SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MERIX CORPORATION
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
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pursuant to Exchange Act Rule 0-11. Set forth the amount on which
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
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was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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<PAGE>
MERIX CORPORATION
Notice of Annual Meeting of Shareholders
October 5, 1998
To the Shareholders of Merix Corporation:
The Annual Meeting of Shareholders of Merix Corporation, an Oregon
corporation, will be held on Monday, October 5, 1998 at 9:00 a.m., local time,
at the Corporate Offices of the Company, 1521 Poplar Lane, Forest Grove, Oregon
97116, for the following purposes, as more fully described in the accompanying
Proxy Statement:
1. To elect six directors to serve for the ensuing year and until their
successors are elected.
2. To transact any other business that may properly come before the
meeting or any adjournment of the meeting.
You are respectfully requested to date and sign the enclosed proxy and
return it in the postage prepaid envelope enclosed for that purpose. You may
attend the meeting in person even though you have sent in your proxy, since
retention of the proxy is not necessary for admission to or identification at
the meeting.
By Order of the Board of Directors
Samuel R. DeSimone, Jr.
Vice President of Corporate Development
and Secretary
Forest Grove, Oregon
August 17, 1998
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THIS MEETING IN
PERSON, PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE SO THAT YOUR STOCK WILL BE VOTED. THE ENVELOPE REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
<PAGE>
MERIX CORPORATION
1521 Poplar Lane
Forest Grove, Oregon 97116
-------------------------
PROXY STATEMENT
-------------------------
The enclosed proxy is solicited on behalf of the Board of Directors of
Merix Corporation, an Oregon corporation ("Merix" or the "Company"), for use at
the annual meeting of shareholders to be held on Monday, October 5, 1998 at 9:00
a.m., local time, and at any adjournment or adjournments thereof. The Company
will hold the annual meeting at the Corporate Offices of the Company, 1521
Poplar Lane, Forest Grove, Oregon 97116. The approximate date this proxy
statement and accompanying proxy card are first being sent to shareholders is
August 17, 1998.
Merix will bear the cost of preparing and mailing the proxy, proxy
statement and any other material furnished to the shareholders by the Company in
connection with the annual meeting. Proxies will be solicited by the use of the
mails. Officers and employees of the Company may also solicit proxies by
telephone or personal contact. Costs of any solicitation will be borne by the
Company. Copies of solicitation materials will be furnished to fiduciaries,
custodians and brokerage houses for forwarding to beneficial owners of the stock
held in their names.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. The proxy may be revoked
by filing with the Secretary of the Company an instrument of revocation or duly
executed proxy bearing a later date. The proxy may also be revoked by
affirmatively electing to vote in person while in attendance at the meeting.
However, a shareholder who attends the meeting need not revoke the proxy and
vote in person, unless so desired. The shares represented by each proxy will be
voted in accordance with the instructions specified in the proxy, if given. If a
signed proxy is returned without instructions, it will be voted for the
directors and in accordance with this proxy statement on any other business that
may properly come before the meeting.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Common Stock is the only outstanding voting security of the Company.
The record date for determining holders of Common Stock entitled to vote at the
annual meeting is August 3, 1998. On that date, there 6,202,114 shares of Common
Stock outstanding, entitled to one vote per share. The Common Stock does not
have cumulative voting rights.
<PAGE>
The following table shows Common Stock ownership on July 1, 1998 by (i)
each person who, to knowledge of the Company, beneficially owns more than 5% of
the Common Stock, (ii) each of the current or former executive officers named in
the Summary Compensation Table below and (iii) all current executive officers
and directors of the Company as a group:
<TABLE>
<CAPTION>
Approximate
Shares(1) Percent
--------- -------
<S> <C> <C>
Tektronix, Inc.
PO Box 1000
Wilsonville, OR 97070 1,692,000 27.3%
The TCW Group, Inc.
865 S. Figueroa St.
Los Angeles, CA 90017 651,700 (2) 10.5%
Dimensional Fund Advisors, Inc.
1299 Ocean Ave. 11th Floor
Santa Monica, CA 90401 316,200 (3) 5.1%
Deborah A. Coleman 379,032 (4) 6.1%
Joseph Reichbach 41,850 (5) *
Mark Hollinger 200 *
Terri L. Timberman 28,920 (6) *
Samuel R. DeSimone, Jr. 20,315 (7) *
Charles W. Payne 7,037 (8) *
Joseph H. Howell 65,916 (9) 1.1%
All executive officers and directors 2,227,354 (10) 35.9%
as a group (11 people)
- ----------------------------
* Less than one percent
(1) Shares are held directly with sole voting and dispositive power except as
otherwise indicated.
