MERIX CORP, S-3/A, 2000-03-29

MERIX CORP
S-3/A, 2000-03-29
PRINTED CIRCUIT BOARDS

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<PAGE>

AS FILED WITH THE SECURITIES EXCHANGE COMMISSION ON MARCH 29, 2000

REGISTRATION NO. 333-32616
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

--------------------------

MERIX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
--------------------------

<TABLE>
<S> <C> <C>
OREGON 3672 93-1135197
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code No.) Identification No.)
</TABLE>

MERIX CORPORATION
1521 POPLAR LANE
FOREST GROVE, OREGON 97116
(503) 359-9300
(Address and telephone number of registrant's principal executive office)
--------------------------

JANIE S. BROWN
MERIX CORPORATION
1521 POPLAR LANE
FOREST GROVE, OREGON 97116
(503) 359-9300
(Name, address and telephone number of agent for service)
--------------------------

Copies to:

<TABLE>
<S> <C>
PATRICK J. SIMPSON, ESQ. CHRISTOPHER L. KAUFMAN, ESQ.
ERICH J. LITCH, ESQ. WILLIAM DAVISSON, ESQ.
PERKINS COIE LLP LATHAM & WATKINS
1211 SW FIFTH AVENUE, 15TH FLOOR 135 COMMONWEALTH DRIVE
PORTLAND, OREGON 97204 MENLO PARK, CALIFORNIA 94025
(503) 727-2000 (650) 328-4600
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION, DATED MARCH 29, 2000

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THE PREMILINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE>
-------

[LOGO]
PROSPECTUS

- ----------------------------------------------------------
-------

[LOGO]

3,000,000 Shares
Common Stock

- --------------------------------------------------------------------------------

This is an offering of shares of common stock of Merix Corporation. We are
offering 2,000,000 shares in this offering. The selling shareholder that we
identify in this prospectus is offering an additional 1,000,000 shares. Merix
will not receive any proceeds from the sale of the shares by the selling
shareholder.

Our common stock is traded on the Nasdaq National Market under the symbol
"MERX." On March 28, 2000, the last reported sale price for the common stock on
the Nasdaq National Market was $29.13 per share.

- --------------------------------------------------------------------------------

INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON PAGE
8.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price $ $

Underwriting discounts and commissions $ $

Proceeds, before expenses, to us $ $

Proceeds to the selling shareholder $ $
</TABLE>

The Underwriters have an option to purchase 300,000 additional shares from us
and 150,000 additional shares from the selling shareholder to cover any
over-allotment of shares.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
- --------------------------------------------------------------------------------

THOMAS WEISEL PARTNERS LLC

WILLIAM BLAIR & COMPANY

NEEDHAM & COMPANY, INC.

The date of this prospectus is , 2000
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.............................. 5
Risk Factors......................... 8
Price Range of Common Stock.......... 15
Use of Proceeds...................... 15
Dividend Policy...................... 15
Capitalization....................... 16
Selected Financial Data.............. 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 18
Business............................. 28
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management........................... 37
Information Regarding the Selling
Shareholder........................ 40
Principal and Selling Shareholders... 41
Underwriting......................... 43
Legal Matters........................ 45
Experts.............................. 45
Where You Can Find Additional
Information........................ 45
Index to Financial Statements........ F-1
</TABLE>

------------------------

IN THIS PROSPECTUS, THE "COMPANY," "MERIX," "WE," "US," AND "OUR" REFER TO
MERIX CORPORATION, AN OREGON CORPORATION. OUR FISCAL YEAR CONSISTS OF EITHER THE
52 OR 53-WEEK PERIOD ENDING ON THE LAST SATURDAY IN MAY. FISCAL YEARS 1999 AND
1998 WERE BOTH 52-WEEK YEARS AND FISCAL YEAR 1997 WAS A 53-WEEK YEAR. FOR
CONVENIENCE, ALL OF OUR FISCAL YEARS ARE PRESENTED AS ENDED ON MAY 31, AND ALL
INTERIM PERIODS ARE PRESENTED AS ENDED ON THE LAST DAY OF THE LAST CALENDAR
MONTH OF THE PERIOD, WITH FEBRUARY ALWAYS ENDING ON FEBRUARY 28.

3
<PAGE>
SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION IN THIS PROSPECTUS, INCLUDING RISK FACTORS, REGARDING OUR COMPANY
AND THE COMMON STOCK BEING SOLD IN THIS OFFERING.

MERIX

We are a leading manufacturer of technologically advanced electronic
interconnect solutions for use in sophisticated electronic equipment. Our
principal products are complex multilayer printed circuit boards, which are the
platforms used to interconnect microprocessors, integrated circuits and other
components that are essential to the operation of electronic products and
systems. We focus on providing our solutions to manufacturers of technologically
advanced electronic products within selected high growth segments of the
electronics industry, including communications, computing, and test and
measurement. Within these market segments we have focused on increasing our
sales within the communications segment, as indicated in the table below.

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
---------------------------------------------------
NINE MONTHS
YEAR ENDED ENDED
MAY 31, FEBRUARY 28,
---------------------- ----------------------
1998 1999 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MARKET SEGMENTS:
Communications.......................................... 26.2% 37.9% 36.1% 49.7%
Computing............................................... 27.9 32.8 32.9 23.6
Test and Measurement.................................... 42.1 25.4 27.3 23.8
Other................................................... 3.8 3.9 3.7 2.9
----- ----- ----- -----
Total................................................. 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>

We provide our customers with an integrated interconnect manufacturing
solution that includes quick-turn prototypes, pre-production and volume
production of printed circuit boards and backplanes and backplane assemblies.
Our major and emerging customers include leading original equipment
manufacturers, or OEMs, and contract manufacturers in the electronics industry.

<TABLE>
<CAPTION>
MAJOR OEM CUSTOMERS EMERGING OEM CUSTOMERS CONTRACT MANUFACTURERS
- ------------------- ---------------------- ----------------------
<S> <C> <C>
Cisco Systems Agilent Technologies ACT Manufacturing
Credence Systems Sonus Networks Benchmark Electronics
EMC(2) Spring Tide Networks Celestica
Hewlett-Packard Sycamore Networks Flextronics
Intel Telaxis Communications Jabil Circuit
Lucent Technologies SCI Systems
Motorola Solectron
Tektronix
Teradyne
</TABLE>

Our customers demand increasingly complex and technologically advanced
printed circuit boards with high layer counts, dense circuitry designs, high
performance materials and precision cavities. Our engineering and manufacturing
capabilities enable us to produce, in volume, printed circuit boards of 34
layers utilizing high performance materials and leading-edge fabrication
techniques. Our manufacturing facility is designed to meet the accelerated
time-to-market and time-to-volume requirements of customers whose markets are
characterized by high growth rates, rapid technological advances and short
product life-cycles. We believe our on-time delivery record and product return
rate are among the best in the industry. We also believe we are one of a limited
number of interconnect manufacturers with the advanced process technology and
manufacturing and engineering expertise necessary to offer these high-end
products and services.

5
<PAGE>
The worldwide market for rigid printed circuit boards in 1998 was
$30.2 billion and is projected to grow to $43.0 billion in 2001. High-end
commercial equipment manufacturers require more complex multilayer interconnect
solutions with advanced materials, narrow line widths and separations of copper
traces, precision cavities and small diameter vias and through-holes to connect
internal circuitry. The market for these more complex printed circuit boards was
18.2% of the total market in 1998 and is projected to grow to 24.3% of the total
market in 2001. Sales of high performance printed circuit boards are projected
to grow at a compound annual growth rate of approximately 25.0% over the next
two years.

STRATEGY

Our objective is to continue to be a preferred supplier of technologically
sophisticated interconnect solutions for leading OEMs and contract manufacturers
in high growth segments of the electronics industry. The key elements of our
strategy include:

- Continue to focus on both market and technology leaders in selected high
growth end markets;

- Extend our technology leadership;

- Provide an integrated manufacturing solution;

- Enhance our reputation as the customer service leader;

- Invest in capacity and technology; and

- Pursue strategic acquisitions and alliances.

THE OFFERING

<TABLE>
<S> <C>
Common stock offered by Merix................ 2,000,000 shares

Common stock offered by the selling
shareholder................................ 1,000,000 shares

Common stock to be outstanding after the
offering................................... 8,509,759 shares

Use of proceeds.............................. We will receive net proceeds from the
offering of approximately $46.6 million,
assuming a public offering price of $25.00
per share. We intend to use the net proceeds
to purchase new equipment and expand our
production capacity and for working capital
and general corporate purposes. We will not
receive any proceeds from sale of shares by
the selling shareholder.

