UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 30, 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)
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 [ ]
The number of shares of the Registrant's Common Stock outstanding as of
September 30, 1997 was 6,191,623 shares.
<PAGE>
MERIX CORPORATION
FORM 10-Q
TABLE OF CONTENTS
Part I Financial Information Page
Item 1. Financial Statements:
Condensed Balance Sheets as of August 30, 1997 and 2
May 31, 1997
Condensed Statements of Income for the three months ended 3
August 30, 1997 and August 31, 1996
Condensed Statements of Cash Flows for the three months ended 4
August 30, 1997 and August 31, 1996
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
1
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
MERIX CORPORATION
CONDENSED BALANCE SHEETS
(unaudited, in thousands)
August 30, May 31,
1997 1997
---------- -----------
<S> <C> <C>
Assets
Cash and short-term investments $ 23,751 $ 25,097
Accounts receivable, net of $309 and $322 25,018 24,157
Inventories (Note 2) 10,506 8,642
Tax refund receivable 2,344 2,308
Deferred income taxes 1,711 1,410
Other current assets 1,631 1,817
---------- -----------
Total current assets 64,961 63,431
Property, plant and equipment, net (Note 3) 64,489 63,398
Goodwill, net 2,250 2,292
Other assets 1,342 1,328
---------- -----------
Total assets $ 133,042 $ 130,449
========== ===========
Liabilities and Shareholders' Equity
Accounts payable $ 9,869 $ 10,011
Accrued compensation 4,070 3,084
Current portion of long-term debt 2,260 2,260
Other accrued liabilities 3,411 2,490
---------- -----------
Total current liabilities 19,610 17,845
Long-term debt 42,359 42,390
Deferred income taxes 1,840 1,525
Other liabilities 1,273 1,273
---------- -----------
Total liabilities 65,082 63,033
Shareholders' equity 67,960 67,416
---------- -----------
Total liabilities and shareholders' equity $ 133,042 $ 130,449
========== ===========
The accompanying notes are an integral part of the
condensed financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
MERIX CORPORATION
CONDENSED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
Three Months Ended
-------------------------------
August 30, August 31,
1997 1996
---------- ----------
<S> <C> <C>
Net sales $ 44,559 $ 41,116
Cost of sales 38,797 33,764
---------- ----------
Gross profit 5,762 7,352
---------- ----------
Engineering 1,531 1,650
Selling, general and administrative 3,340 3,432
---------- ----------
Total operating expense 4,871 5,082
---------- ----------
Operating income 891 2,270
Interest and other expense, net 487 244
---------- ----------
Income before taxes 404 2,026
Income taxes 111 770
---------- ----------
Net income $ 293 $ 1,256
========== ==========
Earnings per common and common
equivalent shares outstanding: $ 0.05 $ 0.20
========== ==========
Weighted average number of common and
common equivalent shares outstanding: 6,304 6,320
========= ==========
The accompanying notes are an integral part of the
condensed financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MERIX CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended
----------------------------
August 30, August 31,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 293 $ 1,256
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,443 2,034
Deferred income taxes 144 668
Amortization of unearned compensation 75 108
Other (77) (11)
Changes in assets and liabilities:
Accounts receivable (861) 285
Inventories (1,864) (20)
Tax refund receivable (36) -
Other current assets 186 (610)
Accounts payable (142) 1,839
Accrued compensation 986 (1,006)
Other accrued liabilities 921 (648)
---------- ----------
Net cash provided by operating activities 2,068 3,895
---------- ----------
Cash flows from investing activities:
Capital expenditures (3,543) (5,727)
Short-term investments:
Purchases (7,500) (7,196)
Maturities 5,018 3,160
Proceeds from sale of assets 20 7
---------- ----------
Net cash used in investing activities (6,005) (9,756)
---------- ----------
Cash flows from financing activities:
Proceeds from exercise of stock options 297 11
Common stock surrendered in connection with
restricted stock awards (171) -
Principal payments on long-term debt (31) (1,870)
Deferred financing costs 14 -
---------- ----------
Net cash provided by (used in) financing activities 109 (1,859)
---------- ----------
Decrease in cash and cash equivalents (3,828) (7,720)
Cash and cash equivalents at beginning of period 16,537 12,191
---------- ----------
Cash and cash equivalents at end of period 12,709 4,471
Short-term investments 11,042 11,203
---------- ----------
Cash and short-term investments at end of period $ 23,751 $ 15,674
========== ==========
Noncash transactions:
Tax benefit related to stock-based compensation $ 130 $ 169
Cash paid for interest - 956
The accompanying notes are an integral part of the
condensed financial statements.
</TABLE>
4
<PAGE>
MERIX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
Note 1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
pursuant to Securities and Exchange Commission rules and regulations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company's annual report on Form 10-K for the
fiscal year ended May 31, 1997.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the results for interim periods. The
results of operations for the three months ended August 30, 1997 are not
necessarily indicative of the results to be expected for the full year.