(2) Based upon a Schedule 13G/A filed with the Securities and Exchange
Commission on June 10, 1998 by The TCW Group, Inc., a parent holding
company, and Robert Day, an individual who may be deemed to control the TCW
Group, Inc.
(3) Based upon a Schedule 13G filed with the Securities and Exchange Commission
on December 31, 1997. According to the Schedule 13G, Dimensional Fund
Advisors has sole voting power with respect to 188,200 shares. Persons who
are officers of Dimensional Fund Advisors serve as advisors to two open-end
management investment companies, and in such capacities vote an additional
128,000 shares.
(4) Includes stock options for 251,250 shares that are currently exercisable or
become exercisable before August 31, 1998.
(5) Includes 15,000 shares of unvested restricted stock held by Mr. Reichbach,
as to which he does not have the power to sell, and stock options for
18,750 shares that are currently exercisable or become exercisable before
August 31, 1998.
(6) Includes stock options for 22,500 shares that are currently exercisable or
become exercisable before August 31, 1998.
2
<PAGE>
(7) Includes 800 shares of unvested restricted stock held by Mr. DeSimone, as
to which he does not have the power to sell, and stock options for 16,250
shares that are currently exercisable or become exercisable before August
31, 1998.
(8) Includes stock options for 6,737 shares that are currently exercisable or
become exercisable before August 31, 1998.
(9) Includes stock options for 58,750 shares that expired on July 23, 1998.
(10) Includes 1,692,000 shares held by Tektronix, Inc. as to which a director of
the Company disclaims beneficial ownership. Also includes 15,800 shares of
unvested restricted stock and stock options for 370,487 shares held by
executive officers and directors that are currently exercisable or become
exercisable before August 31, 1998.
</TABLE>
3
<PAGE>
1. ELECTION OF DIRECTORS
Six directors will be elected at the annual meeting to serve until the next
annual meeting of shareholders and until their respective successors are elected
and qualified. The nominees for director are listed below, together with certain
information about each of them.
<TABLE>
<CAPTION>
Shares of Common
Stock Beneficially
Owned as of
July 1, 1998(1)
-----------------------------
Merix Director Number Approximate
Name, Principal Occupation and Directorships Age Since of Shares(2) Percent
- -------------------------------------------- --- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Deborah A. Coleman . . . . . . . . . . . . . . . . . . . . 45 1994 379,032 (3) 6.1%
Chair of the Board of Directors, Chief Executive Officer,
President and acting Chief Financial Officer of the Company.
From November 1992 to the inception of the Company,
Ms. Coleman served as Vice President of Materials
Operations of Tektronix and was responsible for management
of the operations of the Circuit Board Division of Tektronix.
Prior to joining Tektronix, Ms. Coleman held various
positions at Apple Computer, Inc. for 11 years, most recently
as Vice President of Information Systems and Technology
from April 1990 to October 1992. Previous positions at
Apple Computer included Chief Financial Officer and Vice
President of Worldwide Manufacturing Operations.
Ms. Coleman serves on the Board of Directors of Synopsys
Inc. and Applied Materials, Inc.
Carlene M. Ellis . . . . . . . . . . . . . . . . . . . . . 51 1994 27,500 *
Ms. Ellis has served as Corporate Vice President and
Director of the Information Technology Group of Intel
Corporation since September 1992. Ms. Ellis was Intel's
Director of Human Resources from September 1990 to
September 1992 and Vice President of its Administration
Group from January 1989 to September 1992.
William C. McCormick . . . . . . . . . . . . . . . . . . . 63 1997 2,000 *
Mr. McCormick has served as Chairman of Precision
Castparts Corporation since October 1994 and its Chief
Executive Officer since August 1991. From 1985 to 1997
he served as President of Precision Castparts, and from 1985
to 1991 he served as Chief Operating Officer.
4
<PAGE>
Shares of Common
Stock Beneficially
Owned as of
July 1, 1998(1)
-----------------------------
Merix Director Number Approximate
Name, Principal Occupation and Directorships Age Since of Shares(2) Percent
- -------------------------------------------- --- -------------- ------------ -----------
Carl W. Neun . . . . . . . . . . . . . . . . . . . . . . . . 54 1994 1,693,000 (4) 27.3%
Mr. Neun has served as Senior Vice President and Chief
Financial Officer of Tektronix since June 1995. From March
1993 to June 1995 he served as Vice President and Chief
Financial Officer of Tektronix. From September 1987 to
March 1993, Mr. Neun served as Senior Vice President of
Administration and Chief Financial Officer of Conner
Peripherals, Inc. Mr. Neun serves on the Board of Directors
of Diamond Multimedia Systems, Inc.
