Stock) by
Tektronix, Inc. or any of its affiliates, it shall not constitute a
Change of Control, or (ii) if such receipt shall occur during a tender
offer or exchange offer described in (B) above, a Change of Control
shall not take place until the conclusion of such offer; or
(D) During any period of 12 months or less, individuals who at
the beginning of such period constituted a majority of the
7
<PAGE>
Board of Directors cease for any reason to constitute a majority
thereof unless the nomination or election of such new directors was
approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such period.
Notwithstanding anything in the foregoing to the contrary, no Change of Control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in Executive, or a group of persons which includes
Executive, acquiring, directly or indirectly, securities representing 20 percent
or more of the voting power of outstanding securities of Merix.
8.4 Disability. Termination of Executive's Employment based on
"Disability" shall mean termination without further compensation under this
Agreement, due to Executive's absence from Executive's full-time duties with
Merix for 180 consecutive days as a result of Executive's incapacity due to
physical or mental illness, unless within 30 days after notice of termination by
Merix following such absence Executive shall have returned to the full-time
performance of Executive's duties.
9. Successors; Binding Agreement.
9.1 This Agreement shall be binding on and inure to the benefit of
Merix and its Successors and assigns. Upon Executive's written request, Merix
will seek to have any Successor by agreement, assent to the fulfillment by Merix
of its obligations under this Agreement. If such a request is made, failure of
Merix to obtain such assent prior to or at the time a company becomes a
Successor shall constitute Good Reason for termination by Executive of his or
her employment and, if a Change of Control of the Company has occurred, shall
entitle Executive to the benefits pursuant to Section 4.
9.2 This Agreement shall inure to the benefit of and be enforceable by
Executive and Executive's legal representatives, executors, administrators and
heirs.
10. Resignation of Corporate Offices. Executive will resign Executive's
office, if any, as a director, officer or trustee of Merix, its subsidiaries or
affiliates and of any other corporation or trust of which Executive serves as
such at the request of Merix, effective as of the date of termination of
employment. Executive agrees to provide Merix such written resignation(s) upon
request and that no severance will be paid until after such resignation(s) are
provided.
11. Governing Law, Arbitration. This Agreement shall be construed in
accordance with and governed by the laws of the State of Oregon. Any dispute or
controversy arising under or in connection with this Agreement or the breach
thereof, shall be settled exclusively by arbitration under the Mutual Agreement
to Arbitrate Claims signed by the Executive, and judgment upon the award
rendered by the Arbitrator may be entered in any Court having jurisdiction
thereof. Notwithstanding any provision in the
8
<PAGE>
Mutual Agreement to Arbitrate Claims, Merix shall pay all arbitration fees and
reasonable attorney's fees and expenses (including at trial and on appeal) of
Executive in enforcing its rights under this Agreement in the event of a
Termination of Executive's Employment within 24 months following a Change of
Control.
12. Amendment. No provision of this Agreement may be modified unless such
modification is agreed to in a writing signed by Executive and Merix.
13. Severability. If any of the provisions or terms of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other terms of this Agreement, and this
Agreement shall be construed as if such unenforceable term had never been
contained in this Agreement.
MERIX CORPORATION
By: TERRI TIMBERMAN CHARLES W. PAYNE
------------------------------ ------------------------------
Title: Vice President Executive
Human Resources
9
<PAGE>
EXHIBIT A
RELEASE OF CLAIMS
1. PARTIES.
The parties to Release of Claims (hereinafter "Release") are ______________
__________________ and Merix Corporation, an Oregon corporation, as hereinafter
defined.
1.1 EXECUTIVE.
For the purposes of this Release, "Executive" means __________________
__________________, and his or her attorneys, heirs, executors, administrators,
assigns, and spouse.
1.2 THE COMPANY.
For purposes of this Release the "Company" means Merix Corporation, an
Oregon corporation, its predecessors and successors, corporate affiliates, and
all of each corporation's officers, directors, employees, insurers, agents, or
assigns, in their individual and representative capacities.
2. BACKGROUND AND PURPOSE.
Executive was employed by Company. Executive's employment is ending
effective __________ [following a Change in Control as defined in Section 8.3
("Change in Control") of Amended Executive Severance Agreement ("Agreement")].
Executive has elected pursuant to the terms of Section 3.3 of the [Amended
Executive Severance Agreement ("Agreement")/Agreement] to receive [50 percent of
target/the applicable prorated amount] of Executive's annual cash incentive and
elected pursuant to Section 3.4 of the Agreement to [receive $12,500 (less
proper withholding) in lieu of outplacement services/have payments up to $12,500
paid directly to a third party outplacement firm.] [Pursuant to Section 4.3 of
the Agreement, Merix shall pay [the cash equivalent not exceeding $5,000 (less
proper withholding) of] the cost and expense of maintaining a life insurance
policy for the Executive's benefit for 18 months.]
The purpose of this Release is to settle, and the parties hereby
settle, fully and finally, any and all claims Executive may have against
Company, whether asserted or not, known or unknown, including, but not limited
to, claims arising out of or related to Executive's employment, any claim for
reemployment, or any other claims whether
A-1
<PAGE>
asserted or not, known or unknown, past or future, that relate to Executive's
employment, reemployment, or application for reemployment.
3. RELEASE.
Except as reserved in paragraphs 3 or 3.1, Executive waives, acquits
and forever discharges Company from any obligations Company has and all claims
Executive may have including but not limited to obligations and/or claims
arising from the Agreement or any other document or oral agreement relating to
employment compensation, benefits severance or post-employment issues. Except as
reserved in Paragraph 3.1, Executive hereby releases Company from any and all
claims, demands, actions, or causes of action, whether known or unknown, arising
from or related in any way to any employment of or past or future failure or
refusal to employ Executive by Company, or any other past or future claim
(except as reserved by this Release or where expressly prohibited by law) that
relates in any way to Executive's employment, compensation, benefits,
reemployment, or application for employment, with the exception of any claim
Executive may have against Company for enforcement of this Release. This release
includes any and all claims, direct or indirect, which might otherwise be made
under any applicable local, state or federal authority, including but not
limited to any claim arising under the Oregon statutes dealing with employment,
discrimination in employment, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and
Medical Leave Act of 1993, the Equal Pay Act of 1963, Executive Order 11246, the
Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Age Discrimination in Employment Act, the Fair Labor
Standards Act, Oregon wage and hour statutes, all as amended, any regulations
under such authorities, and any applicable contract, tort, or common law
theories.
3.1 Reservations of Rights.
This Release shall not affect any rights which Executive may have
under any medical insurance, disability plan, workers' compensation,
unemployment compensation, applicable company stock incentive plan(s),
indemnifications, or the 401(k) plan maintained by the Company.
3.2 No Admission of Liability.
It is understood and agreed that the acts done and evidenced
hereby and the release granted hereunder is not an admission of liability on the
part of Executive or Company, by whom liability has been and is expressly
denied.
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<PAGE>
4. CONSIDERATION TO EXECUTIVE.
After receipt of this Release fully endorsed by Executive, and the
expiration of the seven- (7) day revocation period provided by the Older Workers
Benefit Protection Act without Executive's revocation, Company shall pay:
a) the lump sum of ___________ DOLLARS ($__________ )to Executive
(less proper withholding) for severance and the reasonable estimate of COBRA
continuation coverage as provided in Section[s] 3.1, 3.2 [and 4.1 and 4.6] of
the Agreement;
b) Company will pay [up to $12,500 directly to the third party
outplacement firm selected by Executive for up to one year's outplacement
services as needed/$12,500 (less proper withholding) in lieu of outplacement
services;]
c) the amount of annual cash incentive when due based on the terms of
Section[s] 3.3 [and 4.2] of the Agreement [as elected by Executive];[and]
[d) [the cash equivalent (less proper withholding) of] the premium to
maintain Executive's life insurance plan for 18 months as provided in Section
4.3 of the Agreement.]