Note 2. INVENTORIES
<TABLE>
<CAPTION>
August 30, May 31,
1997 1997
----------- -----------
<S> <C> <C>
Raw materials $ 4,623 $ 2,506
Work in process 4,459 4,790
Finished goods 1,424 1,346
----------- -----------
Total $ 10,506 $ 8,642
=========== ===========
</TABLE>
Note 3. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
August 30, May 31,
1997 1997
----------- -----------
<S> <C> <C>
Land $ 2,190 $ 2,190
Buildings and grounds 23,685 23,618
Machinery and equipment 93,576 90,219
----------- -----------
Total 119,451 116,027
Less accumulated depreciation (54,962) (52,629)
----------- -----------
Property, plant and equipment, net $ 64,489 $ 63,398
=========== ===========
</TABLE>
5
<PAGE>
Note 4. EARNINGS PER SHARE
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.
Following is the pro forma effect of adoption of SFAS 128 on the Company's
earnings per share for the three months ended August 30, 1997 and August 31,
1996:
Three Months Ended
August 30, August 31,
1997 1996
--------- ---------
Primary EPS as reported $ 0.05 $ 0.20
Effect of SFAS 128 0.00 0.00
--------- ---------
Basic EPS as restated $ 0.05 $ 0.20
========= =========
Fully diluted EPS $ 0.05 $ 0.20
Effect of SFAS 128 0.00 0.00
--------- ---------
Diluted EPS as restated $ 0.05 $ 0.20
========= =========
Note 5. RECENT ACCOUNTING PRONOUNCEMENTS
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.
In June 1997, the FASB issued Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131), which redefines how operating segments are determined and requires
disclosure of certain financial and descriptive information about operating
segments, and is effective for the Company's fiscal year ending May 1999. The
Company has not yet completed its analysis of which operating segments it will
report on.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Dollars in Thousands)
This discussion and analysis is designed to be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth in the Merix Corporation (the Company) Form 10-K for the
fiscal year ended May 31, 1997.
Results of Operations
Fiscal year. The Company's fiscal year is the 52 or 53 week period ending the
last Saturday in May. Fiscal year 1998 is a 52-week year and fiscal year 1997
was a 53-week year, with the extra week occurring in the first quarter.
Net Sales. Net sales for the first quarter of fiscal 1998 were $44,559, an
increase of 8% over net sales of $41,116 in the first quarter of fiscal 1997.
The increase in sales was due principally to increases in sales to
Hewlett-Packard Company and Teradyne, Inc., partially offset by decreased sales
to Motorola, Inc. The decrease in sales to Motorola, Inc. was principally due to
a transition to a new generation of its cellular base station products, which
have a lower selling price than the prior generation products.
The Company's 90 day backlog was approximately $40.4 million at August 30, 1997,
compared to $26.4 million at May 31, 1997. 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.
The Company's five largest customers comprised 72% of net sales for the first
quarters of fiscal 1998 and 1997. One of the Company's 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, but the success of these actions has been limited by a shortage
of available capacity. While the Company increased its sales backlog at the end
of the first quarter of fiscal 1998, manufacturing constraints have limited the
capacity available to meet the production needs of both current and new
customers. Orders from the Company's five largest customers comprised over 70
percent of the backlog at the end of the quarter. The Company is adding capacity
to relieve the manufacturing constraints and increase output. These actions
include addition of equipment in the constraint areas and expansion of
manufacturing space. The Company expects that increasing capacity will permit it
to accept volume production orders from new customers, but also expects that a
small number of customers will continue to account for a substantial majority of
its sales until additional capacity is available. The Company also continues to
take actions to enhance its product mix by targeting higher complexity products.
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
increase capacity, broaden its customer base, increase sales to new and existing
customers and enhance its product mix 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.
7
<PAGE>
Sales by market segments and major customers as a percent of net sales were as
follows:
<TABLE>
<CAPTION>
Three Months Ended
August 30, 1997 August 31, 1996
------------------ ------------------
<S> <C> <C> <C> <C>
Market Segments
Computers 27% $ 11,904 29% $ 11,792
Communications 17 7,340 24 10,060
Test and Instruments 34 15,331 31 12,646
Contract Mfg. 18 8,072 14 5,630
Other 4 1,912 2 988
---- -------- ---- --------
Total 100% $ 44,559 100% $ 41,116
Largest Customers
Hewlett-Packard Company 25% $ 11,218 22% $ 9,165
Tektronix, Inc. 16 7,245 19 7,966
Motorola, Inc. 11 4,688 18 7,484
Teradyne, Inc. 12 5,337 5 2,102
Storage Technology Corp. 8 3,416 8 3,127
Others 28 12,655 28 11,272
---- -------- ---- --------
Total 100% $ 44,559 100% $ 41,116
</TABLE>
Gross Margins. The Company's gross margin was 12.9% for the first quarter of
fiscal 1998 compared to 17.9% in the same period of the prior year. The
Company's gross margins can be affected by various factors, including sales
volumes, product mix, production yields, price changes and changes in the
Company's cost structure. The product mix in the first quarter of fiscal year
1998 included a greater proportion of lower priced, lower margin products than
in the first quarter of fiscal 1997. Additionally, due to manufacturing capacity
constraints, certain manufacturing processes were performed by subcontractors in
the first quarter of fiscal 1998, which reduced gross margin in the quarter. In
order to improve profitability, the Company is taking steps to focus on higher
complexity products which generally have higher prices and gross margins. The
Company is also taking actions to lessen the need for subcontracting services,
to reduce costs, and to add capacity. However, there can be no assurance that
these efforts will be successful or result in an increase in gross margins.