Nasdaq National Market symbol................ MERX
</TABLE>

Common stock outstanding after the offering:

- excludes 1,470,661 shares of common stock issuable upon exercise of
outstanding options as of February 28, 2000, at a weighted average
exercise price of $9.50 per share; and

- excludes shares issued under our 401(k) plan after February 28, 2000.

Unless we indicate otherwise, all information in this prospectus reflects no
exercise by the underwriters of their over-allotment options to purchase up to
300,000 additional shares of common stock from us and up to 150,000 additional
shares of common stock from the selling shareholder. See "Underwriting" and
"Information Regarding the Selling Shareholder."

--------------------------

We were incorporated in March 1994 to succeed to the business conducted by
the Circuit Board Division of Tektronix, Inc. Our principal executive offices
are located at 1521 Poplar Lane, Forest Grove, Oregon 97116, and our telephone
number is (503) 359-9300. Our website is located at WWW.MERIX.COM. Information
contained on our website does not constitute part of this prospectus. "Merix" is
a trademark of our company. This prospectus also includes trademarks and trade
names of other parties.

6
<PAGE>
SUMMARY FINANCIAL DATA

The following table summarizes our financial data and has been derived from
our audited financial statements for each of the years in the three-year period
ended May 31, 1999 and our unaudited financial statements for the nine months
ended February 28, 1999 and 2000. For further detail and explanation of
period-to-period changes, the information shown below should be read together
with "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
the related notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MAY 31, FEBRUARY 28,
--------------------------------- ----------------------
1997 1998 1999 1999 2000
--------- --------- --------- -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $156,184 $178,620 $113,982 $ 81,050 $109,654
Gross profit (loss)........................ 21,856 27,520 3,448 (1,421) 19,769
Operating income (loss).................... 2,021 5,522 (31,447) (33,261) 8,626
Net income (loss).......................... 321 2,138 (20,681) (21,398) 3,887
Basic net income (loss) per share.......... $ 0.05 $ 0.35 $ (3.30) $ (3.43) $ 0.60
Diluted net income (loss) per share........ $ 0.05 $ 0.34 $ (3.30) $ (3.43) $ 0.58
Weighted average common shares outstanding:
Basic.................................... 6,146 6,194 6,269 6,245 6,428
Diluted.................................. 6,260 6,272 6,269 6,245 6,667

OTHER FINANCIAL DATA:
EBITDA(1).................................. $ 10,920 $ 15,493 $(23,281) $(27,017) $ 14,343
</TABLE>

<TABLE>
<CAPTION>
FEBRUARY 28, 2000
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 16,538 $ 63,123
Working capital............................................. 20,786 67,371
Total assets................................................ 113,295 159,880
Long-term debt, less current portion........................ 29,150 29,150
Shareholders' equity........................................ $ 55,711 $102,296
</TABLE>

Please see Note 1 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing per share data. The As
Adjusted Balance Sheet Data summarized above reflects the application of the
estimated net proceeds from the sale of the 2,000,000 shares of common stock
offered by Merix at an assumed public offering price of $25.00 per share and
after deducting the estimated underwriting discounts and commissions and our
estimated offering expenses.

(1) EBITDA, which we calculate as income (loss) before taxes, interest income
and interest expense, plus depreciation and amortization, is a supplemental
financial measurement used by us in the evaluation of our business and by
many analysts in our industry. However, EBITDA should not be considered as
an alternative to net income as a measure of operating results or to cash
flows as a measure of liquidity in accordance with generally accepted
accounting principles.

7
<PAGE>
RISK FACTORS

THIS OFFERING AND AN INVESTMENT IN OUR COMMON STOCK INVOLVE A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND THE OTHER
INFORMATION IN THIS PROSPECTUS BEFORE INVESTING IN OUR COMMON STOCK. OUR
BUSINESS AND RESULTS OF OPERATIONS COULD BE SERIOUSLY HARMED BY ANY OF THE
FOLLOWING RISKS. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE TO ANY
OF THESE RISKS, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.

BECAUSE A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR A SUBSTANTIAL PORTION OF OUR
REVENUE, OUR REVENUE COULD DECLINE IF WE LOSE A MAJOR CUSTOMER OR IF A MAJOR
CUSTOMER DEMANDS LESS OF OUR PRODUCTS OR CANCELS OR DELAYS ORDERS.

Historically, we have derived a significant portion of our revenue from a
limited number of customers. For example, our top five customers represented
68.1%, 67.8% and 75.1% of our net sales in the first nine months of fiscal 2000
and in fiscal 1999 and 1998, respectively. In fiscal 1999, Cisco Systems,
Motorola, Hewlett-Packard and Tektronix, an affiliate of Merix, each accounted
for more than 10% of our net sales, and in the nine-month period ended
February 28, 2000, Cisco Systems, Motorola and Teradyne each accounted for more
than 10% of our net sales. We expect to continue to depend upon a small number
of customers for a significant portion of our net sales for the foreseeable
future. The loss of or decrease in orders from one or more major customers could
reduce our revenues.

The level and timing of orders placed by our customers vary due to a number
of factors, including customer attempts to manage inventory, changes in customer
manufacturing strategies and variations in demand for customer products. Because
we do not obtain long-term purchase orders or commitments from our customers, we
must anticipate the future volume of orders based on discussions with our
customers. We rely on our estimates of anticipated future volumes when making
commitments regarding the level of business that we will seek and accept, the
mix of products that we intend to manufacture, the timing of production
schedules and the levels and utilization of personnel and other resources. A
customer may cancel, reduce or delay orders that were previously made or
anticipated. A significant portion of our backlog at any time may be subject to
cancellation or postponement without penalty. We may not be able to timely
replace canceled, delayed or reduced orders. Significant or numerous
cancellations, reductions or delays in orders by a customer or group of
customers could lead to under-utilization of our installed capacity and harm our
results of operations.

IF ECONOMIC CONDITIONS DECREASE DEMAND FOR ELECTRONIC PRODUCTS OR ADVERSELY
AFFECT THE MARKET FOR ELECTRONIC PRODUCTS, WE COULD EXPERIENCE REDUCED SALES AND
LOWER GROSS MARGINS.

Our business depends on the electronics industry, which is subject to
intense competition, rapid technological change, short product life cycles and
pricing and margin pressures. When these factors adversely affect our customers,
we may suffer similar effects. Our customers are primarily manufacturers in the
communications, computing, and test and measurement segments of the electronics
industry. At any time, our customers can discontinue or modify products
containing components manufactured by us. This discontinuance or modification
could adversely affect our results of operations.

In addition, the electronics industry has historically been cyclical and
subject to significant economic downturns characterized by diminished product
demand, rapid declines in average selling prices and over-capacity. For example,
the economic downturn in Asia in 1998 had a negative effect on the prices of
electronic products as demand for electronic products and components declined
and price competition escalated. The electronics industry is likely to
experience recessionary periods in the future. The economic conditions affecting
the electronics industry, in general, or any of our major customers, in
particular, may adversely affect our operating results.

8
<PAGE>
WE MAY NOT SUCCESSFULLY MANAGE OUR GROWTH AND CAPACITY EXPANSION OR CONTROL OUR
BUSINESS OPERATIONS AFTER THIS EXPANSION.

We plan to expand our manufacturing capacity by expanding our facilities and
by adding new equipment. Internal growth will require us to expand our
facilities and to improve our operational and information systems. This
expansion involves significant risks. For example, we may encounter construction
delays, equipment delays, labor shortages or disputes and production start-up
problems that could prevent us from meeting our customers' delivery schedules.
In addition, we expect to incur new fixed operating expenses associated with our
expansion efforts, including increases in depreciation expenses and lease
expenses. If our revenues do not increase sufficiently to offset these expense,
our operating results may be harmed.

OUR BUSINESS REQUIRES SUBSTANTIAL CAPITAL, AND WE MAY NOT BE ABLE TO INCREASE
OUR REVENUES OR MAINTAIN OUR MARKET SHARE IF WE DO NOT INCREASE OUR
MANUFACTURING CAPACITY.