5. NO DISPARAGEMENT.
Executive agrees that henceforth Executive will not disparage or make
false or adverse statements about Company. The Company should report to
Executive any actions or statements that are attributed to Executive that the
Company believes are disparaging. The Company may take actions consistent with
breach of this Release should it determine that Executive has disparaged or made
false or adverse statements about Company. The Company agrees to follow the
applicable policy(ies) regarding release of employment reference information.
6. CONFIDENTIALITY, PROPRIETARY, TRADE SECRET AND RELATED
INFORMATION.
Executive acknowledges the duty and agrees not to make unauthorized
use or disclosure of any confidential, proprietary or trade secret information
learned as an employee about Company, its products, customers and suppliers, and
covenants not to breach that duty. Moreover, Executive acknowledges that,
subject to the enforcement limitations of applicable law, the Company reserves
the right to enforce the terms of Executive's Employment Agreement with Company
and any paragraph(s) therein. Should Executive, Executive's attorney or agents
be requested in any judicial, administrative, or
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<PAGE>
other proceeding to disclose confidential, proprietary or trade secret
information Executive learned as an employee of Company, Executive shall
promptly notify the Company of such request by the most expeditious means in
order to enable the Company to take any reasonable and appropriate action to
limit such disclosure.
7. ARBITRATION OF CERTAIN DISPUTES.
Executive and Company agree that should the issue arise of whether
either party to this Agreement has failed to satisfy or has breached the terms
of this Agreement, any dispute regarding the issue, except for any claim
excepted under the Mutual Agreement to Arbitration Claims, shall be submitted to
arbitration pursuant to the Mutual Agreement to Arbitrate Claims signed by
Executive. In such event, [each party shall pay its own costs and attorneys'
fees/notwithstanding contrary language in the Mutual Agreement to Arbitrate
Claims, because this Release follows a Change in Control, the reasonable
attorneys fees incurred by Executive to seek enforcement of this Release shall
be paid by the Company].
8. SCOPE OF RELEASE.
The provisions of this Release shall be deemed to obligate, extend to,
and inure to the benefit of the parties; Company's parents, subsidiaries,
affiliates, successors, predecessors, assigns, directors, officers, and
employees; and each parties insurers, transferees, grantees, legatees, agents
and heirs, including those who may assume any and all of the above-described
capacities subsequent to the execution and effective date of this Release.
9. OPPORTUNITY FOR ADVICE OF COUNSEL.
Executive acknowledges that Executive has been encouraged to seek
advice of counsel with respect to this Release and has had the opportunity to do
so.
10. ENTIRE RELEASE.
This Release, the Mutual Agreement to Arbitrate Claims, [as modified
herein] and the Employment Agreement signed by Executive contain the entire
agreement and understanding between the parties and, except as reserved in
paragraph 3 and 3.1, supersede and replace all prior agreements written or oral
including but not limited to the Agreement and the Executive Stock Bonus
Agreement, prior negotiations and proposed agreements, written or oral.
Executive and Company acknowledge that no other party, nor agent nor attorney of
any other party, has made any promise, representation, or
A-4
<PAGE>
warranty, express or implied, not contained in this Release concerning the
subject matter of this Release to induce this Release, and Executive and Company
acknowledge that they have not executed this Release in reliance upon any such
promise, representation, or warranty not contained in this Release.
11. SEVERABILITY.
Every provision of this Release is intended to be severable. In the
event any term or provision of this Release is declared to be illegal or invalid
for any reason whatsoever by a court of competent jurisdiction or by final and
unappealed order of an administrative agency of competent jurisdiction, such
illegality or invalidity should not affect the balance of the terms and
provisions of this Release, which terms and provisions shall remain binding and
enforceable.
12. PARTIES MAY ENFORCE RELEASE.
Nothing in this Release shall operate to release or discharge any
parties to this Release or their successors, assigns, legatees, heirs, or
personal representatives from any rights, claims, or causes of action arising
out of, relating to, or connected with a breach of any obligation of any party
contained in this Release .
13. COSTS AND ATTORNEY'S FEES.
[The parties each agree to bear their own costs and attorneys' fees
which have been or may be incurred in connection with any matters released
herein or in connection with the negotiation and consummation of this Release.
In the event of any administrative or civil action to enforce the provisions of
this Release, the prevailing party shall be entitled to attorney fees and costs
through trial and/or on appeal. /Because this Release follows a Change of
Control, reasonable attorneys' fees which have been or may be incurred in
connection with any matters released herein or in connection with the
negotiation and consummation of this Release shall be paid by Company. In the
event of any administrative or civil action to enforce the provisions of this
Release, the Company shall pay Executive's reasonable attorneys' fees through
trial and/or on appeal.]
14. ACKNOWLEDGMENTS.
Executive acknowledges that the Release provides severance pay and
benefits which the Company would otherwise have no obligation to provide.
Executive acknowledges that Company has provided the following
information: (a) the class or group of employees offered the opportunity to
obtain severance benefits similar to those in the Release, (b) the eligibility
factors required to
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obtain severance benefits similar to those in the Release, (c) the time limits
required to obtain severance benefits similar to those in the Release, (d) the
job titles and ages of employees eligible or selected for severance benefits
similar to those in the Release, and (e) the ages of employees in the same
classification either not eligible or not selected.
15. REVOCATION.
As provided by the Older Workers Benefit Protection Act, Executive's
is entitled to have forty-five (45) days to consider this Release. For a period
of seven (7) days from execution of this Release, Executive may revoke this
Release. Upon receipt of Executive's signed Release and the end of the
revocation period, payment by Company as described in paragraph 4 above will be
forwarded by mail in a timely manner as provided herein.
_______________________________________ Dated: __________ __, 199_
[Name of Executive]
STATE OF OREGON )
) ss.
County of _________ )
Personally appeared the above named and acknowledged the foregoing
instrument to be his or her voluntary act and deed.
Before me: ____________________________________
Notary Public for __________________
My commission expires: _____________
MERIX CORPORATION
By: ___________________________________ Dated: _______________________
Its: __________________________________
On Behalf of "Company"
A-6
<PAGE>
AMENDMENT NO. 1 TO
EXECUTIVE NONSTATUTORY STOCK OPTION AGREEMENT
In connection with the approval of an Amended Executive Severance
Agreement by the Board of Directors of Merix Corporation (the "Company") and the
execution of such agreement by the Company and Charles William Payne
("Optionee"), the Company and Optionee agree to amend as follows all Executive
Nonstatutory Stock Option Agreements between the Company and Optionee in effect
on the date hereof:
1. Paragraph 10 of Exhibit A is amended to read in its entirety as follows:
"The terms of the Option are subject to the special
acceleration provisions set forth in the Amended Executive
Severance Agreement between the Company and Optionee."
2. All references in Exhibit A to "paragraph 10" are deleted.
DATED: July 1, 1997 MERIX CORPORATION
By TERRI TIMBERMAN
--------------------------------------
Title V.P. Human Resources
-----------------------------------
CHARLES W. PAYNE
-----------------------------------------
Optionee
<PAGE>
AMENDMENT NO. 1 TO
EXECUTIVE STOCK BONUS AGREEMENT
In connection with the approval of an Amended Executive Severance
Agreement by the Board of Directors of Merix Corporation ("Merix") and the
execution of such agreement by Merix and Charles William Payne ("Executive"),
Merix and Executive agree to amend as follows all Executive Stock Bonus
Agreements between Merix and Executive in effect on the date hereof:
1. The last sentence of Section 1 is amended to read in its entirety as follows:
"The Bonus Shares are also subject to the special
acceleration provisions set forth in the Amended Executive
Severance Agreement between Merix and Executive (the
"Severance Agreement")."