Engineering. Engineering expenses were $1,531 and $1,650 in the first quarters
of fiscal 1998 and 1997, respectively, and were 3.4% and 4.0% of sales,
respectively. Engineering expenses have decreased primarily as a result of lower
headcount in the first quarter of fiscal 1998.
Selling, General and Administrative. Selling, general and administrative
expenses were $3,340 and $3,432 in the first quarters of fiscal 1998 and 1997,
respectively, and were 7.5% and 8.3% of sales, respectively. The decrease was
due principally to a reduction in amounts paid for professional fees, services
and insurance in the first quarter of fiscal 1998, offset by an increase in
salary expense in the sales organization due to increased headcount. The Company
has invested in expanded selling activity, including the restructuring and
relocation of its sales force.
Interest and Other Expense, net. Interest and other expense, net was $487 and
$244 for the first quarters of fiscal 1998 and 1997, respectively. The increase
in the first quarter of fiscal 1998 was due primarily to higher interest expense
resulting from the issuance of $40 million in senior notes in September 1996.
Income Taxes. The Company's effective tax rate for the first quarter of fiscal
1998 was approximately 28 percent, due to the impact of tax exempt interest
income and a revision of fiscal 1997 income taxes. The Company estimates that
its effective income tax rate for fiscal 1998 will be 37 percent.
Liquidity and Capital Resources
Cash and short-term investments at August 30, 1997 were $23,751 compared with
$25,097 at May 31, 1997. Working capital was $45,351 at August 30, 1997 compared
with $45,586 at May 31, 1997.
8
<PAGE>
The Company generated cash from operations of $2,068, primarily consisting of
net income for the quarter adjusted for depreciation and amortization, partially
offset by an increase in inventories. The higher level of inventories primarily
related to raw material for orders scheduled to be manufactured and shipped in
the second quarter of fiscal 1998.
The Company used $6,005 of cash in investing activities, which primarily
consisted of $3,543 of capital expenditures for manufacturing equipment, and
$7,500 of purchases of short-term investments, offset by $5,018 of maturities of
short-term investments. The Company's policy is to hold such short-term
investments to maturity.
The Company has $40 million outstanding under a 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.
The Company has an unsecured $30 million bank line of credit against which it
had no borrowings at August 30, 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 (7.64% at August 30, 1997). The line of credit
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 August 30, 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 had capital
commitments of approximately $7.3 million at August 30, 1997, related to
expansion of manufacturing capacity. The Company believes that its existing
capital resources and cash generated from operations will be sufficient to meet
its working capital and capital expenditure requirements for the next twelve
months. To the extent necessary, the Company may satisfy capital requirements
through bank borrowings or other financing alternatives, if such resources are
available on satisfactory terms.
Forward-looking Statements
Information set forth in this Quarterly Report on Form 10-Q relating to the
remainder of fiscal year 1998, including: anticipated customer demand, sales and
profitability; gross margins; estimated effective tax rate for fiscal year 1998;
and Company goals with respect to revenue growth, customer diversification,
orders from new customers, changes in product mix and increases in manufacturing
capacity 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-Q 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; 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.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits filed as part of this report are listed below:
Exhibit
No.
-------
10.29 Second Amendment to Note Purchase Agreement dated August 29,
1997
10.30 Notice of Assignment of Loan Agreement with Bank of America
dated September 30, 1997
10.31 Revolving Loan Note with Bank of America dated September 30,
1997
10.32 Indemnity Agreement between Merix Corporation and Mark R.
Hollinger as of September 2, 1997*
10.33 Executive Severance Agreement between Merix Corporation and
Mark R. Hollinger*
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
* This Exhibit constitutes a management contract or compensatory plan
or arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended August 30,
1997.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized this 10th day of October, 1997.
MERIX CORPORATION
By: /s/ JOSEPH H. HOWELL
-------------------------------------
Joseph H. Howell
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
11
<PAGE>
EXHIBIT INDEX
Exhibit
No.
- ------
10.29 Second Amendment to Note Purchase Agreement dated August 29,
1997
10.30 Notice of Assignment of Loan Agreement with Bank of America
dated September 30, 1997
10.31 Revolving Loan Note with Bank of America dated September 30,
1997
10.32 Indemnity Agreement between Merix Corporation and Mark R.
Hollinger as of September 2, 1997*
10.33 Executive Severance Agreement between Merix Corporation and
Mark R. Hollinger*
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
* This Exhibit constitutes a management contract or compensatory plan
or arrangement.
