Exhibit 10.2

 

EXECUTIVE SEVERANCE AGREEMENT

 

Steve Robinson

  December 8, 2004

 

Data Circuit Systems, Inc.

 

Data Circuit Systems, Inc. (“the Company”) is a wholly owned subsidiary of Merix
Corporation (“Parent”). (The term “Employer” is used in this Agreement to mean
either the Company or Parent, whichever employs Executive upon Termination of
Executive’s Employment (as defined in Section 8.1). The Company considers the
establishment and maintenance of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company, Parent and its
shareholders. In this connection, the Company recognizes that, as is the case
with many corporations, the possibility of a change of control may exist and
that such possibility, and the uncertainty and questions that it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company, Parent and its shareholders. In order to induce
Steve Robinson (“Executive”) to remain employed by the Company or Parent in the
face of uncertainties about the long-term strategies of the Company and Parent
and possible change of control of the Company or Parent and their potential
impact on Executive’s position with the Company or Parent, this Agreement, which
has been approved by the Board of Directors of the Company, sets forth the
severance benefits that Executive will receive in the event Executive’s
employment is terminated under the circumstances described in this Agreement.

 

1. Employment Relationship.

 

Executive is currently employed by the Company as President pursuant to a
written Employment Agreement. Executive and the Company acknowledge that either
party may terminate this employment relationship pursuant to the terms of that
Employment Agreement, subject to the obligation to provide the severance
benefits specified in this Agreement in accordance with the terms hereof.

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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 and deliver to
Employer a Release of Claims in the form attached as Exhibit A (“Release of
Claims”) that will be delivered to Executive on the date of Termination of
Executive’s Employment.

 

3. Additional Compensation Upon Termination.

 

In addition to unpaid salary and other wages, if any, payable to Executive
through the date of Termination of Executive’s Employment, in the event of a
Termination of Executive’s Employment 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 of this Agreement, 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 of Executive’s Employment, Employer shall
pay Executive, in a single payment after employment has ended and eight days
have passed following execution of the Release of Claims without revocation, an
amount in cash equal to one year of Executive’s annual base pay at the rate in
effect immediately prior to the date of Termination of Executive’s Employment.

 

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 Executive’s Employment under the COBRA continuation laws for the
18-month statutory period, or for as long as Executive remains eligible under
COBRA. Employer 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 of Executive’s Employment,
such payment to be made no later than 2 1/2 months following the year in which
the Termination of Executive’s Employment occurs. 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 of Executive’s
Employment equal to the greater of (a) 50 percent of Executive’s target benefit
under such plan for the year or (b) a prorated amount representing the portion
of the plan year during

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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 to Executive until the date that all
awards are payable to other eligible employees after the close of the incentive
period, but in no event later than 2 1/2 months following the year in which the
Termination of Executive’s Employment occurs. Notwithstanding the foregoing,
Executive may elect at any time after Termination of Executive’s Employment and
before such payment, by written notice to Employer, to receive 50 percent 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. Executive acknowledges that this Section 3.3 modifies and supersedes any
payment provisions under any existing or future bonus plan.

 

3.4 Employer 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 the date of Termination of Executive’s Employment.
Executive may elect to receive the $12,500 in cash in lieu of payment to a
third-party outplacement firm payable no later than 2 1/2 months following the
year in which the Termination of Executive’s Employment occurs.

 

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.

 

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 (as defined
in Section 8.3), or prior to a Change of Control at the direction of a person
who has entered into an agreement with the Company or Parent, 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 Employer shall pay Executive, in a single payment within the later of (a)
eight days after the last day of employment, including employment during the
up-to-six-months-employment period referred to in Section 5 if the Company,
Parent 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 pay at the rate in effect immediately prior to the date of Termination of
Executive’s Employment.

