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
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. Set forth the amount on which
the filing fee is calculated and state how it was determined.
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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<PAGE>
MERIX CORPORATION
Notice of Annual Meeting of Shareholders
September 27, 1999
To the Shareholders of Merix Corporation:
The Annual Meeting of Shareholders of Merix Corporation, an Oregon
corporation, will be held on Monday, September 27, 1999 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 seven 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
Deborah A. Coleman,
Chair and Chief Executive Officer
Forest Grove, Oregon
August 18, 1999
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, September 27, 1999 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 18, 1999.
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, 1999. On that date, there were 6,397,968 shares of
Common Stock outstanding, entitled to one vote per share. The Common Stock does
not have cumulative voting rights.
1
<PAGE>
The following table shows Common Stock ownership on July 1, 1999 by (i)
each person who, to the 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 26.5%
The TCW Group, Inc.
865 South Figueroa Street
Los Angeles, CA 90017 609,400 (2) 9.5%
Becker Capital Management, Inc.
1211 SW 5th Avenue
Portland, OR 97204 509,015 (3) 8.0%
Royce & Associates, Inc.
1414 Avenue of the Americas
New York, NY 10019 330,200 (4) 5.2%
Deborah A. Coleman 416,968 (5) 6.5%
Mark R. Hollinger 38,207 (6) *
Terri L. Timberman 45,043 (7) *
Janie S. Brown 18,222 (8) *
Joseph Reichbach 12,600 *
All executive officers and directors
as a group (9 people) 2,295,940 (9) 36.0%
* 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 February 12, 1999 by The TCW Group, Inc., a parent holding
company, and Robert Day, an individual who may be deemed to control the TCW
Group, Inc. According to filings with the Nasdaq Stock Market, holdings
have been reduced to 475,400 as of March 31, 1999.
(3) Based upon a Schedule 13G filed with the Securities and Exchange Commission
on February 10, 1999 by Becker Capital Management, Inc.
(4) Based upon a Schedule 13G filed with the Securities and Exchange Commission
on February 8, 1999. Charles Royce may be deemed to beneficially own shares
beneficially held by Royce & Associates, but disclaims such ownership.
According to filings with the Nasdaq Stock Market ownership by Royce &
Associates at June 30, 1999 increased to 404,100.
(5) Includes stock options for 283,750 shares that are currently exercisable or
become exercisable before August 31, 1999.
(6) Includes stock options for 33,750 shares that are currently exercisable or
become exercisable before August 31, 1999.
(7) Includes stock options for 37,500 shares that are currently exercisable or
become exercisable before August 31, 1999.
(8) Includes stock options for 13,212 shares that are currently exercisable or
become exercisable before August 31, 1999.
(9) Includes 1,692,000 shares held by Tektronix, Inc. as to which a director of
the Company disclaims beneficial ownership. Also includes stock options for
443,212 shares held by executive officers and directors that are currently
exercisable or become exercisable before August 31, 1999.
</TABLE>
2
<PAGE>
1. ELECTION OF DIRECTORS
Seven 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 , 1999 (1)
Merix -----------------------------
Director Number Approximate
Name, Principal Occupation and Directorships Age Since of Shares (2) Percent
- -------------------------------------------- --- -------- ------------- -----------
<S> <C> <C> <C> <C>
Deborah A. Coleman 46 1994 416,968 6.5%
Chair of the Board of Directors and Chief
Executive Officer of the Company. Until May
1999 Ms. Coleman was also President. 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 52 1994 40,000 *
Ms. Ellis has served as Vice President of
Education of Intel Corporation since January
1999. Ms. Ellis served as Corporate Vice
President and Director of the Information
Technology Group of Intel Corporation from
1992 to 1998 and was Intel's Director of
Human Resources from 1990 to 1992. She was
Vice President of its Administration Group
from 1989 to 1992.
3
<PAGE>
Shares of Common
Stock Beneficially
Owned as of
July 1 , 1999 (1)
Merix -----------------------------
Director Number Approximate
Name, Principal Occupation and Directorships Age Since of Shares (2) Percent
- -------------------------------------------- --- -------- ------------- -----------
<S> <C> <C> <C> <C>
Mark R. Hollinger 41 1999 38,207 *
President and Chief Operating Officer of the
Company. He was elected to the Board of
Directors in May 1999. Mr. Hollinger will
become Chief Executive Officer at the time of
the Merix Annual Shareholders' Meeting on
September 27, 1999. Mr. Hollinger joined
Merix in September 1997 as Senior Vice
President of Operations and became President
in May 1999. Prior to joining Merix, he spent
three years as Vice President of Operations
at Continental Circuits Corporation. His
experience also includes more than a decade
at IBM where he served in a variety of
positions including PCB Manufacturing
Superintendent.