Manufacturing increasingly sophisticated electronic interconnect products
requires substantial investment in advanced production facilities, engineering
and manufacturing expertise and technology. A significant portion of the costs
associated with these investments are fixed costs. In addition, we believe our
long-term competitive position depends in part on our ability to increase
manufacturing capacity. We are currently utilizing approximately 85-90% of the
installed equipment capacity of our manufacturing facility. We anticipate being
able to increase our production output to 100% of our installed equipment
capacity by employing additional manufacturing personnel. Any production output
beyond this level would require us to invest in plant and equipment. We may
obtain additional capacity through acquisitions or expansion of our current
facilities. Either of these alternatives would require substantial additional
capital, and we may not be able to access sufficient capital to pursue either of
these alternatives. Further, we may not be able to acquire sufficient capacity
or successfully integrate and manage additional facilities, and expanding our
current facilities could take up to two years. Our recent expansion of our
Forest Grove facility has increased and will continue to increase our fixed
costs, and our future profitability will depend on our ability to utilize our
manufacturing capacity in an effective manner. The failure to obtain sufficient
capacity when needed or to successfully integrate and manage additional
manufacturing facilities could adversely impact our relationships with our
customers and materially adversely affect our business and results of
operations.

IF WE LOSE KEY PERSONNEL, WE COULD EXPERIENCE REDUCED SALES, DELAYED PRODUCT
DEVELOPMENT AND DIVERSION OF MANAGEMENT RESOURCES.

Our success depends largely on the continued contributions of our key
management, engineering, sales and marketing and professional services
personnel, many of whom would be difficult to replace. We do not have employment
or non-compete agreements with our key personnel. If one or more members of our
senior management were to resign, the loss of personnel could result in loss of
sales, delays in new product development and diversion of management resources.
We do not maintain "key man" insurance policies on any of our personnel and do
not require our personnel to enter into non-competition agreements with us.

IF WE ARE NOT ABLE TO RETAIN OR ATTRACT EMPLOYEES WITH SUFFICIENT KNOW-HOW TO
CONDUCT OUR MANUFACTURING PROCESSES, WE MAY NOT BE ABLE TO MAINTAIN OR INCREASE
OUR PRODUCTION OUTPUT AND QUALITY.

Manufacturing printed circuit boards requires employees with sufficient
know-how to operate advanced equipment and to conduct sensitive and complicated
manufacturing processes. There is intense competition for these types of
employees. We have been successful in attracting and retaining a sufficient
number of these employees in our operations to date. In the future, we may not
be able to attract and retain a sufficient number of these employees for our
existing operations or our planned expanded operations.

9
<PAGE>
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.

Our quarterly results of operations have varied in the past and may vary
significantly in the future for a variety of reasons, including the following:

- economic conditions in the markets we serve;

- price and product competition;

- the timing and volume of our customers' orders;

- changes in the mix of products we sell;

- the levels at which we utilize our manufacturing capacity;

- our level of experience in manufacturing a particular product;

- difficulties we may face integrating acquired operations;

- costs associated with adding new geographical locations or expanding our
facilities;

- manufacturing process yields;

- new material and component availability;

- shortages of experienced labor;

- the length of our sales cycles;

- trends in our industry; and

- general economic conditions.

Each of these factors has had in the past, and may have in the future, an
adverse effect on our quarterly operating results. In addition, a significant
portion of our operations expenses are relatively fixed in nature and planned
expenditures are based in part on anticipated orders. Any inability to adjust
spending quickly enough to compensate for any revenue shortfalls may magnify the
adverse impact of such revenue shortfalls on our results of operations. As a
result, our operating results may vary significantly from one quarter to the
next.

OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE, WHICH MAY LEAD TO
LOSSES BY INVESTORS.

Our common stock has experienced significant price volatility, and this
volatility may continue in the future. The market price for our common stock may
be affected by a number of factors, including quarterly variations in our
results of operations, changes in earnings estimates or recommendations by
securities analysts, developments in our industry, sales of substantial numbers
of shares of our common stock in the public market, general market conditions
and other factors, including factors unrelated to our operating performance.
These factors and fluctuations, as well as general economic, political and
market conditions, such as recessions, may materially adversely affect the
market price of our common stock. See "Price Range of Common Stock."

OUR ABILITY TO USE OUR FEDERAL NET OPERATING LOSS CARRYFORWARDS COULD BE
LIMITED.

As of May 31, 1999, we had federal net operating loss carryforwards, subject
to review by the Internal Revenue Service, totaling approximately $34.0 million
for federal income tax purposes, which will expire in 2019. Federal net
operating losses can generally be used to offset our taxable income, which
reduces our income tax liability.

10
<PAGE>
Section 382 of the Internal Revenue Code provides that when a company
undergoes an "ownership change," the company's use of its net operating losses
is limited in each subsequent year. An "ownership change" occurs when, as of any
testing date, the sum of the increases in ownership of each shareholder that
owns five percent or more of the value of a company's stock as compared to that
shareholder's lowest percentage ownership during the preceding three-year period
exceeds fifty percent. For purposes of this rule, shareholders who own less than
five percent of a company's stock are aggregated and treated as a single
five-percent shareholder.

We may issue shares of our common stock in acquisitions, and persons who
were five percent shareholders of Merix within the past three years, such as
Tektronix, may sell additional shares in the public market. In addition, the
exercise of outstanding options to purchase shares of our common stock may
require us to issue additional shares of our common stock. These stock issuances
and sales after this offering could result in an "ownership change." If we were
to experience such an "ownership change," our ability to use our net operating
loss carryforwards could be limited.

ACQUISITIONS MAY BE COSTLY AND DIFFICULT TO INTEGRATE, DIVERT MANAGEMENT
RESOURCES OR DILUTE SHAREHOLDER VALUE.

As part of our business strategy, we may make acquisitions of, or
investments in, companies, products or technologies that complement our current
products, augment our market coverage, enhance our technical capabilities or
production capacity or that may otherwise offer growth opportunities.

In connection with these acquisitions or investments, we could:

- issue stock that would dilute our current shareholders' percentage
ownership;

- incur debt and assume liabilities; and

- incur amortization expenses related to goodwill and other intangible
assets or incur large and immediate write-offs.

Future acquisitions also could pose numerous additional risks to our
operations, including:

- problems integrating the purchased operations, technologies or products;

- unanticipated costs;

- diversion of management's attention from our core business;

- adverse effects on existing business relationships with suppliers and
customers;

- entering markets in which we have no or limited prior experience; and

- potential loss of key employees, particularly those of the purchased
organization.

We may not be able to complete one or more acquisitions or integrate the
operations, products or personnel gained through any such acquisition without a
material adverse effect on our business, financial condition and results of
operations.

COMPETITION IN THE MARKET FOR ELECTRONIC INTERCONNECT SOLUTIONS IS INTENSE, AND
COULD REDUCE OUR SALES AND PREVENT US FROM ACHIEVING OR MAINTAINING
PROFITABILITY.

The market for electronic interconnect solutions is intensely competitive,
highly fragmented and rapidly changing. We expect competition to persist and
intensify, which could result in price reductions, reduced gross margins and
loss of market share. We believe our major competitors are the large United
States and international independent captive producers that also manufacture
multilayer printed circuit boards and provide backplane and other electronic
assemblies, such as Hadco, Honeywell, Multek (a division of DII Group), Sanmina,
Tyco International and Viasystems. New and emerging technologies may result in
new competitors entering our market.

11
<PAGE>
Many of our competitors and potential competitors have a number of
significant advantages over us, including:

significantly greater financial, technical, marketing and manufacturing
resources;

preferred vendor status with our existing and potential customers;

greater name recognition; and

larger customer bases.

In addition, these competitors may have the ability to respond more quickly
to new or emerging technologies, may adapt more quickly to changes in customer
requirements and may devote greater resources to the development, promotion and
sale of their products than us. We must continually develop improved
manufacturing processes to meet our customers' needs for complex products, and
our basic interconnect technology is generally not subject to significant
proprietary protection. We may not be able to maintain or expand our sales if
competition increases and we are unable to respond effectively. During
recessionary periods in the electronics industry, our competitive advantages in
the areas of providing an integrated manufacturing solution and responsive
customer service may be of reduced importance to our customers which may become
more price sensitive.

We believe price competition from printed circuit board manufacturers in
Asia and other locations with lower production costs may play an increasing role
in the printed circuit board markets in which we compete. While historically our
competitors in these locations have primarily competed in less technologically
advanced markets, they continue to expand their technology to include higher
technology printed circuit boards. These competitors may gain market share in
the market for higher technology printed circuit boards, which may have a
material adverse effect on the pricing of our products and our gross margin and
cause our sales to decrease.