Dr. Koichi Nishimura . . . . . . . . . . . . . . . . . . . . 59 1994 27,500 *
Dr. Nishimura has served as Chairman of the Board of
Solectron Corporation since September 1996, Chief
Executive Officer since September 1992 and President since
1990. He was Co-Chief Executive Officer from 1991 to
1992 and Chief Operating Officer of Solectron from 1988 to
1991. He became a director of Solectron in February 1991.
Robert C. Strandberg . . . . . . . . . . . . . . . . . . . . 40 1998 0
Mr. Strandberg became a director by board action in June
1998. Mr. Strandberg has served as the President and Chief
Executive Officer of PSC, Inc. since April 1997 and as
Executive Vice President from November 1996 until April
1997. Between 1991 and 1996, Mr. Strandberg was
Chairman of the Board of Directors, President and Chief
Executive Officer of Datamax International Corporation. Mr.
Strandberg is also a director of Sawtek, Inc.
- ----------------------------
* Less than one percent.
(1) Shares are held directly with sole voting and dispositive power except as
otherwise indicated.
(2) Includes stock options granted pursuant to the Company's 1994 Stock
Incentive Plan, as amended, that are currently exercisable or become
exercisable before August 31, 1998 as follows: Ms. Ellis - 27,500 shares;
Dr. Nishimura - 27,500 shares; Mr. McCormick - 0 shares; and Mr. Strandberg
- 0 shares.
(3) Includes stock options for 251,250 shares that are currently exercisable or
become exercisable before August 31, 1998.
(4) Includes 1,692,000 shares held by Tektronix, Inc. Mr. Neun serves as
director of the Company as the representative of Tektronix. In his capacity
as an executive officer of Tektronix, he may be deemed to share with the
board of directors of Tektronix voting and/or dispositive power with
respect to such shares of Common Stock. Mr. Neun disclaims beneficial
ownership of such shares.
</TABLE>
5
<PAGE>
The Board of Directors met eight times during the fiscal year ended May 30,
1998. Each director, except Dr. Nishimura, attended at least 75% of the
aggregate of the meetings of the Board of Directors and the committees of which
the director was a member. The only standing committees of the Board of
Directors are the Audit and Finance Committee and the Human Resources and
Compensation Committee. The Company does not have a Nominating Committee.
Shareholders who wish to submit names for consideration as potential directors
should do so in writing addressed to the Board of Directors, c/o Samuel R.
DeSimone, Jr., Secretary, Merix Corporation, 1521 Poplar Lane, Forest Grove,
Oregon 97116.
The Audit and Finance Committee was comprised during the last fiscal year
of Mr. Neun, Dr. Nishimura , Mr. McCormick and Mr. Charles M. Boesenberg, who is
departing from the Board, and met five times during the last fiscal year. The
Audit and Finance Committee recommends the independent auditor of the Company
for approval by the Board of Directors, reviews the planned scope and results of
the annual audit, confers with the independent auditor, reviews the auditor's
recommendations with respect to accounting, internal controls and other matters
and makes other recommendations to the Board of Directors with respect to audit
and finance matters.
The Human Resources and Compensation Committee was comprised during the
last fiscal year of Ms. Ellis, Mr. Boesenberg and Mr. John P. Karalis, who
resigned from the Board in June 1998, and met three times during the last fiscal
year. The Human Resources and Compensation Committee makes recommendations to
the Board of Directors on executive and director compensation plans, approves
salaries for executive officers of the Company and administers compensation
plans as authorized by the Board of Directors.
Directors not employed by the Company or Tektronix receive an annual
retainer of $6,000, a fee of $500 for attendance at each Board or committee
meeting, an automatic option grant of 20,000 shares under the Company's 1994
Stock Incentive Plan at the time first elected or appointed to the Board of
Directors, and annual automatic option grants thereafter of 5,000 shares. The
options are 10-year options granted at the market price on the date of grant and
vest in four equal installments beginning one year after the date of grant. All
directors are reimbursed for expenses incurred in connection with attending
Board and committee meetings.
The proxies will be voted with respect to the election of the nominees in
accordance with the instructions specified in the proxy form. If no instructions
are given, proxies will be voted for the election of the nominees. If for some
unforeseen reason any of the nominees would not be available as a candidate for
director, the number of directors constituting the Board of Directors may be
reduced prior to the meeting or the proxies may be voted for such other
candidate or candidates as may be nominated by the Board of Directors, in
accordance with the authority conferred in the proxy.