Exhibit 10.29
MERIX CORPORATION
-------------------------------------------
SECOND AMENDMENT
Dated as of August 29, 1997
to
Note Purchase Agreements
dated September 10, 1996
-------------------------------------------
Re: $40,000,000 7.92% Senior Notes
due September 15, 2003
<PAGE>
SECOND AMENDMENT TO NOTE PURCHASE AGREEMENTS
THIS SECOND AMENDMENT dated as of August 29, 1997 (the or this "Second
Amendment") to the Note Purchase Agreements, each dated September 10, 1996, as
amended by the First Amendment to Note Purchase Agreements dated May 28, 1997,
is between MERIX CORPORATION, an Oregon corporation (the "Company"), and each of
the institutions which is a signatory to this Second 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, as
amended by the First Amendment to Note Purchase Agreements dated May 28, 1997
(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 Second 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 Second 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.
(a) The Company will not permit the ratio, as of the end of the
fiscal quarter of the Company ended August 30, 1997, of (i)
Consolidated Income Available for Interest Charges for the fiscal
quarter then ended to (ii) Interest Charges for such fiscal quarter,
to be less than .80 to 1.00.
(b) The Company will not permit the ratio, as of the end of the
fiscal quarter of the Company ended November 29, 1997, of (i)
Consolidated Income Available for Interest Charges for the fiscal
quarter then ended to (ii) Interest Charges for such fiscal quarter,
to be less than 1.880 to 1.00.
(c) The Company will not permit the ratio, as of the end of any
fiscal quarter of the Company ended after November 29, 1997, of (i)
Consolidated Income Available for Interest Charges for the period of
the four consecutive fiscal quarters then ended to (ii) Interest
Charges for the
<PAGE>
period of the four consecutive fiscal quarters then ended, to be less
than 2.00 to 1.00."
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
2.1. To induce the Noteholders to execute and deliver this Second Amendment
(which representations shall survive the execution and delivery of this Second
Amendment), the Company represents and warrants to the Noteholders that:
(a) this Second Amendment has been duly authorized, executed and
delivered by the Company and this Second Amendment, the Note Purchase
Agreements, as amended by this Second 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 Second 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, 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 Second
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.
SECTION 3. CONDITION TO EFFECTIVENESS OF THIS SECOND AMENDMENT; DELIVERY OF
BOARD RESOLUTIONS.
3.1. This Second Amendment shall become effective and binding upon the
Company and the Noteholders at such time as executed counterparts of this Second
Amendment, duly executed by the Company and the Noteholders, shall have been
delivered to the Noteholders.
3.2. Not later than September 20, 1997, the Company shall deliver to the
Noteholders a copy of the resolutions of the Audit and Finance Committee of the
Board of Directors of the Company ratifying the execution, delivery and
performance by the Company of this Second Amendment, certified by its Secretary
or an Assistant Secretary.
<PAGE>
SECTION 4. PAYMENT OF NOTEHOLDERS' COUNSEL FEES AND EXPENSES.
5.1. 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 Second Amendment.
SECTION 5. MISCELLANEOUS.
5.1. This Second 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 Second 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 Second 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 Second
Amendment may refer to the Note Purchase Agreements without making
specific reference to this Second Amendment but nevertheless all such
references shall include this Second Amendment unless the context
otherwise requires. This Second Amendment is an Operative Document.
The headings in this Second 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 Second 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.
5.3. This Second 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.]
<PAGE>
If you are in agreement with the foregoing, please sign the accompanying
counterpart of this Second Amendment and return it to the Company, whereupon the
foregoing shall become a binding agreement between you and the Company.
MERIX CORPORATION
By: /s/ JOSEPH H. HOWELL
Its Senior Vice President and
Chief Financial Officer
By: /s/ SAMUEL R. DESIMONE, JR.
Its Vice President,
Corporate Development
and Secretary
By: /s/ JANIE S. BROWN
Its Vice President and
Corporate Controller
Accepted and Agreed to:
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: /s/ D. DANA DOVOVAN
Its
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By: /s/ D. DANA DOVOVAN
Its
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ RICHARD C. MORRISON
Its
CM LIFE INSURANCE COMPANY
By: /s/ RICHARD C. MORRISON
Its
NOTICE OF ASSIGNMENT
September 30, 1997
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 National Trust
and Savings Association,
as Agent
701 Fifth Avenue, 16th Floor
Seattle, Washington 98104
Attn: Ms. Dora A. Brown
Vice President/
Senior Agency Officer
From: Wells Fargo Bank, N.A. (the "Assignor")
Bank of America National Trust and Savings Association, as a Lender
(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 and Assignee, as
the Lenders, Bank of America National Trust and Savings Association, as Letter
of Credit Agent, and Bank of America National Trust and Savings Association,
doing business as Seafirst Bank, the successor by merger to 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.
Page 1 - NOTICE OF ASSIGNMENT
<PAGE>
2. This Notice of Assignment (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 September 30, 1997 (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 $30,000,000 and its Pro Rata Share of all outstanding rights
and obligations under the Loan Agreement shall be 100%. The Effective Date of
the Assignment shall be the later of September 30, 1997 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.
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.
Page 2 - NOTICE OF ASSIGNMENT
<PAGE>
6. The Assignee advises the Agent that notice instructions are as set
forth in the Assignment.
ASSIGNEE: ASSIGNOR:
BANK OF AMERICA NATIONAL TRUST WELLS FARGO BANK, N.A.