William C. McCormick 64 1997 7,000 *
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.
Carl W. Neun 55 1994 1,693,000 (3) 26.5%
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.
<S> <C> <C> <C> <C>
Dr. Koichi Nishimura 60 1994 32,500 *
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.
4
<PAGE>
Shares of Common
Stock Beneficially
Owned as of
July 1 , 1999 (1)
Merix -----------------------------
Director Number Approximate
Name, Principal Occupation and Directorships Age Since of Shares (2) Percent
- -------------------------------------------- --- -------- ------------- -----------
<S> <C> <C> <C> <C>
Robert C. Strandberg 42 1998 5,000 *
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, 1999 as follows: Ms. Coleman - 283,750
shares; Ms. Ellis - 32,500 shares; Mr. Hollinger - 33,750 shares; Mr.
McCormick - 5,000 shares; Dr. Nishimura - 32,500 shares; and Mr. Strandberg
- 5,000 shares.
(3) 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>
The Board of Directors met eight times during the fiscal year ended May 29,
1999. Each director 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 Terri L. Timberman, Senior Vice President and Chief
Administrative Officer, Merix Corporation, 1521 Poplar Lane, Forest Grove,
Oregon 97116.
The Audit and Finance Committee is comprised of Mr. Neun, Dr. Nishimura and
Mr. McCormick , and met four 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 is comprised of Ms. Ellis
and Mr. Strandberg, and met five times during the last fiscal year. The Human
Resources and Compensation Committee makes
5
<PAGE>
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 affiliated with 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 nominee 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 Stock Awards ($) (1) Options (#) Compensation (2)
------ --------- --------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Deborah A. Coleman 1999 $ 86,433 (3) $ 119,700 $ -- 160,000 $ 5,158
(Chair and Chief 1998 271,278 21,301 -- 20,000 4,671
Executive Officer) 1997 276,302 -- -- 15,000 5,714
Mark R. Hollinger 1999 199,615 84,000 -- 75,000 7,044
(President and Chief 1998 (4) 138,846 85,584 -- 85,000 5,568 (5)
Operating Officer)
Terri L. Timberman 1999 143,308 55,251 -- 50,000 8,212
(Senior Vice President 1998 137,609 6,876 -- 10,000 4,335
and Chief Administrative 1997 131,981 -- -- 10,000 4,003
Officer)
Janie S. Brown 1999 (6) 127,732 34,901 -- 22,825 (7) 5,698
(Vice President and
Chief Financial Officer)
Joseph Reichbach 1999 98,992 12,713 -- 25,000 109,701 (8)
(Former Senior Vice 1998 200,000 66,839 -- 10,000 26,035 (9)
President, Sales 1997 (10) 61,538 120,781 285,000 75,000 3,069
and Marketing)
- --------------
(1) As of May 29, 1999, Mr. Reichbach held no unvested restricted stock.
(2) Consists principally of amounts contributed by the Company under its 401(k)
Plan unless otherwise indicated.
(3) Ms. Coleman voluntarily lowered her annual salary from $285,000 to Oregon's
minimum wage for a period of one year beginning September 1, 1998.
(4) Mr. Hollinger became an executive officer in fiscal 1998. 1998 bonus amount
includes payments made pursuant to his employment letter.
(5) Includes $1,184 paid for relocation expenses.
(6) Ms. Brown became an executive officer in fiscal 1999.
(7) Includes options for 12,825 shares, granted in exchange for the surrender
of options for a greater number of shares.
(8) Includes $108,259 paid pursuant to a settlement agreement.
(9) Includes $19,407 paid for relocation expenses.
(10) Mr. Reichbach became an executive officer in February 1997. 1997 and 1998
bonus amounts include payments made pursuant to his employment letter.
</TABLE>
7
<PAGE>
Stock Option Grants in Last Fiscal Year
The following table provides information regarding stock options granted to
certain current and former executive officers named in the Summary Compensation
Table for fiscal 1999.