The Board of Directors recommends a vote FOR the election of the nominees
listed above. Directors are elected by a plurality of the votes cast by the
shares entitled to vote if a quorum is present at the annual meeting.
Abstentions are counted for purposes of determining whether a quorum exists at
the annual meeting, but are not counted and have no effect on the determination
of whether a plurality exists with respect to a given nominee.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation information for the Chief
Executive Officer and certain other current and former executive officers of the
Company.
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
-------------------------------
Annual Compensation Securities
Fiscal ----------------------- Restricted Underlying All Other
Year Salary Bonus(1) Stock Awards($)(1) Options(#) Compensation(2)
------ -------- ------- ------------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Deborah A. Coleman 1998 $271,278 $21,301 $ -- 20,000 $ 4,671
(Chair, Chief Executive 1997 276,302 -- -- 15,000 5,714
Officer, President and 1996 217,642 34,500 -- 15,000 9,843
acting Chief Financial
Officer)
Joseph Reichbach 1998 200,000 66,839 -- 10,000 26,035(3)
(Senior Vice President, 1997(4) 61,538 120,781 285,000 75,000 3,069
Sales and Marketing)
Mark R. Hollinger 1998(5) 138,846 85,584 -- 85,000 5,568(6)
(Senior Vice President,
Operations)
Terri L. Timberman 1998 137,609 6,876 -- 10,000 4,335
(Vice President of 1997 131,981 -- -- 10,000 4,003
Human Resources and 1996 120,000 12,000 -- 10,000 4,918
Quality)
Samuel R. DeSimone, Jr. 1998 140,011 7,130 -- 25,000 3,922
(Vice President of 1997 135,529 -- -- 10,000 3,833
Corporate Development 1996(7) 88,976 12,500 84,637 20,000 12,453
and Secretary)
Charles W. Payne 1998 140,000 5,232 -- 4,500 2,096
(Vice President, 1997(8) 136,689 3,000 -- 4,650 2,734
Engineering and Chief
Technology Officer)
Joseph H. Howell 1998 174,636 6,520 -- 10,000 247,845(10)
(Former Senior Vice 1997 187,375 -- -- 10,000 4,981
President and Chief 1996 165,000 16,500 -- 8,000 11,848
Financial Officer)(9)
- --------------------
(1) Dollar amounts set forth in the table represent the value of the
shares on the date of grant. As of May 30, 1998, the number of
unvested shares of restricted stock held by the named executives and
the value of such shares on such date were as follows: Mr. DeSimone -
800 shares ($9,300) and Mr. Reichbach - 15,000 shares ($174,375).
(2) Amounts for 1998 consist principally of amounts contributed by the
Company under its 401(k) Plan unless otherwise indicated.
(3) Includes $19,407 paid for relocation expenses.
(4) Mr. Reichbach became an executive officer in February 1997. 1997 and
1998 bonus amounts include payments made pursuant to his employment
letter.
(5) Mr. Hollinger became an executive officer in September 1997. 1998
bonus amount includes payments made pursuant to his employment letter.
7
<PAGE>
(6) Includes $1,184 paid for relocation expenses.
(7) Mr. DeSimone became an executive officer in September 1995.
(8) Mr. Payne was an executive officer from March 1997 to September 1997.
(9) Mr. Howell resigned as Senior Vice President and Chief Financial
Officer in April 1998.
(10) Amount for 1998 includes $243,461 paid or payable pursuant to an
Executive Severance Agreement.
</TABLE>
Stock Option Grants in Last Fiscal Year
The following table provides information regarding stock options granted to
certain current and former executive officers in fiscal 1998.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------- Potential Realizable Value at
Number of Percent of Assumed Annual Rates
Shares Total Options of Stock Price Appreciation
Underlying Granted to for Option Term(2)
Options Employees in Exercise Price Expiration -----------------------------
Name Granted(1) Fiscal Year per Share Date 5% 10%
---- ---------- ------------- --------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Deborah A. Coleman 20,000 5.2 % $17.875 9/23/07 $224,830 $569,763
Joseph Reichbach 10,000 2.6% 17.875 9/23/07 112,415 284,881
Mark R. Hollinger 85,000 22.2% 18.1875 9/2/07 972,232 2,463,826
Terri L. Timberman 10,000 2.6% 17.875 9/23/07 112,415 284,881
Samuel R. DeSimone, Jr. 10,000 2.6% 17.875 9/23/07 112,415 284,881
15,000 3.9% 17.375 6/19/07 163,906 415,369
Charles W. Payne 2,500 0.7% 17.875 9/23/07 28,104 71,220
2,000 0.5% 17.375 6/19/07 21,854 55,383
Joseph H. Howell 10,000 2.6% 17.875 4/24/98(3) 112,415 284,881
- ---------------------
(1) Under the terms of the option agreements with these executive
officers, each of the options is subject to accelerated vesting in the
event of a future change in control of the Company or the occurrence
of certain events indicating an imminent change in control of the
Company. Each of the options is subject to early termination in the
event of termination of employment. Each option terminates 12 months
after termination following death or disability and 90 days after
termination for any other reason. These options become exercisable in
four equal annual installments beginning one year after the date of
grant.