2. In the first sentence of Section 2.1, the words "except as otherwise provided
in Section 6 below" are amended to read as "except as otherwise provided in the
Severance Agreement".
3. Section 6 is deleted in its entirety, and Sections 7 and 8 are renumbered as
Sections 6 and 7, respectively.
DATED: July 1, 1997 MERIX CORPORATION
By TERRI TIMBERMAN
--------------------------------------
Title V.P. Human Resources
--------------------------------
CHARLES W. PAYNE
-----------------------------------------
Executive
EXECUTIVE SEVERANCE AGREEMENT
August 4, 1997
Mark H. Hynes
2305 Idledale Drive
Fort Collins, Colorado 80526 Executive
Merix Corporation
an Oregon corporation
PO Box 3000
Forest Grove, Oregon 97116 Merix
Merix considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of
Merix and its shareholders. In order to induce Executive to remain employed by
Merix in the face of uncertainties about the long-term strategies of Merix and
their potential impact on the scope and nature of Executive's position with
Merix, this Agreement, which has been approved by the Board of Directors of
Merix, sets forth the severance benefits that Merix will provide to Executive in
the event Executive's employment by Merix is terminated under the circumstances
described in this Agreement.
1. Employment Relationship. Executive is currently employed by Merix as
Vice President, Site Operations. Executive and Merix acknowledge that either
party may terminate this employment relationship at any time and for any or no
reason, subject to the obligation of Merix to provide the benefits specified in
this Agreement in accordance with the terms hereof.
2. Release of Claims. In consideration for and as a condition precedent to
receiving the severance benefits outlined in this Agreement, Executive agrees to
execute a Release of Claims in the form attached as Exhibit A ("Release of
Claims"). Executive promises to execute and deliver the Release of Claims to
Merix within the later of (a) 45 days from the date Executive receives the
Release of Claims or (b) the last day of Executive's active employment.
3. Compensation Upon Termination. In the event of a Termination of
Executive's Employment (as defined in Section 6.1) at any time other than for
Cause (as defined in Section 6.2 of this Agreement), Death or Disability (as
defined in Sections 6.4 and 6.3 of this Agreement), and contingent upon
Executive's execution of a Release of Claims, Executive shall be entitled to the
following benefits:
<PAGE>
3.1 As severance pay and in lieu of any other compensation for periods
subsequent to the date of termination, Merix shall pay Executive, in a single
payment within the later of (a) 45 days after termination of employment or (b)
eight days after execution of the Release of Claims, an amount in cash equal to
one-twelfth of Executive's annual base pay at the rate in effect immediately
prior to the date of termination multiplied by a number determined from the
following schedule:
Date of Termination Multiplication Factor
------------------- ---------------------
On or before the first anniversary
date of this Agreement. 12
After the first anniversary date
but on or before the second
anniversary date of this
Agreement. 9
Any time after the second
anniversary date of this
Agreement. 6
3.2 Executive is entitled to extend coverage under any group health
plan in which Executive and Executive's dependents are enrolled at the time of
termination of employment under the COBRA continuation laws for the 18-month
statutory period, or so long as Executive remains eligible under COBRA.
Merix will pay Executive a lump sum payment in an amount equivalent to
the reasonably estimated cost Executive may incur to extend for a period of 18
months under the COBRA continuation laws Executive's group health and dental
plan coverage in effect at the time of termination. Executive may use this
payment, as well as any payment made under Section 3.1, for such COBRA
continuation coverage or for any other purpose.
3.3 Except as provided in Section 5.2, Executive shall be entitled to
a portion of the benefits under any incentive plans in effect at the time of
termination, prorated for the portion of the plan year during which Executive
was a participant. For purposes of this Agreement, Executive's participation in
any annual performance improvement plan will be considered to have ended on
Executive's last day of active employment. Prorated awards shall not be due and
payable by Merix to Executive until the date that all awards are paid to other
eligible employees after the close of the incentive period. Unless the
applicable plan provides for a greater payment for a participant whose
employment terminates prior to the end of an incentive period (in which case the
applicable plan payment shall be made), the proration shall be calculated
pursuant to this Section 3.3. The payment, if any, that would have been made
under
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<PAGE>
Executive's award had Executive been made a participant for the full incentive
period shall be calculated at the end of the incentive period. Such amount shall
be divided by the total number of days in the incentive period and the result
multiplied by the actual number of days Executive participated in the plan.
3.4 Merix will pay up to $12,500 to a third party outplacement firm
selected by Executive to provide career counseling assistance to Executive for a
period of one year following Executive's termination date.
3.5 All outstanding stock options, restricted stock, stock bonuses or
other stock awards shall become vested to the extent provided in Section 5.2.
4. Subsequent Employment. The amount of any payment provided for in this
Agreement shall not be reduced, offset or subject to recovery by Merix by reason
of any compensation earned by Executive as the result of employment by another
employer after termination.
5. Other Agreements.
5.1 In the event that severance benefits are payable to Executive
under any other agreement with Merix in effect at the time of termination
(including but not limited to any change of control, "golden parachute" or
employment agreement, but excluding for this purpose any stock option agreement
or stock bonus agreement or stock appreciation right agreement that may provide
for accelerated vesting or related benefits upon the occurrence of a change in
control), the benefits provided in this Agreement shall not be payable to
Executive. Executive may, however, elect to receive all of the benefits provided
for in this Agreement in lieu of all of the benefits provided in all such other
agreements. Any such election shall be made with respect to the agreements as a
whole, and Executive cannot select some benefits from one agreement and other
benefits from this Agreement.
5.2 The vesting or accrual of stock options, restricted stock, stock
bonuses, or any other stock awards shall not continue following termination. The
vesting or accrual provisions of any agreements between Executive and Merix that
relate to stock awards (including but not limited to stock options, long term
incentive program, stock bonuses and restricted stock) shall be superseded by
the provisions of this Section 5.2 to the extent this Section 5.2 results in
earlier vesting or accrual. In the event of a Termination of Executive's
Employment (as defined in Section 6.1) at any time other than for Cause (as
defined in Section 6.2), Death or Disability (as defined in Sections 6.4 and
6.3), and contingent upon Executive's execution of a Release of Claims, all
outstanding stock options, restricted stock, stock bonuses or any other stock
awards then held by Executive shall vest or accrue in accordance with the
following schedule:
3
<PAGE>
Date of Termination Amount Vested or Accrued
------------------- ------------------------
On or before the All shares that would
first anniversary have otherwise vested
date of this or accrued on or
Agreement. before the date of
termination.
After the first All shares that would
anniversary date but have otherwise vested
on or before the or accrued on or
second anniversary before the end of the
date of this 12 calendar months
Agreement. after the month in
which termination
occurred.
Any time after the All shares that would
second anniversary have otherwise vested
date of this or accrued on or
Agreement. before the end of the
24 calendar months
after the month in
which termination
occurred.
5.3 Executive shall be entitled to exercise any stock options or stock
appreciation rights that are or became exercisable as a result of any other
agreement between Executive and Merix or this Agreement at any time prior to the
expiration date of the option or the expiration of 90 days after the date
Executive's employment is terminated, whichever is the shorter period. All
unexercised stock options and stock appreciation rights shall immediately
terminate upon the expiration of such 90-day period.