<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 40,000 5.0% $ 9.9375 6/30/08 $ 249,986 $ 633,513
120,000 14.9% $ 4.1875 9/1/08 $ 316,020 $ 800,856
Mark R. Hollinger 25,000 3.1% $ 9.9375 6/30/08 $ 156,241 $ 395,945
50,000 6.2% $ 5.6250 3/25/04 $ 77,704 $ 171,706
Terri L. Timberman 15,000 1.9% $ 9.9375 6/30/08 $ 93,745 $ 237,567
35,000 4.3% $ 5.6250 3/25/04 $ 54,393 $ 120,194
Janie S. Brown 1,125 (3) 0.1% $ 9.9375 9/23/06 $ 5,527 $ 13,323
5,400 (3) 0.7% $ 9.9375 2/7/03 $ 13,529 $ 29,594
1,800 (3) 0.2% $ 9.9375 9/23/07 $ 10,179 $ 25,237
4,500 (3) 0.6% $ 9.9375 6/5/05 $ 17,995 $ 41,858
10,000 1.2% $ 6.1875 8/11/08 $ 38,913 $ 98,613
Joseph Reichbach 25,000 3.1% $ 9.9375 11/5/98 (4) $ 156,241 $ 395,945
- --------------
(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 either become exercisable in four equal annual installments
beginning one year after the date of grant or they become exercisable in
two 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) Granted in exchange for the surrender of options for greater number of
shares.
(4) Mr. Reichbach's option was canceled upon his resignation in November 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 29, 1999 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 29, 1999.
<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 0 263,750 186,250 $ 0 $ 217,500
Mark R. Hollinger 0 0 21,250 138,750 -- 18,750
Terri L. Timberman 0 0 30,000 65,000 -- 13,125
Janie S. Brown 0 0 7,087 15,738 -- --
Joseph Reichbach 0 0 0 0 -- --
- --------------
(1) Calculated based on the May 28, 1999 closing stock price of $6.00 per
share.
</TABLE>
Ten-Year Option Repricings
The Company has never regranted options to executive officers. In June 1998
the Company offered to all employee option holders (other than executive
officers) the opportunity to surrender options granted prior to June 30, 1998
with an exercise price of more than $9.9375 in exchange for new options for a
lesser number of shares with an exercise price equal to the then current fair
market value of $9.9375 per share. Option holders received a new option for
ninety percent of the option shares surrendered. The new options retain the
original vesting period and expiration date. One such employee later became an
executive officer of the Company. The following table provides information
relating to a regrant to this executive officer as well as information about
1997 regrants to two former employees who also received replacement options
prior to becoming executive officers that year. The options listed below that
were repriced on 2/7/97 were cancelled when the executives terminated employment
with the Company.
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price of Exercise Option Term
Underlying Stock at Price at New Remaining
Options Time of Time of Exercise at Date of
Name Date Repriced Repricing Repricing Price Repricing
- ---------------- --------- ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles W. Payne 2/07/97 1,000 $ 19.75 $ 31.375 $ 19.75 8.67 years
Charles W. Payne 2/07/97 2,400 $ 19.75 $ 24.50 $ 19.75 8.31 years
Mark Hynes 2/07/97 25,000 $ 19.75 $ 37.75 $ 19.75 8.74 years
Janie S. Brown 6/30/98 4,500 $ 9.9375 $ 23.625 $ 9.9375 6.93 years
Janie S. Brown 6/30/98 1,125 $ 9.9375 $ 18.6875 $ 9.9375 8.23 years
Janie S. Brown 6/30/98 5,400 $ 9.9375 $ 19.75 $ 9.9375 4.61 years
Janie S. Brown 6/30/98 1,800 $ 9.9375 $ 17.875 $ 9.9375 9.23 years
</TABLE>
9
<PAGE>
Severance and Change of Control Agreements
The Company has entered into Executive Severance Agreements with Ms.
Coleman, Ms. Timberman, Mr. Hollinger, and Ms. Brown 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 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. 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.
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 two 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:
o Attract and retain talented executives;
o Motivate executives to achieve long term business strategies while
achieving near term financial targets; and
o Align executive performance with Merix's strategic and tactical goals.
10
<PAGE>
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.
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.
Management Incentive Plan
The Company's executive officers participate in the Company's Management
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 quarterly
targets 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.
The Management Incentive Plan for fiscal 1999 provided for quarterly
bonuses based on operating profit and a fiscal year end bonus based on
individual performance on specified critical operating tasks. 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 15% to 70%. The Company's operating profit for
fiscal 1999 did not meet the predetermined quarterly plan levels except for the
third fiscal quarter. The Chief Executive Officer and other senior officers
received quarterly bonuses under this plan in the third fiscal quarter
(one-fifth of targeted annual incentive). The Chief Executive Officer and other
senior officers were awarded fiscal year end bonuses for performance on critical
operating metrics (Quality, Technology Leadership, Customer Satisfaction and
Asset Utilization). In total the Chief Executive Officer and Company's executive
officers received between 60% and 78% of their targeted FY 1999 bonus.