(2) In accordance with rules of the Securities and Exchange Commission,
these amounts are the hypothetical gains or "option spreads" that
would exist for the options based on assumed rates of annual compound
stock price appreciation of 5% and 10% from the date the options were
granted over the full option term.
(3) Mr. Howell's option was canceled upon his resignation in April 1998.
</TABLE>
8
<PAGE>
Fiscal Year-End Option Values
The following table indicates the number of shares acquired upon exercise
of options during the last fiscal year and the value realized, the number of
shares subject to exercisable (vested) and unexercisable (unvested) stock
options as of May 30, 1998 and the value of exercisable and unexercisable
"in-the-money" options, which represents the positive spread between the
exercise price of existing stock options and the price of the Common Stock at
May 30, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at May 30, 1998(#) at May 30, 1998(1)($)
Shares Acquired Value ----------------------------- ----------------------------
on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
--------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Deborah A. Coleman 0 0 241,250 48,750 $ 603,750 $ 26,250
Joseph Reichbach 0 0 18,750 66,250 -- --
Mark R. Hollinger 0 0 -- 85,000 -- --
Terri L. Timberman 0 0 17,500 27,500 26,250 13,125
Samuel R. DeSimone, Jr. 0 0 12,500 42,500 -- --
Charles W. Payne 0 0 4,987 9,263 9,844 3,281
Joseph H. Howell 0 0 58,750 -- -- --
- ---------------------
(1) Calculated based on the May 29, 1998 closing stock price of $11.625
per share.
</TABLE>
Severance and Change of Control Agreements
The Company has entered into Executive Severance Agreements with Ms.
Coleman, Mr. Reichbach, Mr. DeSimone, Ms. Timberman, Mr. Payne and Mr.
Hollinger, pursuant to which the Company has agreed to provide each executive
severance benefits upon the Company's termination of employment without cause.
"Cause" is generally defined as (a) the willful and continued failure to perform
substantially the executive's reasonably assigned duties (except a failure
resulting from incapacity due to physical or mental illness) after a demand for
performance has been made and the manner of nonperformance has been specifically
identified or (b) the willful engaging in illegal conduct materially injurious
to the Company. Termination of employment does not include assignment to the
executive of different responsibilities consistent with the executive's area of
professional expertise, except in the case of Ms. Coleman, with respect to whom
termination of employment would include her removal as Chief Executive Officer
of the Company. In the event of a termination of employment without cause, Ms.
Coleman would receive a lump sum payment equal to twice her annual base pay and
each of the other executives except Mr. Reichbach would receive a lump sum
payment equal to his or her annual base pay, and each executive would also be
entitled to a portion of the benefits under any incentive plan in which the
executive participates and certain heath insurance and out placement benefits.
Mr. Reichbach would receive 1.5 times his annual base pay in the event of
termination without cause before January 1999, and he would receive his annual
base pay for termination without cause after that date. In the event that an
executive is terminated within 24 months following a change of control of the
Company (as defined in the agreement), the executive would receive, in addition
to such benefits, an additional cash payment so that the total amount equaled
two times his or her annual base pay, an additional portion of his or her
targeted cash bonus, accelerated vesting of all stock options and bonus stock
awards and extension of the option exercise period, and certain life insurance
benefits. However, such benefits will not be payable if termination is due to
death or voluntary action of the employee other than for good reason (as defined
in the agreement), or by the Company for cause or permanent disability. Payment
of the benefits following a change of control is conditioned on the executive's
agreement to continue his or her employment with the Company or the surviving
company (if so requested) for a period up to six months following a change of
control.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Human Resources and Compensation Committee
The Human Resources and Compensation Committee of the Board of Directors
(the "Committee") consists of three outside directors. Pursuant to authority
delegated by the Board of Directors, the Committee approves compensation of
executive officers, including the Chief Executive Officer. The Committee is also
responsible for reviewing and approving executive compensation programs and
administering the Company's stock incentive and executive compensation plans.