6. Definitions.
6.1 Termination of Executive's Employment. Termination of Executive's
Employment means that Merix has terminated Executive's employment with Merix
(including any subsidiary of Merix). If Executive is assigned additional or
different titles, tasks or responsibilities from those currently held or
assigned, consistent with Executive's areas of professional expertise, whether
at Merix or any subsidiary of Merix, such circumstances shall not constitute a
Termination of Executive's Employment.
6.2 Cause. Termination of Executive's Employment for "Cause" shall
mean Termination upon (a) the willful failure by Executive to perform
substantially Executive's reasonably assigned duties with Merix after written
notice outlining the deficiencies and after a demand for substantial performance
is delivered to Executive by
4
<PAGE>
the Board, Chief Executive Officer or President of Merix or (b) the willful
engaging by Executive in illegal conduct which is materially and demonstrably
injurious to Merix.
6.3 Disability. Termination of Executive's Employment based on
"Disability" shall mean termination without further compensation under this
Agreement, due to Executive's absence from Executive's full-time duties with
Merix for 180 consecutive days as a result of Executive's incapacity due to
physical or mental illness, unless within 30 days after notice of termination by
Merix following such absence Executive shall have returned to the full-time
performance of Executive's duties.
6.4 Death. Executive's employment terminates upon Executive's death
without further compensation under this Agreement.
7. Successors; Binding Agreement.
7.1 This Agreement shall be binding on and inure to the benefit of
Merix and its successors and assigns.
7.2 This Agreement shall inure to the benefit of and be enforceable by
Executive and Executive's legal representatives, executors, administrators and
heirs.
8. Resignation of Corporate Offices. Executive will resign Executive's
office, if any, as a director, officer or trustee of Merix, its subsidiaries or
affiliates, effective as of the date of termination of employment. Executive
agrees to provide Merix such written resignation(s) upon request and that no
severance will be paid until after such resignation(s) are provided.
9. Governing Law, Arbitration. This Agreement shall be construed in
accordance with and governed by the laws of the States of Oregon and Colorado.
Any dispute or controversy arising under or in connection with this Agreement or
the breach thereof, shall be settled exclusively by arbitration under the Mutual
Agreement to Arbitrate Claims signed by the Executive, and judgment upon the
award rendered by the Arbitrator may be entered in any Court having jurisdiction
thereof.
10. Amendment. No provision of this Agreement may be modified unless such
modification is agreed to in a writing signed by Executive and Merix.
MERIX CORPORATION
By: TERRI TIMBERMAN MARK H. HYNES
------------------------------ ------------------------------
Title: Vice President Executive
Human Resources
5
<PAGE>
EXHIBIT A
RELEASE OF CLAIMS
1. PARTIES.
The parties to Release of Claims (hereinafter "Release") are MARK H.
HYNES and MERIX CORPORATION, an Oregon corporation, as hereinafter defined.
1.1 MARK H. HYNES, JR..
For the purposes of this Release, "HYNES" means MARK H. HYNES, HYNE's
attorneys, heirs, executors, administrators, assigns, and spouse.
1.2 THE COMPANY.
For purposes of this Release the "Company" means MERIX CORPORATION, an
Oregon corporation, its predecessors and successors, corporate affiliates, and
all of each corporation's officers, directors, employees, insurers, agents, or
assigns, in their individual and representative capacities.
2. BACKGROUND AND PURPOSE.
HYNES was employed by Company. HYNES' employment is ending effective
__________.
The purpose of this Release is to settle, and the parties hereby
settle, fully and finally, any and all claims HYNES may have against Company,
whether asserted or not, known or unknown, including, but not limited to, claims
arising out of or related to HYNES' employment, any claim for reemployment, or
any other claims whether
6
<PAGE>
asserted or not, known or unknown, past or future, that relate to HYNES'
employment, reemployment, or application for reemployment.
3. RELEASE.
Except as reserved in paragraph 3.1, HYNES waives, acquits and forever
discharges Company from any and all claims HYNES may have. Except as reserved in
Paragraph 3.1, HYNES hereby releases Company from any and all claims, demands,
actions, or causes of action, whether known or unknown, arising from or related
in any way to any employment of or past or future failure or refusal to employ
HYNES by Company, or any other past or future claim (except as reserved by this
Release or where expressly prohibited by law) that relates in any way to HYNES'
employment, compensation, benefits, reemployment, or application for employment,
with the exception of any claim HYNES may have against Company for enforcement
of this Release. This release includes any and all claims, direct or indirect,
which might otherwise be made under any applicable local, state or federal
authority, including but not limited to any claim arising under the Oregon and
Colorado statutes dealing with employment, discrimination in employment, Title
VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans
With Disabilities Act, the Family and Medical Leave Act of 1993, the Equal Pay
Act of 1963, Executive Order 11246, the Rehabilitation Act of 1973, the
Uniformed Services Employment and Reemployment Rights Act of 1994, the Age
Discrimination in Employment Act, the Fair Labor
7
<PAGE>
Standards Act, Oregon wage and hour statutes, all as amended, any regulations
under such authorities, and any applicable contract, tort, or common law
theories.
3.1 Reservations of Rights.
This Release shall not affect any rights which HYNES may have under
any medical insurance, disability plan, workers' compensation, unemployment
compensation, applicable company stock incentive plan(s), indemnifications, or
the 401(k) plan maintained by the Company.
3.2 No Admission of Liability.
It is understood and agreed that the acts done and evidenced hereby
and the release granted hereunder is not an admission of liability on the part
of HYNES or Company, by whom liability has been and is expressly denied.
4. CONSIDERATION TO HYNES.
After receipt of this Release , fully endorsed by HYNES and the
expiration of the seven (7) day revocation period provided by the Older Workers
Benefit Protection Act without HYNES' revocation, Company shall pay the lump sum
of $_____________to HYNES (less proper withholding).
5. NO DISPARAGEMENT.
HYNES agrees that henceforth HYNES will not disparage or make false or
adverse statements about Company. The Company should report to HYNES any actions
or statements that are attributed to HYNES that the Company believes are
disparaging. The Company may take actions consistent with breach of this Release
8
<PAGE>
should it determine that HYNES has disparaged or made false or adverse
statements about Company. The Company agrees to follow the applicable
policy(ies) regarding release of employment reference information.
6. CONFIDENTIALITY, PROPRIETARY, TRADE SECRET AND RELATED
INFORMATION.
HYNES acknowledges the duty and agrees not to make unauthorized use or
disclosure of any confidential, proprietary or trade secret information learned
as an employee about Company, its products, customers and suppliers, and
covenants not to breach that duty. Moreover, HYNES acknowledges that, subject to
the enforcement limitations of applicable law, the Company reserves the right to
enforce the terms of HYNES' Employment Agreement with Company and any
paragraph(s) therein. Should HYNES, HYNES' attorney or agents be requested in
any judicial, administrative, or other proceeding to disclose confidential,
proprietary or trade secret information HYNES learned as an employee of Company,
HYNES shall promptly notify the Company of such request by the most expeditious
means in order to enable the Company to take any reasonable and appropriate
action to limit such disclosure.
7. ARBITRATION OF CERTAIN DISPUTES.
HYNES and Company agree that should the issue arise of whether either
party to this Agreement has failed to satisfy or has breached the terms of this
Agreement, any dispute regarding the issue, except for any claim excepted under
the Mutual Agreement to Arbitration Claims, shall be submitted to arbitration
pursuant to
9
<PAGE>
the Mutual Agreement to Arbitrate Claims signed by HYNES. In such event, each
party shall pay its own costs and attorneys' fees.