AND SAVINGS ASSOCIATION
By: ROBERT L. COUNTRYMAN By: DARRELL SUTHERLAND
------------------------------ ------------------------------
Name: Robert L. Countryman Name: Darrell Sutherland
------------------------ ---------------------------
Title: Vice President Title: Vice President
----------------------- --------------------------
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.
BANK OF AMERICAN NATIONAL TRUST AND
SAVINGS ASSOCIATION, doing business
as SEAFIRST BANK
By: DORA A. BROWN
-------------------------------------
Name: Dora A. Brown
-------------------------------
Title: Vice President
------------------------------
The Borrower 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.
MERIX CORPORATION
By: JANIE S. BROWN
-------------------------------------
Name: Janie S. Brown
-------------------------------
Title: VP, Corporate Controller
& Treasurer
------------------------------
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.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: ROBERT L. COUNTRYMAN
-------------------------------------
Name: Robert L. Countryman
-------------------------------
Title: Vice President
------------------------------
Page 4 - NOTICE OF ASSIGNMENT
REVOLVING LOAN NOTE
$30,000,000 September 30, 1997
Portland, Oregon
FOR VALUE RECEIVED, the undersigned, MERIX CORPORATION, an Oregon
corporation (the "Borrower"), hereby promises to pay to the order of BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Lender") on the Maturity
Date the unpaid principal balance of all Loans made by the Lender under this
Revolving Loan Note, in a maximum amount not to exceed Thirty Million Dollars
($30,000,000), together with interest thereon at a per annum rate equal to the
Interest Rate as defined below (changing as the Interest Rate changes), and, if
default shall occur in the payment when due (whether by acceleration or
otherwise) of any principal amount hereunder, from the maturity of that amount
until it is paid in full at a per annum rate equal to the Prime Rate (changing
as the Prime Rate changes), plus one percent (1%). Notwithstanding anything
herein to the contrary, interest shall not accrue at a rate in excess of the
maximum rate permitted by applicable law.
The Borrower further agrees as follows:
1. All payments of principal and interest on this Revolving Loan Note shall
be made in immediately available funds to Bank of America National Trust and
Savings Association, doing business as Seafirst Bank, the successor by merger to
Bank of America NW, N.A., as the Agent for the Lender, at the Agent's Commercial
Loan Service Center, Fifth Avenue Plaza Building, 13th Floor, 800 Fifth Avenue,
Seattle, Washington 98104, or such other address as the Agent shall from time to
time designate.
2. As used herein "Interest Rate" shall mean the Prime Rate unless the
Borrower shall elect to have some or all of the loans made hereunder accrue
interest at an Alternative Rate as provided in Section 2.05(b) of the Loan
Agreement (as defined below). Accrued but unpaid interest on each Alternative
Rate Loan shall be paid on the last day of each Applicable Interest Period, on
the date of any principal payment (to the extent accrued on the principal amount
paid) and at maturity and, additionally, in the case of an Alternative Rate Loan
for which the Applicable Interest Period exceeds three months, on the day that
is three months after the commencement of such Applicable Interest Period and on
the last day of each three-month period thereafter. Accrued but unpaid interest
on each loan accruing interest at the Prime Rate shall be paid in arrears on the
fifth day of each calendar month commencing on November 5, 1997 and at the
Maturity Date. If the fifth day of a month is not a Business
Page 1 - Revolving Loan Note
<PAGE>
Day, such payment shall be made on the next Business Day. Unpaid interest
accruing on amounts in default shall be payable on demand.
3. This Revolving Loan Note is issued under and is subject to the terms of
that certain Loan Agreement dated as of October 31, 1996, among Bank of America
National Trust and Savings Association, doing business as Seafirst Bank, the
successor by merger to Bank of America NW, N.A., as "Agent," Bank of America
National Trust and Savings Association, as Letter of Credit Agent, the Lender
and certain other financial institutions which may be added from time to time as
"Lenders" and the undersigned as "Borrower" (as amended from time to time, the
"Loan Agreement"). Capitalized terms not defined herein have the meanings set
forth in the Loan Agreement.
4. It is expressly provided that if any of the Events of Default defined in
Sections 8.01(f) or (g) of the Loan Agreement shall occur, the entire unpaid
balance of the principal and interest hereunder shall be immediately due and
payable in accordance with the terms of the Loan Agreement. It is also expressly
provided that upon the occurrence of any other Event of Default, the entire
remaining unpaid balance of the principal and interest may be declared by the
Agent to be immediately due and payable in accordance with the terms of the Loan
Agreement.
5. The Borrower may repay a Prime Rate Loan at any time without penalty or
premium. Prepayment of any Loan bearing interest at an Alternative Rate, whether
voluntary, mandatory, or as the result of the Agent's or Lender's collection
efforts, shall be subject to the prepayment of fees as described in Section 2.6
of the Loan Agreement.