The Committee also provides advice on a broad range of human resources issues
including best practices in the areas of benefits, staffing, succession planning
and general compensation.
Compensation Policy
The Board of Directors and the Committee believe that the Company's total
executive compensation programs should be related to corporate performance. The
Company has developed a total compensation strategy that ties a significant
portion of executive compensation to achievement of pre-established financial
results. The primary objective of the executive compensation program is to:
* Attract and retain talented executives;
* Motivate executives to achieve long term business strategies while
achieving near term and financial targets; and
* Align executive performance with Merix's strategic and tactical goals.
The Company has base pay and annual incentive compensation programs for its
executive officers, as well as a 401(k) plan. These programs are designed to
offer compensation that is competitive with compensation offered by companies of
similar size and complexity within the electronics and similar industries. The
Company targets the 50th percentile for base pay and 65-70th percentile for
total compensation. The Committee uses comparative information from a group of
companies in the electronics industry for establishing executive compensation,
general compensation structures and Company performance goals. The Committee
periodically engages a compensation consulting firm to assist in this process.
Base Salaries
Base salaries for the Chief Executive Officer and other executive officers
are initially determined by evaluating the responsibilities of the position and
the experience of the individual, and by reference to the competitive
marketplace for corporate executives. This includes a comparison of base salary
and total compensation for comparable positions at other companies.
Annual salary adjustments are considered and determined by evaluating the
performance of the Company and each executive officer, and also take into
account any new responsibilities. The Committee, when appropriate, also
considers non-financial performance measures that focus attention on improvement
in management processes.
Corporate Plan
The Company's executive officers participate in the Company's Corporate
Incentive Plan, an annual cash incentive compensation plan. Company performance
objectives are established and approved by the Board of Directors at the
beginning of the fiscal year. Performance measures have established thresholds,
targets and maximums that determine the amount of cash payment under the plan.
The Company's performance objectives for the fiscal year are specified each year
and reviewed by the full Board of Directors.
10
<PAGE>
The Corporate Incentive Plan for fiscal 1998 provided for quarterly bonuses
based on operating profit. Each participant was assigned a leverage percentage,
which represented the percent of base salary that would be received under the
plan if the plan criterion was met, and the leverage percentages ranged from 10%
to 60%. The plan provided for additional cash payments if the target was
exceeded, subject to a maximum amount of twice the leverage percentage. The
Company's operating profit for fiscal 1998 did not meet the predetermined plan
level except for the third fiscal quarter. The Chief Executive Officer and other
senior officers received nominal bonuses under this plan in the third fiscal
quarter (one-eighth of targeted annual incentive).
Stock Options
All employees of the Company, including executive officers, are eligible to
participate in the Company's 1994 Stock Incentive Plan. All option grants are
approved by the Committee. Guidelines for the number of options granted have
been established and are reviewed periodically to ensure competitiveness. Actual
grants are based on individual performance and contribution to the Company's
strategic success. The Stock Incentive Plan supports the linkage between
executives, employees and other shareholders to the long term business
strategies. Option and restricted stock grants made to executive officers for
fiscal 1996, 1997 and 1998 are reflected in the Summary Compensation Table.
Section 162(m)
Section 162(m) of the Internal Revenue Code of 1986 limits to $1,000,000
per person the amount that the Company may deduct for compensation paid to any
of its most highly compensated officers in any year after 1993. The Company
anticipates that the levels of salary and bonus to be paid by the Company will
not generally exceed that limit. Under the 162(m) regulations, the $1,000,000
cap on deductibility will not apply to compensation received through the
exercise of nonqualified stock options that meet certain requirements. This
option exercise compensation is equal to the excess of the market price at the
time of exercise over the option price and, unless limited by Section 162(m), is
generally deductible by the Company. The Company's current policy is generally
to grant options that meet the requirements of the proposed regulations.
Human Resources and Compensation Committee Report Submitted By:
Charles M. Boesenberg, Chairman
Carlene M. Ellis
John P. Karalis
Compensation Committee Interlocks and Insider Participation
During the last fiscal year John P. Karalis was an executive officer of
Tektronix, Inc. See "Certain Relationships and Transactions" regarding
transactions between Tektronix and the Company.
Performance Graph
The graph below compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total return on the Nasdaq Composite
U.S. Index and a peer group of companies in the Company's industry over the
period indicated, assuming the investment of $100 on May 25, 1994, the date of
the Company's initial public offering, and reinvestment of any dividends. In
accordance with guidelines of the SEC, the stockholder return for each entity in
the peer group index has been weighted on the basis of market capitalization as
of each annual measurement date set forth on the graph. The stock price
performance shown on the graph below is not necessarily indicative of future
price performance.