WE COULD FAIL TO DEVELOP OR UTILIZE NEW TECHNOLOGIES OR COMPETE WITH COMPANIES
THAT DEVELOP AND UTILIZE NEW TECHNOLOGIES MORE EFFECTIVELY THAN WE DO.

The market for electronic interconnect solutions is characterized by rapidly
changing technology and continuing process development. Our future success will
depend in large part upon our ability to timely and cost-effectively:

- maintain and enhance our technological capabilities;

- develop and market products and services that meet changing customer
needs; and

- successfully anticipate or respond to technological changes.

In addition, the electronic interconnect industry in the future could
encounter competition from new technologies that render existing electronic
interconnect technology less competitive or obsolete, including technologies
that may reduce the number of printed circuit boards required in electronic
equipment. We may not be able to effectively respond to the technological
requirements of the evolving market. If we determine that new technologies and
equipment are required to remain competitive, we may have to invest significant
capital in the development, acquisition and implementation of these technologies
and equipment. We may not be able to access sufficient capital for this purpose
in the future. In addition, investments in new technologies may not provide us
with commercially viable technological processes, or there may not be commercial
applications for the technologies we acquire or develop. If we are unable to
develop or utilize new technologies or if our competitors are more effective at
developing or utilizing new technologies, our business could be harmed.

12
<PAGE>
WE RELY ON OUR SUPPLIERS FOR COMPONENTS AND RAW MATERIALS, WHICH MAY NOT TIMELY
MEET OUR SUPPLY DEMANDS.

We order raw materials and components to complete our customers' purchase
orders. Although we work with our customers and suppliers to minimize the impact
of shortages in materials, we have occasionally experienced short-term effects
due to price fluctuations and delayed shipments. If a significant shortage of
raw materials or components were to occur, our operating results would be
materially adversely affected. We also depend on a small number of suppliers for
many of the raw materials and components that we use in our business. If we were
unable to continue to purchase these raw materials and components from our
suppliers, our operating results would be materially adversely affected.

DEFECTS IN OUR PRODUCTS COULD DIMINISH DEMAND FOR OUR PRODUCTS AND RESULT IN
LOSS OF REVENUE, DELAY IN MARKET ACCEPTANCE AND INJURY TO OUR REPUTATION.

Complex electronic interconnect products like ours may contain undetected
errors or defects that may be detected at any point in the life of the product.
We have in the past discovered errors in our products and as a result have
experienced delays in shipment of products during the period required to correct
these errors. Errors may be found from time to time in our products after
commencement of commercial shipments, resulting in loss of revenue, delay in
market acceptance and sales, diversion of development resources, injury to our
reputation or increased warranty costs.

IF WE BECOME SUBJECT TO PRODUCT LIABILITY LITIGATION, IT COULD BE COSTLY AND
TIME CONSUMING TO DEFEND.

Since our products are used in products that are integral to our customers'
businesses, errors, defects or other performance problems could result in
financial or other damages to our customers. Although our purchase orders
generally contain provisions designed to limit our exposure to product liability
claims, existing or future laws or unfavorable judicial decisions could negate
such limitation of liability provisions. Product liability litigation, even if
it were unsuccessful, would be time consuming and costly to defend.

WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL LAWS.

We are required to comply with federal, state, county and municipal
regulations regarding protection of the environment. Electronic interconnect
product manufacturing requires the use of a variety of materials, including
metals and chemicals. Water used in the printed circuit board manufacturing
process must be treated to remove metal particles and other contaminants before
it can be discharged into the municipal sanitary sewer system. As a result, we
are subject to various federal, state, local and foreign environmental laws and
regulations, including those governing the storage use, discharge and disposal
of hazardous substances in the ordinary course of our manufacturing processes.
Although we believe our current manufacturing operations comply in all material
respects with applicable environmental laws and regulations, environmental
legislation has been enacted and may in the future be enacted or interpreted to
create environmental liability with respect to our facilities or operations. We
may be responsible for the cleanup of any contamination discovered at our
current and former manufacturing facilities and could be subject to revocation
of permits necessary to conduct our business. Further, we can not assure you
that additional environmental matters will not arise in the future at sites
where no problem is currently known or at sites that we may acquire in the
future.

13
<PAGE>
WE HAVE DISCRETION AS TO THE USE OF THE PROCEEDS FROM THIS OFFERING AND MAY NOT
OBTAIN A SIGNIFICANT RETURN ON THE USE OF THESE PROCEEDS.

Our management has broad discretion as to how to spend the proceeds from
this offering and may spend these proceeds in ways with which our shareholders
may not agree. We plan to use the proceeds from this offering to purchase new
equipment and expand our production capacity and for working capital and other
general corporate purposes. We may also use some of the proceeds to acquire
other companies, technologies or assets that complement our business. We cannot
predict that investment of the proceeds will yield a favorable return.

OUR CHARTER DOCUMENTS AND OREGON LAW MAY INHIBIT A TAKEOVER OR CHANGE IN OUR
CONTROL THAT A SHAREHOLDER MAY CONSIDER FAVORABLE.

Provisions in our articles of incorporation, bylaws and shareholder rights
plan may have the effect of delaying or preventing a merger or acquisition of
us, or making a merger or acquisition less desirable to a potential acquirer,
even where the shareholders may consider the acquisition or merger favorable.
Provisions of the Oregon Business Corporation Act and the Control Share Act may
also delay, prevent or discourage someone from acquiring or merging with us.

FUTURE SALES OF OUR STOCK COULD CAUSE THE PRICE OF OUR STOCK TO DECLINE.

Sales of a substantial number of shares of our common stock in the public
market after this offering could cause the market price of our common stock to
decline. In addition, the sale of these shares could impair our ability to raise
capital through the sale of additional equity securities. Upon completion of
this offering, we will have approximately 8,509,759 shares of common stock
outstanding, approximately 8,809,759 if the underwriters' over-allotment options
are exercised in full, based on shares outstanding as of February 28, 2000.

WITHIN 90 DAYS OF THIS OFFERING, A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON
STOCK BECOME ELIGIBLE FOR SALE.

All of our officers and directors and the selling shareholder have agreed
that they will not offer, sell, agree to sell, directly or indirectly, or
otherwise dispose of any shares of common stock without the prior written
consent of Thomas Weisel Partners LLC for a period of 90 days after the date of
this prospectus. After the expiration of this period, shares held by these
shareholders will become eligible for sale to the public free from any
contractual restrictions.

YOU SHOULD NOT RELY ON OUR FORWARD-LOOKING STATEMENTS.

This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology including "could," "may," "will," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "potential" or "continue," the
negative of these terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially. In evaluating
these statements, you should specifically consider various factors, including
the risks described above and in other parts of the prospectus. These factors
may cause our actual results to differ materially from any forward-looking
statement.

Although we believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform them to
actual results or to changes in our expectations.

14
<PAGE>
PRICE RANGE OF COMMON STOCK

Our common stock is traded on the Nasdaq National Market under the symbol
"MERX." The following table sets forth, for the periods indicated, the high and
low sale prices per share of our common stock as reported on the Nasdaq National
Market.

<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL 1998:
First Quarter............................................. $18.50 $15.75
Second Quarter............................................ 19.50 13.75
Third Quarter............................................. 16.75 13.62
Fourth Quarter............................................ 20.50 11.62

FISCAL 1999:
First Quarter............................................. 12.38 4.00
Second Quarter............................................ 7.13 2.50
Third Quarter............................................. 7.00 3.00
Fourth Quarter............................................ 7.00 4.75

FISCAL 2000:
First Quarter............................................. 11.38 5.69
Second Quarter............................................ 14.25 9.25
Third Quarter............................................. 22.87 9.93
Fourth Quarter (through 3/28/00).......................... 29.13 17.63
</TABLE>

On March 28, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $29.13 per share. As of February 28, 2000, there were
approximately 105 shareholders of record of our common stock.

USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of the 2,000,000
shares of common stock that we are offering hereby will be approximately $46.6
million, at an assumed public offering price of $25.00 per share and after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses. We will not receive any proceeds from the sale of shares of
common stock by the selling shareholder.