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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 percent of the Executive’s target benefit for the year under
annual cash incentive plans in effect at the time of Termination of Executive’s
Employment. 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 Employer 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 of Executive’s Employment, 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 of Executive’s Employment,
provided that Executive’s continued participation is possible under the general
terms and provisions of such policy. At Executive’s election, or if Executive’s
continued participation in such policy is barred, Employer shall make a lump-sum
payment to Executive equal to the total premiums that would have been paid by
Employer for such 18-month period, such payment to be made no later than 2 1/2
months following the year in which the Termination of Executive’s Employment
occurs. The maximum amount that Employer shall be obligated to pay pursuant to
this Section 4.3 in premiums and payments to Executive shall be $5,000.

 

4.4 The possibility of forfeiture to the Company or Parent, as the case may be,
of all stock issued to Executive under all Executive Stock Bonus Agreements
shall immediately lapse.

 

4.5 All outstanding stock options held by Executive under all stock option and
stock incentive plans of the Company or Parent shall become immediately
exercisable in full and shall remain exercisable until the earlier of (a) two
years after Termination of Executive’s Employment or (b) the option expiration
date as set forth in the applicable option agreement.

 

4.6 Notwithstanding any provision in this Agreement, in the event that Executive
would receive a greater after-tax benefit from the Capped Benefit (as

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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 (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 § 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 Employer in writing is applicable
to Executive.

 

4.7 If Executive’s employment with Employer terminates for any reason prior to a
Change of Control, other than at the direction of a person who has entered into
an agreement with the Company or Parent, the consummation of which will
constitute a Change of Control, Executive shall not be entitled to benefits
under Section 4 of this Agreement.

 

5. Additional Service.

 

Executive agrees that, if requested by the Employer or the surviving company
following a Change of Control, Executive will continue his or her employment
with Employer or the surviving company for a period of up to six months
following the Change of Control in any capacity requested by Employer or the
surviving company consistent with Executive’s areas of professional expertise.
During this period Executive shall receive the same salary and substantially the
same benefits as in effect prior to the Change of Control. Executive shall not
be entitled to any benefits provided by Section 4 if Executive fails to perform
in accordance with this Section 5.

 

6. Tax Withholding; Subsequent Employment.

 

6.1 All payments provided for in this Agreement are subject to applicable tax
withholding obligations imposed by federal, state and local laws and
regulations.

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6.2 The amount of any payment provided for in this Agreement shall not be
reduced, offset or subject to recovery by the Company or Parent by reason of any
compensation earned by Executive as the result of employment by another employer
after Termination of Executive’s Employment.

 

7. Other Agreements.

 

This Agreement replaces and supersedes any severance agreement or other similar
agreement between Executive and the Company or Parent entered into prior to the
date of this Agreement. In the event that severance benefits are payable to
Executive under any other agreement with the Company or Parent in effect at the
time of Termination of Executive’s Employment (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 may not 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 Employer has terminated
Executive’s employment (including termination of employment with any subsidiary
of the Company or Parent). 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,
with no decrease in annual base compensation, and with no requirement that
Executive be based more than 50 miles from where Executive’s office is located
on the date of this Agreement, whether at the Parent, Company or any subsidiary
of the Company or Parent, 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 Employer 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

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responsibility for Employer’s 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 Employer
operations after the Change of Control as Executive had prior to the Change of
Control even if the former Employer operations are a subsidiary or division of
the surviving company and such operations receive the same or greater budget
than before the Change of Control;

 

(b) a reduction by Employer or the surviving company in Executive’s annual base
pay as in effect immediately prior to the Change of Control;

 

(c) a significant reduction by Employer 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) a requirement by Employer or the surviving company that Executive 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 that
Executive undertook on behalf of the Employer prior to the Change of Control;

 

(e) the failure by the Company or Parent 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 the Company or Parent, as the
case may be the assent to this Agreement contemplated by Section 9 hereof; or

 

(f) the failure of Employer or its affiliates to support Employer by providing
the working capital for Employer to grow and meet its budgeted EBITDA or to
purchase the capital equipment reasonably necessary to produce the products
necessary to meet its financial targets.

 

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 Employer (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 of Directors of Employer that specifically identifies the manner in which
the Board believes that Executive has not substantially performed Executive’s
duties or (b) the willful engaging by Executive in illegal conduct that is
materially and demonstrably injurious to the Company or Parent. No act, or
failure to act, on Executive’s part shall be

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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 the Company or Parent. 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 the Company or Parent shall be conclusively
presumed to be done, or omitted to be done, by Executive in the best interests
of the Company or Parent.