11
<PAGE>
<TABLE>
<CAPTION>
[GRAPHIC OMITTED] 5/25/94 5/26/95 5/24/96 5/30/97 5/29/98
=================================== =========== ============ =========== ============ ===========
<S> <C> <C> <C> <C> <C>
MERIX CORP $ 100.0 $ 248.7 $ 315.4 $ 166.7 $ 119.2
NASDAQ INDEX $ 100.0 $ 119.0 $ 172.9 $ 194.8 $ 247.5
PEER GROUP(1) $ 100.0 $ 208.6 $ 363.6 $ 573.0 $ 642.1
- ----------------------------
(1) The selected peer group consists of ADFlex Solutions, Inc., Altron, Inc.,
Hadco Corporation, M-Wave, Inc., Parlex Corporation, Sanmina Corporation,
Sheldahl, Inc. and Sigma Circuits, Inc. Such companies have been selected
for the peer group on the basis of, among other factors, the similarity of
their business to that of the Company and their market capitalization
relative to that of the Company.
</TABLE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company was formed in March 1994 to succeed to the business conducted
by the Circuit Board Division of Tektronix. Pursuant to an Asset Transfer
Agreement dated as of May 31, 1994 (the "Asset Transfer Agreement"), all of the
business of the Circuit Board Division of Tektronix was transferred to the
Company immediately prior to the consummation of the Company's initial public
offering. Tektronix transferred to the Company all of the assets used
exclusively in the Division's business and approximately $17.5 million in cash
in exchange for 6,000,000 shares of Common Stock and a note in the principal
amount of $10 million (the "Note"). The Note bears interest at the rate of 7.5%
per annum and is payable over five years. The Company granted Tektronix a
security interest in the Company's real property (including improvements) to
secure repayment of the Note pursuant to a Trust Deed.
The Asset Transfer Agreement provides that the Company will use all
reasonable efforts to nominate and maintain as members of its Board of Directors
two individuals designated by Tektronix and three additional independent
individuals, so long as Tektronix holds at least 25% of the outstanding shares
of the Company's Common Stock. If the Company increases the size of its Board of
Directors beyond seven while this covenant is in effect, Tektronix is entitled
to designate such number of directors as represents two-sevenths of the total
number of directors. Mr. Neun has been nominated pursuant to the agreement.
Tektronix is a significant customer of the Company. During the last fiscal
year net sales by the Company to Tektronix were $29,688,000. In addition, the
Company and Tektronix are parties to a Waste
12
<PAGE>
Management and Services Agreement covering certain environmental matters. During
the last fiscal year, the Company paid $450,539 to Tektronix pursuant to this
agreement.
INDEPENDENT AUDITORS
Deloitte & Touche LLP audited the Company's financial statements for the
year ended May 30, 1998 and has been selected to audit the Company's financial
statements for the fiscal year ending May 1999. Representatives of Deloitte &
Touche LLP, the Company's independent auditors, are expected to be present at
the annual meeting, will have the opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than 10% of the Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission ("SEC"). Executive officers, directors and beneficial
owners of more than 10% of the Common Stock are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of such forms received by the Company and on
written representations from certain reporting persons that they have complied
with the relevant filing requirements, the Company believes that all Section
16(a) filing requirements applicable to its executive officers and directors
were complied with during the fiscal year ended May 30, 1998.
OTHER MATTERS
Shareholder Proposals to be Included in the Company's Proxy Statement
A shareholder proposal to be considered for inclusion in proxy materials
for the Company's 1999 annual meeting must be received by the Company not later
than April 19, 1999.
Shareholder Proposals Not in the Company's Proxy Statement
Shareholders wishing to present proposals for action at this annual meeting
or at another shareholders' meeting must do so in accordance with the Company's
Bylaws. A shareholder must give timely notice of the proposed business to the
Secretary. To be timely, a shareholder's notice must be in writing, delivered to
or mailed and received at the principal executive offices of the Company not
less than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that if the date of the
annual meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the shareholder, to be timely, must be received no
later than the close of business on the 90th day prior to such annual meeting
and not later than the close of business on the later of the 60th day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. For each matter the
shareholder proposes to bring before the meeting, the notice to the Secretary
must include (a) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(b) the name and address of the shareholder proposing such business, (c) the
class and number of shares of the Company which are beneficially owned by the
shareholder and (d) any material interest of the shareholder in such business.