We intend to use the net proceeds of this offering to purchase new equipment
and expand our production capacity and for working capital and other general
corporate purposes. We may also use some of the proceeds to acquire other
companies, technologies, or assets that complement our business, although we
have no agreements or understandings relating to any of these transactions.
Pending these uses, we will invest the net proceeds of this offering in
short-term, investment-grade, interest-bearing securities.

The amounts we actually spend on any particular use of proceeds may vary
significantly depending on a number of factors, including future revenue growth,
the cash we generate or use in our operations and the progress we make in our
sales and marketing efforts.

DIVIDEND POLICY

We currently intend to retain any earnings for use in our business and,
therefore, we do not anticipate paying any cash dividends in the foreseeable
future. We have never declared or paid any cash dividends on our capital stock.
In the future, the decision to pay any cash dividends will depend upon our
results of operations, financial condition and capital expenditure plans, as
well as such other factors as our Board of Directors, in its sole discretion,
may consider relevant.

15
<PAGE>
CAPITALIZATION

The following table sets forth our actual capitalization as of February 28,
2000, and our adjusted capitalization to reflect the receipt of the net proceeds
from the sale of the 2,000,000 shares of common stock that we are offering, at
an assumed public offering price of $25.00 per share and after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses.

You should read this table in conjunction with the financial statements and
related notes and other financial information included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
FEBRUARY 28, 2000
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $16,538 $ 63,123
Long-term debt, including current portion................... 38,299 38,299
Shareholders' equity:
Preferred stock, no par value: 10,000 shares authorized;
none issued and outstanding, actual and as adjusted..... -- --
Common stock, no par value: 50,000 shares authorized;
6,510 shares issued and outstanding, actual; 50,000
shares authorized, 8,510 shares issued and outstanding,
as adjusted............................................. 46,689 93,274
Retained earnings........................................... 9,022 9,022
Total shareholders' equity................................ 55,711 102,296
Total capitalization.................................... $94,010 $140,595
</TABLE>

This table excludes the following shares:

- 1,470,661 shares issuable upon exercise of stock options outstanding as of
February 28, 2000 at a weighted average exercise price of $9.50 per share;
and

- 361,696 shares available for future grant or issuance under our stock
option plan as of February 28, 2000.

See Note 8 of Notes to Financial Statements.

16
<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data is qualified by reference to, and
should be read in conjunction with, the financial statements and related notes
and "Management's Discussion and Analysis of Financial Condition and Results of
Operation," appearing elsewhere in this prospectus. The statement of operations
data for the years ended May 31, 1997, 1998 and 1999 and the balance sheet data
at May 31, 1997, 1998 and 1999 are derived from and are qualified by reference
to the audited financial statements included elsewhere in this prospectus. The
statement of operations data as of and for the nine months ended February 28,
1999 and 2000 and the balance sheet data at February 28, 1999 and 2000 are
derived from our unaudited financial statements and include, in the opinion of
management, all adjustments, including normal recurring adjustments necessary to
present fairly the financial information therein. The results for the nine
months ended February 28, 2000 are not necessarily indicative of the results
that may be expected for the full year.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MAY 31, FEBRUARY 28,
--------------------------------- --------------------
1997 1998 1999 1999 2000
--------- --------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $156,184 $178,620 $113,982 $ 81,050 $109,654
Cost of sales................................ 134,328 151,100 110,534 82,471 89,885
Gross profit (loss).......................... 21,856 27,520 3,448 (1,421) 19,769
Operating expenses:
Engineering................................ 6,013 5,854 4,100 3,058 3,269
Selling, general and administrative........ 13,822 14,266 9,045 7,032 7,874
Restructuring.............................. -- 1,878 21,750 21,750 --
Total operating expenses................. 19,835 21,998 34,895 31,840 11,143
Operating income (loss)...................... 2,021 5,522 (31,447) (33,261) 8,626
Interest income.............................. 1,380 1,432 912 700 520
Interest expense............................. (3,247) (3,313) (2,906) (2,071) (2,362)
Other income (expense), net.................. 137 (290) 85 119 (412)
Income (loss) before taxes................... 291 3,351 (33,356) (34,513) 6,372
Income tax benefit (expense)................. 30 (1,213) 12,675 13,115 (2,485)
Net income (loss)............................ $ 321 $ 2,138 $(20,681) $(21,398) $ 3,887
Net income (loss) per share:
Basic...................................... $ 0.05 $ 0.35 $ (3.30) $ (3.43) $ 0.60
Diluted.................................... $ 0.05 $ 0.34 $ (3.30) $ (3.43) $ 0.58
Shares used in per share calculations:
Basic...................................... 6,146 6,194 6,269 6,245 6,428
Diluted.................................... 6,260 6,272 6,269 6,245 6,667

OTHER FINANCIAL DATA:
EBITDA(1).................................... $ 10,920 $ 15,493 $(23,281) $(27,017) $ 14,343
</TABLE>

<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
--------------------------------- ---------------------
1997 1998 1999 1999 2000
--------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 16,537 $ 15,430 $ 5,874 $ 16,868 $ 16,538
Working capital.............................. 45,586 40,755 14,322 13,823 20,786
Total assets................................. 130,449 135,168 109,383 116,201 113,295
Long-term debt, less current portion......... 42,390 40,000 34,299 34,299 29,150
Shareholders' equity......................... 67,416 70,191 50,326 49,302 55,711
</TABLE>

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

We were incorporated in March 1994 to succeed to the business conducted by
the Circuit Board Division of Tektronix. All of the business of the Circuit
Board Division of Tektronix, together with $17.5 million in cash, was
transferred to us immediately prior to the consummation of our initial public
offering in May 1994 in exchange for 6,000,000 shares of our common stock, of
which Tektronix continues to own 1,656,500 shares, and a note in the principal
amount of $10.0 million, of which $2.3 million remained outstanding as of
February 28, 2000.

We manufacture complex multilayer printed circuit boards primarily for use
in high-end commercial equipment within the communications, computing and test
and measurement segments of the electronics industry. Our strategy since the
beginning of fiscal 1999 has been to increase the percentage of our sales of
printed circuit boards with higher layer counts and more advanced technology,
which generally have higher gross margins.

For the first nine months of fiscal 2000, we supplied our products and
services to 74 customers. Our five largest original equipment manufacturer, or
OEM, customers during this period were Cisco Systems, Intel, Motorola, Tektronix
and Teradyne. Our five largest OEM customers comprised 73.6%, 75.1% and 67.8% of
our net sales during fiscal years 1997, 1998 and 1999, respectively. For the
first nine months of fiscal 2000, Cisco Systems, Motorola and Teradyne each
accounted for more than 10% of our net sales.

We also manufacture and sell our products to contract manufacturers that
assemble components on our products for resale to OEMs. We have included in our
sales to OEMs sales made through contract manufacturers since the beginning of
fiscal 1998. Our largest contract manufacturer customers for the first nine
months of fiscal 2000 were Benchmark Electronics, Celestica, SCI Systems and
Solectron.

In the first quarter of fiscal 1999, we implemented a restructuring plan
designed to improve capacity utilization and lower our cost structure. We closed
our Loveland, Colorado facility, sold our Soladyne facility in San Diego,
California, reduced the headcount in the administrative, engineering and support
groups at our headquarters and reorganized our management team.

In the third quarter of fiscal 1998, we commenced an expansion plan for our
Forest Grove facility to increase our production capacity and our technological
capabilities. By the end of fiscal 1999, we converted non-manufacturing space to
manufacturing space and added new equipment, at a cost of approximately
$20.0 million. By December 1999, we transferred equipment from our Loveland
facility to Forest Grove. Over the next two fiscal years, we plan to increase
our plant capacity through the addition of new equipment and square footage to
our Forest Grove facility, at a cost of approximately $25.0 million. We expect
to fund this expansion with a combination of the proceeds from this offering,
internally generated funds and lease financing. We expect this expansion to
increase our production capacity by approximately 30%.

18
<PAGE>
Our products are specially manufactured to our customers' specifications and
are priced to reflect the complexity and sophistication of the product and the
timing of the order. Typically, a customer requests a price quote by sending us
design specifications and volume requirements for a particular product. Orders
may be cancelled or postponed at any time, but we may charge the customer a fee
that varies depending on the timing of the cancellation or postponement.
Periodically, our customers provide us with order forecasts that we use to
manage our capacity commitments. Revenue from product sales is recognized at the
time of shipment.