6. The unpaid principal balance of the Loans made hereunder shall be the
total amount advanced hereunder, less the amount of the principal payments made
hereon. This Revolving Loan Note is given to avoid the execution of an
individual note for each Loan by the Lender to the Borrower. This Revolving Loan
Note evidences a revolving credit and, within the limits and on the conditions
set forth in the Loan Agreement, prior to the Maturity Date the Borrower may
borrow, repay and reborrow hereunder. The Lender is hereby authorized to record
the date and amount of each Loan it makes hereunder and the date and amount of
each payment of principal and interest thereon on a schedule annexed hereto and
constituting a part of this Revolving Loan Note or maintained in connection
herewith. Any such recordation by the Lender shall constitute prima facie
evidence of the accuracy of the information so recorded; provided, however, that
the failure to make any such recordation or any error in any such recordation
shall not affect the obligations of the Borrower hereunder.
Page 2 - Revolving Loan Note
<PAGE>
7. Each maker, surety, guarantor and endorser of this Revolving Loan Note
expressly waives all notices, demands for payment, presentations for payment,
notices of intention to accelerate the maturity, protest and notice of protest.
8. In the event this Revolving Loan Note is placed in the hands of an
attorney for collection, or suit is brought on the same, or the same is
collected through bankruptcy or other judicial proceedings, the Borrower agrees
and promises to pay reasonable attorneys' fees and collection costs, including
all out-of-pocket expenses and the allocated costs and disbursements of internal
counsel, incurred by the Lender or the Agent.
9. This Revolving Loan Note has been executed and delivered in and 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). The Borrower
hereby irrevocably submits to the nonexclusive jurisdiction of any state or
federal court sitting in Portland, Multnomah County, Oregon, in any action or
proceeding brought to enforce or otherwise arising out of or relating to this
Revolving Loan Note, and hereby waives any objection to venue in any such court
and any claim that such forum is an inconvenient forum.
MERIX CORPORATION
By: JANIE S. BROWN
-------------------------------------
Name: Janie S. Brown
-------------------------------
Title: VP, Corporate Controller
& Treasurer
------------------------------
Page 3 - Revolving Loan Note
<PAGE>
Schedule 1
to Merix Corporation Revolving Loan Note
Applicable Amount of Unpaid
Amount of Interest Interest Principal Principal Notation
Date Loan Option Period Paid Balance By
- ---- --------- -------- ---------- --------- --------- --------
Page 4 - Revolving Loan Note
INDEMNITY AGREEMENT
This Agreement is made as of September 2, 1997, by and between Merix
Corporation, an Oregon corporation (the "Corporation"), and Mark R. Hollinger
("Indemnitee"), a director and/or officer of the Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as
directors and officers of the Corporation and its subsidiaries the most capable
persons available; and
WHEREAS, corporate litigation subjects directors and officers to
expensive litigation risks at the same time that adequate coverage of directors'
and officers' liability insurance may be unavailable; and
WHEREAS, the Articles of Incorporation of the Corporation require
indemnification of the officers and directors of the Corporation to the fullest
extent permitted by law. The Articles and the Oregon Business Corporation Act
(the "Act") expressly provide that the indemnification provisions set forth in
the Act are not exclusive, and thereby contemplate that contracts may be entered
into between the Corporation and members of the Board of Directors and officers
with respect to indemnification of directors and officers; and
WHEREAS, Indemnitee does not regard the protection available under the
Corporation's Articles of Incorporation, Bylaws and insurance adequate in the
present circumstances, and may not be willing to serve as a director or officer
without adequate protection, and the Corporation desires Indemnitee to serve in
such capacity.
NOW THEREFORE, the Corporation and Indemnitee agree as follows:
1. Agreement to Serve. Indemnitee agrees to serve or continue to serve as a
director and/or officer of the Corporation and/or one or more of its
subsidiaries for so long as Indemnitee is duly elected or appointed or until
such time as Indemnitee tenders a resignation in writing.
2. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought in the right of the
Corporation or otherwise, whether of a civil, criminal, administrative or
investigative nature, and whether formal or informal, in which Indemnitee may be
or may have been involved as a party or otherwise, by reason of the fact that
Indemnitee is or was a director and/or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise,
1
<PAGE>
whether or not serving in such capacity at the time any liability or expense is
incurred for which indemnification or reimbursement can be provided under this
Agreement.
(b) The term "Expenses" includes, without limitation thereto, expense
of investigations, judicial or administrative proceedings or appeals, amounts
paid in settlement by Indemnitee, attorneys' fees and disbursements and any
expenses of establishing a right to indemnification under Section 7 of this
Agreement, but shall not include the amount of judgments or fines against
Indemnitee.
(c) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise tax assessed with respect
to any employee benefit plan; references to "serving at the request of the
corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner reasonably believed to be in the interest of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Agreement.
3. Indemnity in Third Party Proceedings. The Corporation shall indemnify
Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is
a party to or threatened to be made a party to any Proceeding (other than a
Proceeding by or in the right of the Corporation to procure a judgment in its
favor) against all Expenses, judgments and fines actually and reasonably
incurred by Indemnitee in connection with such Proceeding, but only if
Indemnitee acted in good faith and in a manner which Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation and,
in the case of a criminal proceeding, in addition, had no reasonable cause to
believe that Indemnitee's conduct was unlawful. The termination of any such
Proceeding by judgment, order of court, settlement, conviction or upon a plea of
nolo contendere, or its equivalent, shall not, of itself, create a presumption
that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in the best interest of the Corporation, and with
respect to any criminal proceeding, that such person had reasonable cause to
believe that Indemnitee's conduct was unlawful.