8. SCOPE OF RELEASE.
The provisions of this Release shall be deemed to obligate, extend to,
and inure to the benefit of the parties; Company's parents, subsidiaries,
affiliates, successors, predecessors, assigns, directors, officers, and
employees; and each parties insurers, transferees, grantees, legatees, agents
and heirs, including those who may assume any and all of the above-described
capacities subsequent to the execution and effective date of this Release.
9. OPPORTUNITY FOR ADVICE OF COUNSEL.
HYNES acknowledges that HYNES has been encouraged to seek advice of
counsel with respect to this Release and has had the opportunity to do so.
10. ENTIRE RELEASE.
This Release, the Mutual Agreement to Arbitrate Claims and the
Employment Agreement signed by HYNES contain the entire agreement and
understanding between the parties and supersede and replace all other prior
negotiations and proposed agreements, written or oral. HYNES and Company
10
<PAGE>
acknowledge that no other party, nor agent nor attorney of any other party, has
made any promise, representation, or warranty, express or implied, not contained
in this Release concerning the subject matter of this Release to induce this
Release, and HYNES and Company acknowledge that they have not executed this
Release in reliance upon any such promise, representation, or warranty not
contained in this Release.
11. SEVERABILITY.
Every provision of this Release is intended to be severable. In the
event any term or provision of this Release is declared to be illegal or invalid
for any reason whatsoever by a court of competent jurisdiction or by final and
unappealed order of an administrative agency of competent jurisdiction, such
illegality or invalidity should not affect the balance of the terms and
provisions of this Release, which terms and provisions shall remain binding and
enforceable.
12. PARTIES MAY ENFORCE RELEASE.
Nothing in this Release shall operate to release or discharge any
parties to this Release or their successors, assigns, legatees, heirs, or
personal representatives from any rights, claims, or causes of action arising
out of, relating to, or connected with a breach of any obligation of any party
contained in this Release .
13. COSTS AND ATTORNEY'S FEES.
The parties each agree to bear their own costs and attorneys' fees
which have been or may be incurred in connection with any matters released
herein or in connection with the negotiation and consummation of this Release.
In the event of any administrative or civil action to enforce the provisions of
this Release, the prevailing party shall be entitled to attorney fees and costs
through trial and/or on appeal.
11
<PAGE>
14. ACKNOWLEDGEMENTS.
HYNES acknowledges that the Release provides severance pay and
benefits which the Company would otherwise have no obligation to provide.
HYNES acknowledges that Company has provided the following
information: (a) the class or group of employees offered the opportunity to
obtain severance benefits similar to those in the Release, (b) the eligibility
factors required to obtain severance benefits similar to those in the Release,
(c) the time limits required to obtain severance benefits similar to those in
the Release, (d) the job titles and ages of employees eligible or selected for
severance benefits similar to those in the Release, and (e) the ages of
employees in the same classification either not eligible or not selected.
15. REVOCATION.
As provided by the Older Workers Benefit Protection Act, HYNES is
entitled to have forty-five (45) days to consider this Release. For a period of
seven (7) days from execution of this Release, HYNES may revoke this Release.
Upon receipt of HYNES' signed Release and the end of the revocation period,
payment by Company as described in paragraph 4 above will be forwarded by mail
in a timely manner.
_______________________________________ Dated: __________ __, 199_
MARK H. HYNES
12
<PAGE>
STATE OF OREGON )
) ss.
County of _________ )
Personally appeared the above named MARK H. HYNES and acknowledged the
foregoing instrument to be HYNES' voluntary act and deed.
Before me: ____________________________________
Notary Public for __________________
My commission expires: _____________
MERIX CORPORATION
By: ___________________________________ Dated: _______________________
Its: __________________________________
On Behalf of "Company"
13
EXECUTION COPY
================================================================================
MERIX CORPORATION
----------------------------------
FIRST AMENDMENT
Dated May 28, 1997
to
Note Purchase Agreements
dated September 10, 1996
----------------------------------
Re: $40,000,000 7.92% Senior Notes
due September 15, 2003
================================================================================
<PAGE>
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENTS
THIS FIRST AMENDMENT dated May 28, 1997 (the or this "First Amendment") to
the Note Purchase Agreements, each dated September 10, 1996, is between MERIX
CORPORATION, an Oregon corporation (the "Company"), and each of the institutions
which is a signatory to this First Amendment (collectively, the "Noteholders").
RECITALS:
A. The Company and each of the Noteholders have heretofore entered into
separate and several Note Purchase Agreements each dated September 10, 1996
(collectively, the "Note Purchase Agreements"). The Company has heretofore
issued the $40,000,000 7.92% Senior Notes Due September 15, 2003 (the "Notes")
dated September 10, 1996 pursuant to the Note Purchase Agreements. The
Noteholders are the holders of 100% of the outstanding principal amount of the
Notes.
B. The Company and the Noteholders now desire to amend the Note Purchase
Agreements in the respects, but only in the respects, hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Purchase Agreements unless herein defined or the
context shall otherwise require.
D. All requirements of law have been fully complied with and all other acts
and things necessary to make this First Amendment a valid, legal and binding
instrument according to its terms for the purposes herein expressed have been
done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the conditions
precedent to the effectiveness of this First Amendment set forth in Section 3.1
hereof, and in consideration of good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the Company and the Noteholders do
hereby agree as follows:
SECTION 1. AMENDMENTS
1.1. Section 10.4 of the Note Purchase Agreements shall be and is hereby
amended in its entirety to read as follows:
"10.4. Interest Charges Coverage Ratio
The Company will not permit the ratio, as of the end of
any fiscal quarter of the Company, of (a) Consolidated
Income Available for Interest Charges for the period of the
four consecutive fiscal quarters then ended to (b) Interest
Charges for the period of the four consecutive fiscal
quarters then ended, to be less than 2.00 to 1.00; provided
that the applicable
<PAGE>
measurement period for which the ratio is to be determined
under this Section 10.4 as of May 31, 1997, August 31, 1997
and November 30, 1997 shall be the period of the four most
recently completed fiscal quarters ended on such dates other
than the fiscal quarter ended February 28, 1997."
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
2.1. To induce the Noteholders to execute and deliver this First Amendment
(which representations shall survive the execution and delivery of this First
Amendment), the Company represents and warrants to the Noteholders that:
(a) this First Amendment has been duly authorized, executed and
delivered by the Company and this First Amendment, the Note Purchase
Agreements, as amended by this First Amendment, and the Notes, constitute
the legal, valid and binding obligations of the Company enforceable against
it in accordance with their respective terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law);
(b) the execution, delivery and performance by the Company of this
First Amendment (i) has been duly authorized by all necessary corporate
action on the part of the Company, (ii) does not require the consent,
approval or authorization of, or registration, filing or declaration with,
or other action by, any Governmental Authority or any other Person and
(iii) will not (A) contravene, result in any breach of, constitute a
default under, result in the creation of any Lien in respect of any
property of the Company under, or give any other Person the right to
require the Company to purchase or repay any Debt under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to which
the Company is bound or by which the Company or any of its properties may
be bound or affected, (B) conflict with or result in any breach of any of
the terms, conditions or provisions of any order, judgment, decree or
ruling of any court, arbitrator or Governmental Authority applicable to the
Company or (C) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company;
(d) as of the date hereof and after giving effect to this First
Amendment, (i) no Default or Event of Default has occurred and is
continuing and (ii) no event has occurred and no condition exists which has
had a Material Adverse Effect; and
(e) all the representations and warranties contained in Section 5 of
the Note Purchase Agreements are true and correct in all material respects
with the same force and effect as if made by the Company on and as of the
date hereof.
-2-
<PAGE>
SECTION 3. CONDITION TO EFFECTIVENESS OF THIS FIRST AMENDMENT.