Cost of sales consists of materials, labor and overhead. Our gross profit is
affected by various factors, including capacity utilization, product mix,
production yields, price ranges and changes in our manufacturing costs. We are
not a party to any long-term supply contracts and believe there are a number of
potential suppliers for all materials so that the loss of any one supplier would
not materially affect our operations.

Our fiscal year consists of either the 52 or 53-week period ending on the
last Saturday in May. Fiscal years 1999 and 1998 were both 52-week years and
fiscal year 1997 was a 53-week year. For convenience, all of our fiscal years
are presented as ended on May 31, and all interim periods are presented as ended
on the last day of the last calendar month of the period, with February always
ending on February 28.

RESULTS OF OPERATIONS

The following table presents selected financial data as a percentage of our
net sales:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MAY 31, FEBRUARY 28,
------------------------------------ ----------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................... 86.0 84.6 97.0 101.8 82.0
----- ----- ----- ----- -----
Gross profit (loss).............................. 14.0 15.4 3.0 (1.8) 18.0
Operating expenses:
Engineering.................................... 3.9 3.3 3.6 3.8 3.0
Selling, general and administrative............ 8.9 8.0 7.9 8.7 7.2
Restructuring.................................. -- 1.0 19.1 26.8 0.0
----- ----- ----- ----- -----
Total operating expenses..................... 12.7 12.3 30.6 39.3 10.2
----- ----- ----- ----- -----
Operating income (loss).......................... 1.3 3.1 (27.6) (41.1) 7.8
Interest income.................................. 0.9 0.8 0.8 0.9 0.5
Interest expense................................. (2.1) (1.8) (2.5) (2.5) (2.1)
Other income (expense), net...................... 0.1 (0.2) 0.1 0.1 (0.4)
----- ----- ----- ----- -----
Income (loss) before taxes....................... 0.2 1.9 (29.2) (42.6) 5.8
Income tax benefit (expense)..................... -- (0.7) 11.1 16.2 (2.3)
----- ----- ----- ----- -----
Net income (loss)................................ 0.2% 1.2% (18.1)% (26.4)% 3.5%
===== ===== ===== ===== =====
</TABLE>

19
<PAGE>
NINE MONTHS ENDED FEBRUARY 28, 2000 AND FEBRUARY 28, 1999 (UNAUDITED)

NET SALES

Our net sales for the first nine months of fiscal 2000 were $109.7 million,
an increase of 35.3% from net sales of $81.1 million in the first nine months of
fiscal 1999, primarily as a result of higher levels of demand from existing
customers as the electronic equipment industry recovered from the downturn of
1998. Net sales in the first nine months of fiscal 1999 included five months of
sales from our Loveland manufacturing facility ($11.9 million), which we closed
in October 1998, and nine months of sales from our Soladyne manufacturing
facility ($5.6 million), which we sold in February 1999. Sales in the
communications market segment increased both absolutely and as a percentage of
sales in the first nine months of fiscal 2000 compared to the same period in
fiscal 1999 as a result of rapidly increasing demand for data communications,
primarily associated with the growth of the Internet, and increasing use of
wireless communications.

Our five largest OEM customers represented 68.1% of net sales in the first
nine months of fiscal 2000 and 66.7% of net sales in the first nine months of
fiscal 1999. Our sales to OEMs include sales made through contract
manufacturers. Our sales to contract manufacturers were 53.2% of net sales in
the first nine months of fiscal 2000 and 27.4% of net sales in the first nine
months of fiscal 1999. Three customers each accounted for more than 10% of our
net sales in the first nine months of fiscal 2000, and four customers each
accounted for more than 10% of our net sales in the first nine months of fiscal
1999.

Our 90-day backlog was $28.6 million at February 28, 2000, compared to
$18.0 million at the end of fiscal 1999. The level and timing of orders placed
by our customers vary due to many factors, including customer attempts to manage
inventory, changes in customers' manufacturing strategies and variation in
demand for customer products. Accordingly, our backlog is not necessarily
indicative of future quarterly or annual financial results.

Pricing of our products, which had been adversely affected by the
electronics industry slowdown beginning late in fiscal 1998, began to stabilize
during the last half of fiscal 1999 and has remained relatively stable during
the first nine months of fiscal 2000. In recent months we have seen increased
customer demand and an increased customer focus on the availability of capacity
rather than product price. Continued price stability of our products is
dependent on a variety of factors including continued strength of customer
orders, capacity utilization in the printed circuit board industry, competition
from domestic printed circuit board companies and potential future competition
from Asian printed circuit board companies.

GROSS PROFIT

Gross profit (loss) as a percentage of net sales, or gross margin, was 18.0%
in the first nine months of fiscal 2000 and (1.8)% in the first nine months of
fiscal 1999. Gross margin in the first nine months of fiscal 1999 was negatively
affected by a $1.1 million write-off of inventory related to the restructuring
discussed below. In addition, because of the downturn in the electronic
equipment industry in 1998, our capacity utilization in the first nine months of
fiscal 1999 was significantly below our historical capacity utilization levels.
Gross profit increased in the first nine months of fiscal 2000 primarily as a
result of higher capacity utilization, a favorable product mix and cost
reductions. Our product mix was favorable because we produced a greater number
of advanced technology printed circuit boards and quick-turn printed circuit
boards, which provide significantly higher gross margins. Our cost reductions
consisted of higher production yields, manufacturing process improvements and
lower raw material costs because of better supplier arrangements.

20
<PAGE>
OPERATING EXPENSES

ENGINEERING. Engineering expenses primarily consist of salaries and related
expenses for engineering personnel who evaluate and assess our production
capabilities for new projects and manage and enhance our techniques and controls
throughout the manufacturing process. Engineering expenses also include costs
related to research and development. Our engineering expenses were $3.3 million
and $3.1 million in the first nine months of 2000 and 1999, respectively,
representing 3.0% and 3.8% of our net sales in those periods. Engineering
expenses were reduced in the first nine months of fiscal 1999 as a result of the
capitalization of $650,000 in engineering labor expenses related to the Forest
Grove expansion project. These costs are being amortized over approximately
seven years, commencing in fiscal 1999. We also reduced engineering headcount as
a result of the restructuring discussed below.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses primarily consist of salaries and related expenses for management,
sales and marketing, finance and accounting personnel. Our selling, general and
administrative expenses were $7.9 million and $7.0 million in the first nine
months of fiscal 2000 and fiscal 1999, respectively, representing 7.2% and 8.7%
of our net sales in those periods. An increase in selling expenses in fiscal
2000, resulting from a larger sales force and higher commissions on greater net
sales, was offset by a decrease in general and administrative costs primarily
due to reduced headcount resulting from the restructuring.

RESTRUCTURING. In the first quarter of fiscal 1999, we implemented a
restructuring plan designed to improve capacity utilization and lower our cost
structure. We closed our Loveland, Colorado facility in October 1998 and laid
off approximately 340 manufacturing and support employees located there, sold
our Soladyne facility in San Diego, California and laid off approximately 35
employees from administrative, engineering and support functions at our Forest
Grove, Oregon location. We also transferred a portion of the manufacturing
equipment used in the Loveland facility to our Forest Grove site. Installation
of the manufacturing equipment was completed in December 1999.

In the third quarter of fiscal 1999, we reversed $7.1 million of the
restructuring expense taken in the first quarter of fiscal 1999, primarily
because lease termination costs at Loveland were $3.1 million less than we had
anticipated, we were able to realize a higher value on inventory than we had
previously written down and we realized $2.8 million more from the sale of
equipment than we had expected. We also spent less on severance benefits than we
expected.

The components of the restructuring expense, and the subsequent reversal,
were as follows:

<TABLE>
<CAPTION>
NET
RESTRUCTURING RESTRUCTURING
EXPENSE REVERSAL EXPENSE
------------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Non-cash charges:
Write-down and write-off of manufacturing equipment.... $15,672 $(2,826) $12,846
Write-off of goodwill and intangible assets............ 3,952 -- 3,952
------- ------- -------
19,624 (2,826) 16,798
Cash charges:
Severance benefits..................................... 2,801 (372) 2,429
Lease termination costs................................ 4,758 (3,059) 1,699
Other costs............................................ 696 128 824
------- ------- -------
8,255 (3,303) 4,952
------- ------- -------
Total restructuring expense.......................... 27,879 (6,129) 21,750
Write-off of inventory, included in cost of sales........ 2,118 (980) 1,138
------- ------- -------
Total................................................ $29,997 $(7,109) $22,888
======= ======= =======
</TABLE>

21
<PAGE>
Cash proceeds from asset sales of $4.8 million are reflected in the amounts
shown above for write-down and write-off of manufacturing equipment and
inventory. All cash payments for severance benefits, lease termination costs and
other costs related to the restructuring expense were paid in fiscal 1999. As of
May 31, 1999, there were no outstanding liabilities associated with the
restructuring plan.