 

8.3 Change of Control.

 

A Change of Control shall mean that one of the following events has taken place:

 

(a) The shareholders of the Company approve one of the following:

 

(i) Any merger or statutory plan of exchange involving the Company (“Company
Merger”) in which the Company is not the continuing or surviving corporation or
pursuant to which shares of the Company’s common stock would be converted into
cash, securities or other property, other than a Company Merger in which Parent
continues to hold the same proportionate ownership of common stock of the
surviving corporation after the Company 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 the
Company or the adoption of any plan or proposal for the liquidation or
dissolution of the Company;

 

(b) The shareholders of Parent approve one of the following:

 

(i) Any merger or statutory plan of exchange involving Parent (“Parent Merger”)
in which Parent is not the continuing or surviving corporation or pursuant to
which shares of Parent’s common stock would be converted into cash, securities
or other property, other than a Parent Merger in which the holders of shares of
Parent’s common stock immediately prior to the Parent Merger have the same
proportionate ownership of common stock of the surviving corporation after the
Parent 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
Parent or the adoption of any plan or proposal for the liquidation or
dissolution of Parent;

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(c) A tender or exchange offer, other than one made by Parent, is made for
shares of Parent’s common stock (or securities convertible into shares of
Parent’s 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 Parent;

 

(d) Parent receives a report on Schedule 13D of the Exchange Act reporting the
beneficial ownership by any person of securities representing 20 percent or more
of the voting power of outstanding securities of the Company, except that if
such receipt shall occur during a tender offer or exchange offer described in
(c) above, a Change of Control shall not take place until the conclusion of such
offer; or

 

(e) During any period of 12 months or less, individuals who at the beginning of
such period constituted a majority of Parent’s 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 Parent’s
directors then still in office who were directors of Parent 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 that results in Executive, or a group of persons that includes
Executive, acquiring, directly or indirectly, securities representing 20 percent
or more of the voting power of outstanding securities of the Company or Parent.

 

8.4 Disability.

 

Termination of Executive’s Employment based on “Disability” shall mean
termination without further compensation under this Agreement, due to a mental
or physical impairment of Executive that is expected to result in death or that
has lasted or is expected to last for a continuous period of 12 months or more
and that causes Executive to be unable, with reasonable accommodation in the
opinion of Employer’s Board of Directors, to perform his or her duties for
Employer and to be engaged in any substantial gainful activity.

 

9. Successors; Binding Agreement.

 

9.1 This Agreement shall be binding on and inure to the benefit of the Company,
Parent and their respective successors and assigns. Upon Executive’s written
request, the Company or Parent, as they case may be, will seek to have any
successor, by agreement, assent to the fulfillment by the Company or Parent, as
the

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case may be, of its obligations under this Agreement. If such a request is made,
failure of the Company or Parent 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 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 the Company, Parent, their respective subsidiaries or affiliates and
of any other corporation or trust of which Executive serves as such at the
request of the Company or Parent, effective as of the date of Termination of
Executive’s Employment. Executive agrees to provide the Company or Parent, as
the case may be, such written resignation(s) upon request and that no severance
will be paid until after such resignation(s) are provided.

 

11. Governing Law; Arbitration.

 

This Agreement shall be construed in accordance with and governed by the laws of
the State of Oregon. Any dispute or controversy arising under or in connection
with this Agreement, or the breach thereof, shall be settled exclusively by
arbitration under the [Mutual Agreement to Arbitrate Claims signed by the
Executive], and judgment upon the award rendered by the Arbitrator may be
entered in any Court having jurisdiction thereof. Notwithstanding any provision
in the Mutual Agreement to Arbitrate Claims, Employer 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 writing signed by Executive, Parent and the Company.

 

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

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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:    

 

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Title:  

 

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    Mark R. Hollinger Data Circuit Systems By:  

 

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Title:  

 

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Steve Robinson