3.1. This First Amendment shall become effective and binding upon the
Company and the Noteholders' acceptance in the space(s) below and upon the
satisfaction in full of each of the following conditions:
(a) executed counterparts of this First Amendment, duly executed by
the Company and the Noteholders, shall have been delivered to the
Noteholders; and
(b) the Noteholders shall have received a copy of the resolutions of
the Board of Directors of the Company authorizing the execution, delivery
and performance by the Company of this First Amendment, certified by its
Secretary or an Assistant Secretary.
SECTION 4. PAYMENT OF NOTEHOLDERS' COUNSEL FEES AND EXPENSES.
4.1. The Company agrees to pay upon demand, the reasonable fees and
expenses of Choate, Hall & Stewart, special counsel to the Noteholders, in
connection with the negotiation, preparation, approval, execution and delivery
of this First Amendment.
SECTION 5. MISCELLANEOUS.
5.1. This First Amendment shall be construed in connection with and as part
of each of the Note Purchase Agreements, and except as modified and expressly
amended by this First Amendment, all terms, conditions and covenants contained
in the Note Purchase Agreements and the Notes are hereby ratified and shall be
and remain in full force and effect. This First Amendment embodies the entire
agreement and understanding between the Company and the Noteholders and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
5.2. Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this First Amendment
may refer to the Note Purchase Agreements without making specific reference to
this First Amendment but nevertheless all such references shall include this
First Amendment unless the context otherwise requires. This First Amendment is
an Operative Document. The headings in this First Amendment are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof. The
execution hereof by you shall constitute a contract between us for the uses and
purposes hereinabove set forth, and this First Amendment may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
-3-
<PAGE>
5.3. This First Amendment shall be governed by and construed in accordance
with, and the rights of the parties shall be governed by, the law of The
Commonwealth of Massachusetts excluding choice-of-law principles of the law of
such jurisdiction that would require the application of the law of a
jurisdiction other than such jurisdiction.
[The remainder of this page is left blank intentionally.]
-4-
<PAGE>
If you are in agreement with the foregoing, please sign the accompanying
counterpart of this First Amendment and return it to the Company, whereupon the
foregoing shall become a binding agreement between you and the Company.
MERIX CORPORATION
By: JOSEPH HOWELL
-------------------------------------
Its SR VP and Chief Financial Officer
---------------------------------
By: SAMUEL R. DESIMONE
-------------------------------------
Its VP Corporate Development
---------------------------------
By: VALERIE ROSENFELD
-------------------------------------
Its VP Treasurer
---------------------------------
Accepted and Agreed to:
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: D. DANA DONOVAN
-----------------------------------
Its Senior Investment Officer
-------------------------------
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By: D. DANA DONOVAN
-----------------------------------
Its Senior Investment Officer
-------------------------------
-5-
<PAGE>
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: MICHAEL L. KLOFAS
-----------------------------------
Its Managing Director
-------------------------------
CM LIFE INSURANCE COMPANY
By: MICHAEL L. KLOFAS
-----------------------------------
Its Managing Director
-------------------------------
-6-
NOTICE OF ASSIGNMENT
AND
AMENDMENT NO. 1
TO LOAN AGREEMENT
December 13, 1996
To: Ms. Valerie Rosenfeld
Vice President and Treasurer
Merix Corporation
P.O. Box 3000, F8-118
Forest Grove, OR 97116
Bank of America National Trust
and Savings Association, as
Letter of Credit Agent
Commercial Banking
121 S.W. Morrison Street
Suite 1700
Portland, OR 97204
Attn: Robert Countryman
Vice President
Bank of America NW, N.A.,
as Agent
701 Fifth Avenue, 16th Floor
Seattle, Washington 98104
Attn: Ms. Dora A. Brown
Assistant Vice President/
Senior Agency Officer
From: Bank of America National Trust and Savings Association, as a Lender
(the "Assignor")
Wells Fargo Bank, N.A. (the "Assignee")
1. We refer to that Loan Agreement dated as of October 31, 1996
(which, as it may be further amended, modified, renewed or extended from time to
time is herein called the "Loan Agreement"), among Merix Corporation, as the
Borrower, certain banks party thereto, including the Assignor, as the Lenders,
Bank of America National Trust and Savings Association, as Letter of
Page 1 - NOTICE OF ASSIGNMENT
<PAGE>
Credit Agent, and Bank of America NW, N.A., as the Agent. Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Loan Agreement.
2. This Notice of Assignment and Amendment No. 1 to Loan Agreement
(this "Notice") is given and delivered to the Borrower and the Agent pursuant to
Section 11.5 of the Loan Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of December 13, 1996 (the "Assignment"), pursuant to which,
among other things, the Assignor has sold, assigned, delegated and transferred
to the Assignee, and the Assignee has purchased, accepted and assumed from the
Assignor an interest in and to the Assignor's rights and obligations under the
Loan Agreement such that after giving effect to such assignment the Assignee's
Commitment shall be $10,000,000 and its Pro Rata Share of all outstanding rights
and obligations under the Loan Agreement shall be 33-1/3%. The Effective Date of
the Assignment shall be the later of December 13, 1996 or two Business Days (or
such shorter period as agreed to by the Agent) after this Notice has been
executed and delivered among each of the Assignor, the Assignee, the Agent, the
Letter of Credit Agent and the Borrower, provided that the Effective Date shall
not occur if any condition precedent agreed to by the Assignor and the Assignee
in the Assignment has not been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower and the
Agent notice of the Assignment and delegation referred to herein. The Assignor
will confer with the Agent to determine the Effective Date of this Assignment
pursuant to Section 3 hereof. The Assignor shall notify the Agent if the
Assignment does not become effective on any proposed Effective Date as a result
of the failure to satisfy the conditions precedent agreed to by the Assignor and
the Assignee in the Assignment. At the request of the Agent, the Assignor will
give the Agent written confirmation of the satisfaction of the conditions
precedent.
5. If Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Agent prepare and cause the Borrower to
execute and deliver new Notes or, as appropriate, replacement Notes, to the
Assignor and the Assignee. The Assignor agrees to deliver to the Agent the
original Note received by it from the Borrower upon its receipt of a new Note in
the appropriate amount.
6. In accordance with Section 11.5 of the Loan Agreement, the Assignee
agrees to be bound by the terms of the Loan Agreement, as a Lender, with respect
to the rights and obligations assumed under the Assignment.
7. The Assignee advises the Agent that notice instructions are as set
forth in the Assignment. Assignee will provide to Agent payment instructions.
Page 2 - NOTICE OF ASSIGNMENT
<PAGE>
8. Assignor and Assignee acknowledge and agree to amend the Loan
Agreement, subject to approval of Agent, Letter of Credit Agent and Borrower, to
note that in the definition of "LIBOR Rate" that the display of the interest
settlement rates for deposits in French Francs for purposes of determining the
Euro-Dollar Rate will be as set forth on the display designated as "Page 3740"
on the Telerate Service and the display of the interest settlement rates for
deposits in Swedish Krone for purposes of determining the Euro-Dollar Rate will
be as set forth on the display designated as "Page 9328" on the Telerate PMI
Service.
ASSIGNOR: ASSIGNEE:
BANK OF AMERICA NATIONAL TRUST WELLS FARGO BANK, N.A.
AND SAVINGS ASSOCIATION
By: By:
------------------------------ ------------------------------
Title: Title:
---------------------------- ----------------------------
The Agent hereby acknowledges receipt of the foregoing Notice and
hereby agrees that the form of such Notice is satisfactory to the Agent so as to
satisfy the requirements of Section 11.5 of the Loan Agreement with respect to
the assignment by the Assignor to the Assignee pursuant to the Assignment
referred to in the foregoing Notice. The Agent also hereby releases the Assignor
from any obligations to it which have been assigned to the Assignee.