INTEREST INCOME

Our interest income decreased to $520,000 in the first nine months of fiscal
2000 from $700,000 in the first nine months of fiscal 1999, primarily because we
had lower levels of cash.

INTEREST EXPENSE

Interest expense increased to $2.4 million in the first nine months of
fiscal 2000 from $2.1 million in the first nine months of fiscal 1999, primarily
because we capitalized interest of approximately $584,000 related to the Forest
Grove expansion project in the first nine months of fiscal 1999, which is being
amortized over approximately seven years, commencing in fiscal 1999.

OTHER INCOME (EXPENSE), NET

Other income (expense), net, was ($412,000) in the first nine months of
fiscal 2000, as compared to $119,000 in the first nine months of fiscal 1999. In
the first nine months of fiscal 2000, we incurred finance charges of $75,000 in
connection with the restructuring of our senior unsecured notes and retired
manufacturing equipment. In addition, during the first nine months of fiscal
1999, we received a settlement payment.

INCOME TAXES

Our effective tax rate was approximately 39% in the first nine months of
fiscal 2000 compared to 38% in the first nine months of fiscal 1999. We expect
our effective tax rate for fiscal 2000 to approximate 39%. The net operating
losses we incurred in fiscal 1999 are available for carryforward. We expect
these net operating loss carryforwards to offset our taxable income for fiscal
2000.

FISCAL YEARS 1999 AND 1998

NET SALES

Our net sales were $114.0 million in fiscal 1999, a decrease of 36.2% from
net sales of $178.6 million in fiscal 1998. The decrease in net sales in fiscal
1999 was primarily a result of lower unit sales and lower average selling
prices, which resulted from a general electronic equipment industry downturn,
pricing pressures in the printed circuit board industry, excess customer
inventories, the closure of our Loveland manufacturing facility in October 1998
and the sale of our Soladyne manufacturing facility in February 1999.

Our five largest OEM customers comprised 67.8% of our net sales in fiscal
1999, compared to 75.1% in fiscal 1998. Our sales to OEMs include sales made
through contract manufacturers. Approximately 31.2% of our net sales were
through contract manufacturers in fiscal 1999 compared to 23.7% in fiscal 1998.
Four customers each accounted for more than 10% of our net sales in fiscal 1999,
and three customers each accounted for more than 10% of our net sales in fiscal
1998.

22
<PAGE>
GROSS PROFIT

Our gross margin was 3.0% in fiscal 1999 and 15.4% in fiscal 1998. The
decrease in gross margin resulted from lower capacity utilization, lower product
pricing, and the effect of the $1.1 million net write-down of inventory related
to our restructuring expense. Our gross margin began to improve in the last half
of fiscal 1999, primarily as a result of increased sales of higher margin
products, increased capacity utilization of our Forest Grove manufacturing
facility, lower costs as a result of headcount reductions from our restructuring
in fiscal 1999, and other cost reduction actions, such as higher production
yields, manufacturing process improvements and lower raw materials costs.

OPERATING EXPENSES

ENGINEERING. Our engineering expenses were $4.1 million in fiscal 1999 and
$5.9 million in 1998, respectively, representing 3.6% and 3.3% of our net sales
in those periods. The decrease in engineering expenses resulted from reduced
headcount, cost controls and the capitalization of approximately $650,000 of
dedicated engineering labor related to our Forest Grove expansion project during
fiscal 1999, which is being amortized over approximately seven years, commencing
in fiscal 1999.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were $9.1 million and $14.3 million in fiscal 1999 and fiscal 1998,
respectively, representing 7.9% and 8.0% of our net sales in those periods. The
absolute decrease in selling, general and administrative expenses was as a
result of reduced headcount resulting from our restructurings in fiscal 1998 and
fiscal 1999, cost controls and reduced selling expenses as a result of lower net
sales.

RESTRUCTURING. As discussed above, we incurred a net restructuring expense
of $22.9 million in fiscal 1999. In the second quarter of fiscal 1998, we
recorded a $1.9 million charge for the costs associated with a restructuring
plan undertaken to improve our profitability, which included a work force
reduction, the write-off of manufacturing equipment and other miscellaneous
costs. All liabilities associated with the restructuring plan were paid in the
third quarter of fiscal 1998.

INTEREST INCOME

Interest income declined to $912,000 in fiscal 1999 from $1.4 million in
fiscal 1998 primarily because we had lower levels of cash, cash equivalents and
short-term investments during fiscal 1999.

INTEREST EXPENSE

Interest expense declined to $2.9 million in fiscal 1999 from $3.3 million
in fiscal 1998 primarily because we capitalized interest of approximately
$450,000 related to the Forest Grove expansion project in fiscal 1999, which is
being amortized over approximately seven years, commencing in fiscal 1999.

OTHER INCOME (EXPENSE), NET

Other income (expense), net, was $85,000 in fiscal 1999, as compared to
($290,000) in fiscal 1998. In fiscal 1999, we received a settlement payment and
ceased amortizing goodwill for our Loveland, Colorado facility, which was
written off in connection with the restructuring in fiscal 1999. This positively
affected our other income (expense), net in fiscal 1999.

23
<PAGE>
INCOME TAXES

Our effective tax rate was approximately 38% in fiscal 1999 compared to 36%
in 1998. Our effective rate for fiscal 1999 was higher than our effective tax
rate in fiscal 1998 because in fiscal 1998 we received a rebate of excess Oregon
state income taxes collected in prior years.

FISCAL YEARS 1998 AND 1997

NET SALES

Net sales for fiscal 1998 were $178.6 million, an increase of 14.4% from net
sales of $156.2 million in fiscal 1997. The increase in net sales in fiscal 1998
was primarily a result of higher demand for our products and an improvement in
our product mix, including increased sales of higher layer count, higher priced
products.

Our five largest OEM customers comprised 75.1% of our net sales in fiscal
1998, compared to 73.6% in fiscal 1997. Our sales to OEMs include sales made
through contract manufacturers for fiscal 1998. Approximately 23.7% of our net
sales were through contract manufacturers in fiscal 1998 compared to 14.8% in
fiscal 1997. Three customers each accounted for more than 10% of our net sales
in fiscal 1998 and in fiscal 1997.

GROSS PROFIT

Our gross margin was 15.4% in fiscal 1998, compared with 14.0% in fiscal
1997. The improvement in gross margin was attributable to higher sales, improved
pricing of our products, improved product mix, reduced raw material costs and
cost reductions resulting from the restructuring which occurred in the second
quarter of fiscal 1998.

OPERATING EXPENSES

ENGINEERING. Our engineering expenses were $5.9 million and $6.0 million in
fiscal 1998 and 1997, respectively, representing 3.3% and 3.9% of our net sales
in those periods.

SELLING, GENERAL AND ADMINISTRATIVE. Our selling, general and
administrative expenses were $14.3 million and $13.8 million in the fiscal 1998
and 1997, respectively, representing 8.0% and 8.9% of our net sales in those
periods. The absolute increase in selling, general and administrative expenses
was principally a result of an increase in our sales and marketing personnel,
and costs associated with the reorganization and relocation of our sales force.

RESTRUCTURING. In fiscal 1998 we recorded a $1.9 million charge for costs
associated with a plan to improve our profitability, consisting of a work force
reduction in our support and administrative functions, the write-down of
manufacturing equipment, and other miscellaneous costs. We paid all liabilities
associated with the restructuring plan in the third quarter of fiscal 1998.

INTEREST INCOME

Interest income was effectively flat at $1.4 million in fiscal 1998 compared
to $1.4 million in fiscal 1997.

INTEREST EXPENSE

Interest expense was $3.3 million in both fiscal 1998 and fiscal 1997.
Interest expense for these periods consisted primarily of interest on the
$40.0 million of senior notes we issued in September 1996.

24
<PAGE>
OTHER INCOME (EXPENSE), NET

Other income (expense), net, was ($290,000) in fiscal 1998, as compared to
$137,000 in fiscal 1997. Other income (expense), net in fiscal 1997 was
positively affected by gain on an equipment transaction.