Pursuant to this Agreement, the Corporation specifically will, and
hereby does, indemnify, to the fullest extent permitted by law, Indemnitee
against any and all losses, claims, damages, liabilities and expenses, joint or
several, (or actions or proceedings, whether commenced or threatened, in respect
thereof) to which Indemnitee may become subject, as a result of serving as a
director and/or officer of Merix, under the Securities Act or any other statute
or common law, including any amount paid in settlement of any litigation,
commenced or threatened, and to reimburse them for any legal or other expenses
incurred by them in
2
<PAGE>
connection with investigating any claims and defending any actions, insofar as
any such losses, claims, damages, liabilities, expenses or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact regarding Merix, or the omission or alleged omission to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4. Indemnity in Proceedings By or In the Right of the Corporation. The
Corporation shall indemnify Indemnitee in accordance with the provisions of this
Section 4 if Indemnitee is a party to or threatened to be made a party to any
Proceeding by or in the right of the Corporation to procure a judgment in its
favor against all Expenses actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such Proceeding, but only if
Indemnitee acted in good faith and in a manner which Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification for Expenses shall be made under this Section 4
in respect of any claim, issue or matter as to which such person shall have been
finally adjudged by a court to be liable for negligence or misconduct in the
performance of Indemnitee's duty to the Corporation, unless and only to the
extent that any court in which such Proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity.
5. Indemnification of Expenses of Successful Party. Notwithstanding any
other provisions of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise, in defense of any Proceeding or in
defense of any claim, issue or matter therein, including the dismissal of an
action without prejudice, Indemnitee shall be indemnified against all Expenses
incurred in connection therewith.
6. Advances of Expenses. The Expenses incurred by Indemnitee pursuant to
Sections 3, 4 and 8 in any Proceeding shall be paid by the Corporation in
advance at the written request of Indemnitee, if Indemnitee shall undertake to
repay such amount to the extent that it is ultimately determined by a court that
Indemnitee is not entitled to be indemnified by the Corporation and shall
furnish the Corporation a written affirmation of the Indemnitee's good faith
belief that Indemnitee is entitled to be indemnified by the Corporation under
this Agreement. Such advances shall be made without regard to Indemnitee's
ability to repay such expenses.
7. Right of Indemnitee to Indemnification Upon Application; Procedure Upon
Application. Any indemnification or advances under Sections 3, 4, 6 or 8 shall
be made no later than 45 days after receipt of the written request of
Indemnitee, unless a determination is made within such 45 day period by (a) the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such proceeding, or (b) independent legal
3
<PAGE>
counsel in a written opinion (which counsel shall be appointed if such quorum is
not obtainable), that the Indemnitee has not met the relevant standards for
indemnification set forth in Section 3, 4 or 8 or an exclusion set forth in
Section 9 is applicable.
The right to indemnification or advances as provided by this Agreement
shall be enforceable by Indemnitee in any court of competent jurisdiction. The
burden of proving that indemnification or advances are not appropriate shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors or independent legal counsel) to have made a determination prior to
the commencement of such action that indemnification or advances are proper in
the circumstances because Indemnitee has met the applicable standard of conduct
nor an actual determination by the Corporation (including its Board of Directors
or independent legal counsel) that Indemnitee has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that Indemnitee has not met the applicable standard of conduct. Indemnitee's
expenses incurred in connection with successfully establishing Indemnitee's
right to indemnification or advances, in whole or in part, in any such
Proceeding shall also be indemnified by the Corporation.
8. Additional Indemnification.
(a) Notwithstanding any limitation in Sections 3 or 4, the Corporation
shall indemnify Indemnitee in accordance with the provisions of this Section
8(a) to the fullest extent permitted by law if Indemnitee is party to or
threatened to be made a party to any Proceeding (including a Proceeding by or in
the right of the Corporation to procure a judgment in its favor) involving a
claim against Indemnitee for breach of fiduciary duty by Indemnitee against all
Expenses, judgments and fines actually and reasonably incurred by Indemnitee in
connection with such Proceeding, provided that no indemnity shall be made under
this Section 8(a) on account of Indemnitee's conduct which constitutes a breach
of Indemnitee's duty of loyalty to the Corporation or its stockholders or is an
act or omission not in good faith or which involves intentional misconduct or a
knowing violation of the law or with respect to an unlawful distribution under
ORS 60.367.
(b) Notwithstanding any limitation in Sections 3, 4 or 8(a), the
Corporation shall indemnify Indemnitee if Indemnitee is a party to or threatened
to be made a party to any Proceeding (including a Proceeding by or in the right
of the Corporation to procure a judgment in its favor) against all Expenses,
judgments and fines actually and reasonably incurred by Indemnitee in connection
with such Proceeding to the fullest extent permitted by the Act, including the
nonexclusivity provision of ORS 60.414(1) and any successor provision and
including any amendments to the Act adopted after the date hereof that may
increase the extent to which a corporation may indemnify its officers and
directors.