Additionally, Agent accepts and agrees to the Amendment to the Loan Agreement as
set forth in Paragraph 8 of this Notice.
BANK OF AMERICA NW, N.A.
By:
-------------------------------
Title:
----------------------------
The Borrower hereby acknowledges receipt of the foregoing Notice and,
pursuant to Section 11.5 of the Credit Agreement, hereby consents to the
assignment by the Assignor to the Assignee pursuant to the Assignment referred
to in the foregoing Notice. The undersigned also hereby releases the Assignor
from any obligations to it which have been assigned to the Assignee.
Additionally, Borrower accepts and agrees to the Amendment to the Loan Agreement
as set forth in Paragraph 8 of this Notice.
MERIX CORPORATION
By:
-------------------------------
Title:
----------------------------
Page 3 - NOTICE OF ASSIGNMENT
<PAGE>
The Letter of Credit Agent hereby acknowledges receipt of the
foregoing Notice and, pursuant to Section 11.5 of the Loan Agreement, hereby
consents to the assignment by the Assignor to the Assignee pursuant to the
Assignment referred to in the foregoing Notice. The undersigned also hereby
releases the Assignor from any obligations to it which have been assigned to the
Assignee. Additionally, Letter of Credit Agent hereby accepts and agrees to the
Amendment to the Loan Agreement as set forth in Paragraph 8 of this Notice.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
-------------------------------
Title:
----------------------------
Page 4 - NOTICE OF ASSIGNMENT
<PAGE>
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between Bank
of America National Trust and Savings Association (the "Assignor") and Wells
Fargo Bank, N.A. (the "Assignee") is dated as of December 13, 1996. The parties
hereto agree as follows:
1. Preliminary Statement. The Assignor is a party to a Loan Agreement
dated as of October 31, 1996 (which, as it may be amended, modified, renewed or
extended from time to time is herein called the "Loan Agreement"), among Merix
Corporation (the "Borrower"), certain banks party thereto, including the
Assignor (the "Lenders"), Bank of America NW, N.A., as agent for the Lenders
(the "Agent") and Bank of America National Trust and Savings Association, as
Letter of Credit Agent (the "Letter of Credit Agent"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Loan Agreement.
2. Assignment and Assumption. The Assignor hereby sells and assigns to
Assignee, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Loan
Agreement such that after giving effect to such assignment the Assignee's
Commitment shall be $10,000,000 and its Pro Rata Share of all outstanding rights
and obligations under the Loan Agreement shall be 33-1/3%.
3. Effective Date. The effective date of this Assignment Agreement
(the "Effective Date") shall be the later of December 13, 1996 or two Business
Days (or such shorter period agreed to by the Agent) after a Notice of
Assignment substantially in the form of Exhibit I attached hereto has been
executed and delivered among each of the Assignor, the Assignee, the Agent, the
Letter of Credit Agent and the Borrower. The Assignor will notify the Assignee
of the proposed Effective Date no later than the Business Day prior to the
proposed Effective Date. As of the Effective Date, (i) the Assignee shall have
the rights and obligations assigned to the Assignee hereunder and (ii) the
Assignor shall relinquish its rights and be released from its corresponding
obligations under the Loan Documents with respect to the rights and obligations
assigned to the Assignee hereunder.
4. Paymets Obligations. On and after the Effective Date, the Assignee
shall be entitled to receive from the Agent all payments of principal, interest
and fees with respect to the interest assigned hereby. The Assignee shall
advance funds directly to the Agent with respect to all Loans made or
reimbursement obligations assumed under any Letter of credit issued on or after
the Effective Date with respect to the interest assigned hereby. In the event
that either party hereto receives any payment to which the other party hereto is
entitled under this Assignment Agreement, then the party receiving such amount
shall promptly remit it to the other party hereto.
Page 1 - ASSIGNMENT AGREEMENT
<PAGE>
5. Representations of the Assignor; Limitation an the Assignor's
Liability. There are currently no Loans outstanding and Letter of Credit Agent
has not issued any Letters of Credit to Borrower which are subject to the terms
of the Loan Agreement. The Assignor represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim. It is understood and
agreed that the assignment and assumption hereunder are made without recourse to
the Assignor and that the Assignor makes no other representation or warranty of
any kind to the Assignee. Neither the Assignor nor any of its officers,
directors, employees, agents or attorneys shall be responsible for (i) the due
execution, legality, validity, enforceability, genuineness, sufficiency or
collectability of any Loan Document, (ii) any representation or warranty made by
the Borrower, (iii) the financial condition or creditworthiness of the Borrower,
or (iv) the performance of or compliance by the Borrower with any of the terms
or provisions of any of the Loan Documents.
6. Representations of the Assignee. The Assignee (i) confirms that it
has received a copy of the Loan Agreement, together with copies of the financial
statements requested by the Assignee and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement, (ii) agrees that it will independently and
without reliance upon the Agent, the Letter of Credit Agent, the Assignor or any
other Lender and based on such documents and inf ormation as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, (iii) appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under the Loan Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto. Assignee shall
provide Agent with its payment instructions. Assignee's address and telefax
number for notices are as set forth on the signature page hereof.
7. Subsequent Assignments. After the Effective Date, the Assignee
shall have the right pursuant to Section 11.5 of the Loan Agreement to assign
the rights which are assigned to the Assignee hereunder to any entity or person,
provided that any Such subsequent assignment does not violate any of the terms
and conditions of the Loan Documents or any law, rule, regulation,, order, writ,
judgment, injunction or decree and that any consent required under the terms of
the Loan Documents has been obtained.
8. Entire Acrreement. This Assignment Agreement and the attached
Notice of Assignment embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings between the
parties hereto relating to the subject matter hereof.
Page 2 - ASSIGNMENT AGREEMENT
<PAGE>
9. Governing Law. This Assignment Agreement shall be governed by and
construed in accordance with the internal laws of the State of Oregon (without
regard to conflicts of law or choice of law rules).
10. Notices. Notices shall be given under this Assignment Agreement in
the manner set forth in the Loan Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: ROBERT J. COUNTRYMAN
-------------------------------------
Title: Vice President
----------------------------------
WELLS FARGO BANK, N.A.
By: DAVID GOODE
-------------------------------------
Title: VP
----------------------------------
Address: Portland Commercial
Banking Office
1300 S.W. Fifth Avenue
P.O. Box 3131
Portland, OR 97208
Attn: David Goode
Telephone: (503) 225-4639
Telefax: (503) 225-2039
Page 3 - ASSIGNMENT AGREEMENT
SECOND AMENDMENT TO
LOAN AGREEMENT
THIS SECOND AMENDMENT TO THE LOAN AGREEMENT (the "Amendment") is made this
____ day of February, 1997, by and among BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION ("Original Lender") and WELLS FARGO BANK, N.A. ("Wells
Fargo") (each individually also a "Lender" and collectively the "Lenders"), BANK
OF AMERICA NT&SA, doing business as Seafirst Bank, the successor by merger to
Bank of America, NW, N.A., as agent for the Lenders ("Agent"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION as letter of credit agent for Lenders
("Letter of Credit Agent"), and MERIX CORPORATION, an Oregon corporation (the
"Borrower").
RECITALS
A. The Borrower, the Original Lender, the Agent and the Letter of Credit
Agent are parties to that certain Loan Agreement dated as of October 31, 1996,
(as the same may be amended, modified or extended from time to time the "Loan
Agreement") and the related Loan Documents described therein. The Original
Lender assigned a portion of its interest under the Loan Agreement to Wells
Fargo, pursuant to an Assignment Agreement dated as of December 13, 1996.