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 1997, 1998 and 1999 are reflected in the Summary Compensation Table. In
1998 the Committee approved offering to all employee option holders, other than
executive officers, the opportunity to surrender options granted prior to June
30, 1998 with an exercise price greater than $9.9375 in exchange for new options
for a lesser number of shares with an exercise price equal to the then current
market value of $9.9375 per share. (One employee later became an executive
officer of the Company.) Option holders received a new option for ninety percent
of the option shares surrendered. The Committee concluded that, with the decline
in the market price of the stock, the options no longer provided a significant
incentive to key employees and that the options were no longer serving the
purposes intended. The new options retained the original vesting period and
expiration date.
11
<PAGE>
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:
Carlene M. Ellis, Chair
Robert C. Strandberg
Compensation Committee Interlocks and Insider Participation
The Human Resources and Compensation Committee is comprised of Carlene M.
Ellis and Robert C. Strandberg, non-employee directors of 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.
Total Shareholder Return
[Graphic line chart depicting total shareholder return omitted.]
12
<PAGE>
<TABLE>
<CAPTION>
5/25/1994 5/26/1995 5/24/1996 5/30/1997 5/29/1998 5/28/1999
=====================================================================
<S> <C> <C> <C> <C> <C> <C>
MERIX CORP $ 100.0 $ 248.7 $ 315.4 $ 166.7 $ 119.2 $ 61.5
NASDAQ INDEX $ 100.0 $ 119.0 $ 173.0 $ 194.9 $ 246.9 $ 347.5
PEER GROUP $ 100.0 $ 226.5 $ 339.6 $ 594.8 $ 440.3 $ 372.0
(1) The selected peer group consists of ADFlex Solutions, Inc., Hadco
Corporation, M-Wave, Inc., Parlex Corporation, Praegitzer Industries, Inc.
and Sheldahl, 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 was initially 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. In 1999
the Note was amended to provide for payment of accrued interest only in May
1999, in the amount of $171,920, and payment in each of June 2000 and 2001 of
$1,149,280 in principal plus accrued interest.
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 $15,720,000. In addition, the
Company and Tektronix were parties to Waste Management and Services Agreements
covering certain environmental matters. During the last fiscal year, the Company
paid $90,000 to Tektronix pursuant to these agreements.
INDEPENDENT AUDITORS
Deloitte & Touche LLP audited the Company's financial statements for the
year ended May 29, 1999. Representatives of Deloitte & Touche LLP 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.
On August 5, 1999, with the recommendation of the Audit Committee and
approval of the Board of Directors, the Company dismissed Deloitte & Touche LLP
as its independent auditors. Deloitte & Touche's reports on the Company's
financial statements for the last two years did not contain an adverse opinion
or a disclaimer of opinion and the reports were not qualified or modified as to
uncertainty, audit scope or accounting principles. During the Company's last two
fiscal years and during the current year, through August 5, 1999, there have not
been any disagreements with Deloitte & Touche on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Deloitte
& Touche, would have caused it to make a reference to the subject matter of the
disagreement in connection with its reports. The Company has selected
PricewaterhouseCoopers LLP as the Company's independent auditors for the current
fiscal year. Representatives of PricewaterhouseCoopers LLP are expected to be
present at the annual meeting and will be available to respond to appropriate
questions.
13
<PAGE>
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 29, 1999.
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 2000 annual meeting must be received by the Company not later
than April 20, 2000.
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
earlier 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 the purposes of the Company's
2000 annual meeting, such notice, to be timely, must be received by the Company
between June 30, 2000 and July 30, 2000.
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.
14
<PAGE>
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
Deborah A. Coleman
Chair and Chief Executive Officer
August 18, 1999
15
<PAGE>
MERIX CORPORATION
P
R
O Proxy Solicited on Behalf of the Board of Directors of
X the Company for the Annual Meeting September 27, 1999
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 September 27, 1999, 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, ----------------------------------------
Mark R. Hollinger, 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 you have written in the above space,
If no instructions are given, they will be voted please mark the corresponding box on
for the directors. the reverse side of this card)
-------
(The Board of Directors recommends a vote FOR Item 1.) SEE
PLEASE SIGN ON OTHER SIDE AND RETURN PROMPTLY REVERSE
-------
Please mark your -----
votes as in this | X |
example. -----
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.