4
<PAGE>
(c) The indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under the
Restated Articles of Incorporation, the Bylaws, any other agreement, any vote of
shareholders or directors, the Act, or otherwise, both as to action in
Indemnitee's official capacity or as to action in another capacity while holding
such office. The indemnification under this Agreement shall continue as to
Indemnitee even though Indemnitee may have ceased to be a director or officer
and shall inure to the benefit of the heirs and personal representatives of
Indemnitee.
9. Exclusions. Notwithstanding any provision in this Agreement, the
Corporation shall not be obligated under this Agreement to make any
indemnification or advances in connection with any claim made against
Indemnitee:
(a) for which payment is required to be made to or on behalf of
Indemnitee under any insurance policy, except with respect to any excess beyond
the amount of required payment under such insurance, unless payment under such
insurance policy is not made after reasonable effort by Indemnitee to obtain
payment. The Corporation shall be subrogated with respect to any other rights of
Indemnitee with respect to any payment made by the Corporation to or on behalf
of the Corporation under this Agreement;
(b) for any transaction from which Indemnitee derived an improper
personal benefit; or
(c) for an accounting of profits made from the purchase and sale by
Indemnitee of securities of the Corporation within the meaning of Section 16(b)
of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any state statutory law or common law.
10. Partial Indemnification. If Indemnitee is entitled under any provisions
of this Agreement to indemnification by the Corporation for some or a portion of
the Expenses, judgments and fines actually and reasonably incurred by Indemnitee
in the investigation, defense, appeal or settlement of any Proceeding but not,
however, for the total amount thereof, the Corporation shall nevertheless
indemnify Indemnitee for the portion of such Expenses, judgments or fines to
which Indemnitee is entitled.
11. Business Transactions. The Corporation agrees that it will not effect
any Business Transaction (as defined in Article XI of the Restated Articles of
Incorporation of the Corporation) which has not been approved by the Continuing
Directors (as defined in Article XI of the Restated Articles of Incorporation of
the Corporation) of the Corporation unless the other party to the transaction
agrees in writing to (a) use its best efforts to maintain for the subsequent two
year period any and all directors' and officers' liability insurance in effect
prior to any discussions or announcement relating to such Business Transaction
and (b) assume all obligations of the Corporation under this Agreement and
indemnify Indemnitee and advance litigation expenses in accordance with this
Agreement.
5
<PAGE>
12. Severability. If this Agreement or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify Indemnitee as to Expenses, judgments
and fines with respect to any Proceeding to the full extent permitted by any
applicable portion of this Agreement that shall not have been invalidated or by
any other applicable law.
13. Notice. Indemnitee shall, as a condition precedent to Indemnitee's
right to be indemnified under this Agreement, give to the Corporation notice in
writing as soon as practicable of any claim made against Indemnitee for which
indemnity will or could be sought under this Agreement. Notice to the
Corporation shall be directed to Merix Corporation, 1521 Poplar Lane, Forest
Grove, Oregon 97116, Attention: Secretary (or such other address as the
Corporation shall designate in writing to Indemnitee). Notice shall be deemed
received three days after the date postmarked if sent by prepaid mail, properly
addressed. In addition, Indemnitee shall give the Corporation such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
15. Applicable Law. This Agreement shall be governed by and construed in
accordance with Oregon law.
16. Successors and Assigns. This Agreement shall be binding upon the
Corporation and its successors and assigns.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to
be duly executed and signed as of the day and year first above written.
MERIX CORPORATION
By DEBORAH A. COLEMAN
--------------------------------------
Chair, Chief Executive Officer and
President
INDEMNITEE
MARK R. HOLLINGER
------------------------------
Mark R. Hollinger
6
EXECUTIVE SEVERANCE AGREEMENT
September 2, 1997
Mark R. Hollinger
255 Allison Court
Forest Grove, OR 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 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 of 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 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.
2
<PAGE>
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
3
<PAGE>
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 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.
4
<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. 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
5
<PAGE>
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 (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
7
<PAGE>
(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
<PAGE>
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 MARK R. HOLLINGER
------------------------------ --------------------------------
Title: Vice President Executive
Human Resources Senior Vice President Operations
and Quality
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.
A-2
<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
A-3
<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
A-5
<PAGE>
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
EXHIBIT 11
<TABLE>
<CAPTION>
MERIX CORPORATION
CALCULATIONS OF NET INCOME PER SHARE
Three Months Ended
--------------------------------------------------------
August 30, 1997 August 31, 1996
-------------------------- --------------------------
Fully Fully
Primary Diluted Primary Diluted
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding for the period 6,185 6,185 6,134 6,134
Dilutive common stock
options using the treasury
stock method 119 126 186 186
----------- ----------- ----------- -----------
Total shares used in per share
calculations 6,304 6,311 6,320 6,320
=========== =========== =========== ===========
Net income $ 293 $ 293 $ 1,256 $ 1,256
=========== =========== =========== ===========
Earnings per share $ 0.05 $ 0.05 $ 0.20 $ 0.20
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements found in the Company's Quarterly Report on
Form 10Q for the quarter ended August 30, 1997, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
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