B. Borrower has requested that the Lenders temporarily modify a covenant
contained in the Loan Agreement. The parties now wish to amend the Loan
Agreement, subject to the terms and conditions set forth herein.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions. Capitalized terms used herein and not otherwise defined
shall have the meaning given in the Loan Agreement. All references in the Loan
Documents to Bank of America NW, N.A., shall mean its successor by merger, Bank
of America NT&SA.
2. Amendments to Loan Agreement. The Loan Agreement is amended as follows:
Section 6.15 Profitability. Borrower and its Subsidiaries on a
consolidated basis shall, as of the end of the two fiscal quarters ending
February 28, 1997, report a Pre-tax Loss for the combined previous two
quarters (ending November 30, 1996 and February 28, 1997, respectively) of
not more than $2,000,000. As used herein, "Pre-Tax Loss" (or "Pre-Tax
Earnings") means, for any period or periods, net loss (or net income),
excluding any extraordinary gains or losses and taxes associated therewith,
plus income tax expense, if any, in each case determined in accordance with
GAAP for such period or periods. Beginning with the fiscal quarter ending
May 31, 1997, Borrower and its Subsidiaries on a consolidated basis shall,
as of the end of each fiscal quarter, report Pre-tax Earnings of not less
than zero ($0.00) for at least one of the preceding two consecutive fiscal
quarters.
PAGE 1 - SECOND AMENDMENT TO LOAN AGREEMENT
<PAGE>
3. Conditions to Effectiveness. Notwithstanding anything contained herein
to the contrary, this Amendment shall not become effective until each of the
following conditions is fully and simultaneously satisfied:
(a) Delivery of Amendment. The Borrower, the Agent, the Letter of
Credit Agent, and each Lender shall have executed and delivered the original or
appropriate counterparts of this Amendment to the Agent;
(b) Payment of Fee and Reimbursement for Expenses. The Borrower shall
have paid Agent a fee of $1,500 for this Amendment and reimbursed the Agent for
all out-of-pocket expenses incurred by the Lenders in connection with the
preparation of this Amendment, including legal fees;
(c) Default. Borrower hereby represents and warrants that it, and all
of its Subsidiaries, are not in default under any of the terms or conditions of
the Loan Agreement, or any documents related to the Loan Agreement; and
(d) Other Documents. The Agent and the Lenders shall have received
such other documents, instruments, and undertakings as the Agent and such Lender
may reasonably request.
4. Representations and Warranties. The Borrower hereby represents and
warrants to the Lenders and the Agent that each of the representations and
warranties set forth in Article 5 of the Loan Agreement is true and correct in
each case as if made on and as of the date of this Amendment and the Borrower
expressly agrees that it shall be an additional Event of Default under the Loan
Agreement if any representation or warranty made hereunder shall prove to have
been incorrect in any material respect when made.
5. Corporate Authority. Borrower represents and warrants to the Agent and
the Lenders that the execution, delivery and performance of this Amendment are
within Borrower's corporate powers, and have been duly authorized and are not in
contravention of law or the terms of Borrower's charter, bylaws, or other
incorporation papers, or of any undertaking of Borrower of which either Borrower
is a party or by which it is bound.
6. No Further Amendment. Except as expressly modified by this Amendment,
the Loan Agreement and the other Loan Documents shall remain unmodified and in
full force and effect and the parties hereby ratify their respective obligations
thereunder. Without limiting the foregoing, the Borrower expressly reaffirms and
ratifies its obligation to pay or reimburse the Agent and the Lenders on request
for all reasonable expenses, including legal fees, actually incurred by the
Agent or such Lender in connection with the preparation of this Amendment and
the closing of the transactions contemplated hereby and thereby.
7. Miscellaneous.
(a) Entire Agreement. This Amendment and the other Loan Documents
comprise the entire agreement of the parties with respect to the subject matter
hereof and supersede all prior oral or written agreements, representations or
commitments.
PAGE 2 - SECOND AMENDMENT TO LOAN AGREEMENT
<PAGE>
(b) Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same Amendment.
(c) Governing Law. This Amendment and the other agreements provided
for herein and the rights and obligations of the parties hereto and thereto
shall be construed and interpreted in accordance with the laws of the State of
Oregon.
EXECUTED AND DELIVERED by the duly authorized officers of the parties
as of the date first above written.
BORROWER: MERIX CORPORATION
By: VALERIE ROSENFELD
-------------------------------------
Name: VALERIE ROSENFELD
-----------------------------------
Title: Treasurer
----------------------------------
AGENT: BANK OF AMERICA, NT&SA, doing business as
Seafirst Bank
By: DORA A. BROWN
-------------------------------------
Name: DORA A. BROWN
-----------------------------------
Title: Assistant Vice President
----------------------------------
By: RONALD R. PARSONS
-------------------------------------
Name: Ronald R. Parsons
-----------------------------------
Title: Vice President
----------------------------------
LENDER AND
LETTER OF CREDIT AGENT: BANK OF AMERICAN NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: ROBERT L. COUNTRYMAN
-------------------------------------
Name: ROBERT L. COUNTRYMAN
-----------------------------------
Title: Vice President
----------------------------------
LENDER: WELLS FARGO BANK, N.A.
By: DAVID GOODE
-------------------------------------
Name: DAVID GOODE
-----------------------------------
Title: VP
----------------------------------
PAGE 3 - SECOND AMENDMENT TO LOAN AGREEMENT
EXHIBIT 11.1
<TABLE>
<CAPTION>
MERIX CORPORATION
CALCULATIONS OF NET INCOME PER SHARE
Year Ended May 31,
---------------------------------------------------------------------------------------
1997 1996 1995
-------------------------- ------------------------- --------------------------
Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted
-------------------------- ------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted Average Shares
Outstanding for the Period 6,147 6,147 6,182 6,182 6,061 6,061
Dilutive Common Stock
Options Using the Treasury
Stock Method 113 116 267 279 279 367
-------------------------- ------------------------- --------------------------
Total Shares Used for Per
Share Calculations 6,260 6,263 6,449 6,461 6,340 6,428
========================== ========================= ==========================
Net Income $ 321 $ 321 $ 12,793 $ 12,793 $ 10,564 $ 10,564
========================== ========================= ==========================
Earnings Per Share $ 0.05 $ 0.05 $ 1.98 $ 1.98 $ 1.67 $ 1.64
========================== ========================= ==========================
</TABLE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-77348 of Merix Corporation on Form S-8 (containing a Reoffer Prospectus on
Form S-3) of our report dated June 20, 1997, appearing in this Annual Report on
Form 10-K of Merix Corporation for the year ended May 31, 1997.
DELOITTE & TOUCHE LLP
Portland, Oregon
August 5, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 16,537
<SECURITIES> 8,560
<RECEIVABLES> 24,479
<ALLOWANCES> 322
<INVENTORY> 8,642
<CURRENT-ASSETS> 63,431
<PP&E> 116,027
<DEPRECIATION> 52,629
<TOTAL-ASSETS> 130,449
<CURRENT-LIABILITIES> 17,845
<BONDS> 44,650
0
0
<COMMON> 44,360
<OTHER-SE> 23,056
<TOTAL-LIABILITY-AND-EQUITY> 10,449
<SALES> 156,184
<TOTAL-REVENUES> 156,184
<CGS> 134,328
<TOTAL-COSTS> 134,328
<OTHER-EXPENSES> 19,835
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,247
<INCOME-PRETAX> 291
<INCOME-TAX> (30)
<INCOME-CONTINUING> 321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 321
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