The officer presiding at the meeting may, if in the officer's opinion the facts
warrant, determine that business was not properly brought before the meeting in
accordance with the Company's Bylaws. If such officer does so, such officer
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted. For purposes of the Company's 1999
annual meeting, such notice, to be timely, must be received by the Company
between July 7, 1999 and August 6, 1999.
13
<PAGE>
Shareholder Nominations for Director
Shareholders wishing to directly nominate candidates for election to the
Board of Directors at an annual meeting must do so in accordance with the
Company's Bylaws by giving timely notice in writing to the Secretary as defined
above. The notice shall set forth (a) the name and address of the shareholder
who intends to make the nomination, (b) the name, age, business address and
residence address of each nominee, (c) the principal occupation or employment of
each nominee, (d) the class and number of shares of the Company which are
beneficially owned by each nominee and by the nominating shareholder, (e) any
other information concerning the nominee that must be disclosed of nominees in
proxy solicitations pursuant to Regulation 14A of the Securities Exchange Act of
1934, and (f) the executed consent of each nominee to serve as a director of the
Company if elected. Shareholders wishing to make any director nominations at any
special meeting of shareholders held for the purpose of electing directors must
do so, in accordance with the Bylaws, by delivering timely notice to the
Secretary setting forth the information described above for annual meeting
nominations. To be timely, the notice must be given (a) if given by any
shareholder who made a demand for the meeting, concurrently with the delivery of
such demand, and (b) otherwise, not later than the close of business on the
tenth day following the day on which the notice of the special meeting was
mailed. The officer presiding at the meeting may, if in the officer's opinion
the facts warrant, determine that a nomination was not made in accordance with
the procedures prescribed by the Bylaws. If such officer does so, such officer
shall so declare to the meeting and the defective nomination shall be
disregarded.
Other Business
The Board of Directors does not intend to present any business for action
of the shareholders at the annual meeting except the matters referred to in this
proxy statement. If any other matters should properly come before the meeting,
it is the intention of the persons named in the accompanying form of proxy to
vote thereon in accordance with their judgment on such matters.
Whether or not you expect to be present at the meeting, please sign the
accompanying form of proxy and return it promptly in the enclosed stamped return
envelope.
By Order of the Board of Directors
Samuel R. DeSimone, Jr.
Vice President of Corporate Development
and Secretary
August 17, 1998
14
<PAGE>
MERIX CORPORATION
P
R
O Proxy Solicited on Behalf of the Board of Directors of
X the Company for the Annual Meeting October 5, 1998
Y
The undersigned hereby appoints Deborah A. Coleman, Carlene M. Ellis and William
C. McCormick, and each of them, proxies with full power of substitution, to vote
in behalf of the undersigned at the Annual Meeting of Shareholders of Merix
Corporation on October 5, 1998, and at any adjournment thereof, all shares of
the undersigned in Merix Corporation. The proxies are instructed to vote as
follows:
The shares represented by this proxy will be voted in accordance with
instructions, if given. If no instructions are given, they will be voted for the
directors. The proxies may vote in their discretion as to other matters that may
come before the meeting.
<TABLE>
<CAPTION>
<S> <C>
1. Election of Directors, Nominees: (change of address/comments)
Deborah A. Coleman, Carlene M. Ellis, ----------------------------------------
William C. McCormick, Carl W. Neun,
Dr. Koichi Nishimura, Robert C. Strandberg. ----------------------------------------
----------------------------------------
----------------------------------------
The shares represented by this proxy will be voted in accordance with ----------------------------------------
instructions, if given. If no instructions are given, they will be voted (If you have written in the above space,
for the directors. please mark the corresponding box on
the reverse side of this card)
</TABLE>
<TABLE>
<CAPTION>
SEE
REVERSE
SIDE
(The Board of Directors recommends a vote FOR Item 1.)
PLEASE SIGN ON OTHER SIDE AND RETURN PROMPTLY
Please mark your -----
votes as in this | x |
example. -----
<S> <C> <C>
1. Election of
Directors
FOR WITHHELD
[ ] [ ]
For, except vote withheld from the following nominee(s):
___________________________________________________ To facilitate meeting
arrangements, please [ ]
check here if you plan to
attend the meeting in
person.
Please check here if you [ ]
have a change of
address or comments on the
reverse side.
</TABLE>
SIGNATURE(S)________________________________________________ DATE ___________
NOTE: Please sign exactly as name(s) appears hereon. Joint owners should each
sign. Please mark, date, sign and return proxy card promptly. Receipt is
acknowledged of the notice and proxy statement relating to this meeting.