INCOME TAXES

Our effective tax rate was approximately 36% in fiscal 1998 compared to 10%
in 1997. In fiscal 1997, we had lower pretax income, which was offset by the
impact of tax exempt municipal interest income. Also, tax exempt interest income
as a percentage of our pretax income was higher in 1997 than in 1998.

QUARTERLY RESULTS OF OPERATIONS

The following table presents unaudited quarterly financial data, for the
periods indicated. The historical data has been derived from our unaudited
financial statements, and, in our opinion, includes all adjustments, consisting
only of normal recurring adjustments, that are necessary for a fair presentation
of the results of operations for these periods.

This unaudited historical quarterly information should be read in
conjunction with the financial statements and notes included elsewhere in this
prospectus. Our operating results in any quarter are not necessarily indicative
of the results that may be expected for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------- ------------------------------
AUG. 31, NOV. 30, FEB. 28, MAY 31, AUG. 31, NOV. 30, FEB. 28,
1998 1998 1999 1999 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $ 20,515 $30,032 $30,503 $32,932 $34,098 $35,882 $39,674
Cost of sales............ 27,627 29,571 25,273 28,063 28,019 29,722 32,144
-------- ------- ------- ------- ------- ------- -------
Gross profit (loss)...... (7,112) 461 5,230 4,869 6,079 6,160 7,530
Operating expenses:
Engineering............ 1,027 1,021 1,010 1,042 1,028 1,083 1,158
Selling, general and
administrative....... 2,802 2,109 2,121 2,013 2,375 2,516 2,983
Restructuring.......... 27,879 -- (6,129) -- -- -- --
-------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 31,708 3,130 (2,998) 3,055 3,403 3,599 4,141
-------- ------- ------- ------- ------- ------- -------
Operating income
(loss)................. (38,820) (2,669) 8,228 1,814 2,676 2,561 3,389
Interest and other
expense, net........... (489) (434) (329) (657) (981) (600) (673)
-------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes.................. (39,309) (3,103) 7,899 1,157 1,695 1,961 2,716
Income tax (expense)
benefit................ 14,938 1,179 (3,002) (440) (661) (765) (1,059)
-------- ------- ------- ------- ------- ------- -------
Net income (loss)........ $(24,371) $(1,924) $ 4,897 $ 717 $ 1,034 $ 1,196 $ 1,657
======== ======= ======= ======= ======= ======= =======
</TABLE>

In the fall of 1998, the electronic equipment industry began to recover from
the downturn that started in the spring of 1998. Net sales at our Forest Grove
manufacturing facility increased throughout the last three quarters of fiscal
1999 because of a return of demand from our existing customers, our success in
winning orders for new programs at existing customers and increasing sales in
the computing and communications market segments.

25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

As of February 28, 2000, we had $16.5 million in cash and cash equivalents
and $29.2 million of long-term debt.

Cash provided by operating activities in the first nine months of fiscal
2000 was $9.4 million. Cash provided by operating activities consisted primarily
of net income for the period and adjustments for depreciation and amortization,
offset primarily by an increase in accounts receivable and in inventories. Our
inventories increased as a result of a higher level of production in the first
nine months of fiscal 2000.

Cash provided by investing activities in the first nine months of fiscal
2000 was $4.9 million. Cash provided by investing activities included maturities
of short-term investments, net proceeds from the sale-leaseback of equipment
offset by capital expenditures for manufacturing equipment.

Cash used in financing activities in the first nine months of fiscal 2000
was $3.6 million, which primarily consisted of a principal payment on our senior
unsecured notes.

Cash provided by operating activities in fiscal 1999 was $4.1 million. Cash
provided by operating activities reflected an increase in deferred income taxes
offset by our net loss for the period. Cash provided by operating activities
also reflects the net restructuring expense and decreases in accounts receivable
and inventories. The increase in deferred income taxes is due mainly to the net
loss in the period. The decreases in accounts receivable and inventories were
primarily due to the lower level of net sales in fiscal 1999.

Cash used in investing activities in fiscal 1999 was $11.4 million. Cash
used in investing activities consisted of our capital expenditures for
manufacturing equipment of $15.9 million partially offset by $4.5 million of
proceeds from the sale of assets.

Cash used in financing activities in fiscal 1999 was $2.2 million, which
primarily consisted of our payments of long-term debt.

In August 1999, we entered into a lease agreement, which allowed us to sell
and leaseback up to $5.0 million of manufacturing equipment. As of February 28,
2000, we had sold $5.0 million of equipment under this agreement. Gains
resulting from these sales are deferred and amortized on a straight-line basis
over the life of the lease. The lease is classified as an operating lease in
accordance with SFAS No. 13, "Accounting for Leases."

We have a secured note payable to Tektronix with $2.3 million outstanding at
February 28, 2000, which bears interest at 7.5% per year. Principal on this note
of $1.1 million and $1.2 million is payable in June 2000 and June 2001,
respectively.

We have $36.0 million principal amount of 7.9% senior unsecured notes held
by two insurance companies, with interest payable semi-annually. Semi-annual
principal payments of $4.0 million began in September 1999, with a final
principal payment of $8.0 million due in September 2003. The notes contain
certain financial covenants, including minimum net worth, debt ratio and
interest coverage as well as a make-whole provision covering potential
prepayment penalties. As of February 28, 2000, we were in compliance with all
covenants.

In March 2000, we obtained an $8.0 million unsecured line of credit from U.
S. Bank National Association. We have not made any borrowings under this line of
credit as of the date of this prospectus.

26
<PAGE>
We had capital commitments of approximately $5.2 million as of February 28,
2000, primarily for manufacturing equipment. In addition, over the next two
fiscal years, we will increase our plant capacity through the addition of new
equipment and square footage to our Forest Grove facility, at a cost of
approximately $25.0 million. We expect to fund this expansion with a combination
of the proceeds from this offering, internally generated funds and lease
financing.

The Internal Revenue Service has examined our federal income tax returns for
fiscal years 1995, 1996 and 1997. Their proposed adjustments are principally
related to the timing of deductions. We are currently appealing some of their
proposed adjustments. We expect the resolution of these issues to result in the
payment of previously deferred federal and state income taxes and interest on
these taxes becoming currently payable. These tax and interest payments could
range from $1.5 million to $2.5 million. These payments will not impact income
tax expense.

Section 382 of the Internal Revenue Code provides that when a company
undergoes an "ownership change," the company's use of its net operating losses
is limited in each subsequent year. An "ownership change" occurs when, as of any
testing date, the sum of the increases in ownership of each shareholder that
owns five percent or more of the value of a company's stock as compared to that
shareholder's lowest percentage ownership during the preceding three-year period
exceeds fifty percent. As of May 31, 1999, we had federal net operating loss
carryforwards, subject to review by the Internal Revenue Service, totaling
approximately $34.0 million for federal income tax purposes, which will expire
in 2019. We estimate that the Section 382 limitation, even if triggered, will
not have a significant effect on our ability to use our available federal net
operating loss carryforwards to reduce our taxable income.

We believe the proceeds of this offering, together with our existing capital
resources and cash generated from operations should be sufficient to meet our
working capital and capital expenditure requirements through at least the next
12 months.

27
<PAGE>
BUSINESS

THE FOLLOWING BUSINESS SECTION CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY
FROM THE RESULTS DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY
CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN
"RISK FACTORS."

MERIX

Our customers demand increasingly complex and technologically advanced
printed circuit boards with high layer counts, dense circuitry designs, high
performance materials and precision cavities. Our engineering and manufacturing
capabilities enable us to produce, in volume, printed circuit boards of 34
layers utilizing high performance materials and leading-edge fabrication
techniques. Our manufacturing facility is designed to meet the accelerated
time-to-market and time-to-volume requirements of customers whose markets are
characterized by high growth rates, rapid technological advances and short
product life-cycles. We believe we are one of a limited number of interconnect
manufacturers with the advanced process technology and manufacturing and
engineering expertise necessary to offer these high-end products and services.

28
<PAGE>
INDUSTRY OVERVIEW

Printed circuit boards consist of patterns of electrical circuitry etched
from copper that has been laminated on a board of insulating material. They are
the platforms used to interconnect microprocessors, integrated circuits and
other components that are essential to the operation of electronic products and
systems. Printed circuit boards are customized for specific electronic
applications and are sold to OEMs and contract manufacturers in volumes that
range from several units for prototypes to small quantities for pre-production
to large quantities for volume production. Quick-turn prototypes are used in the
design, test and launch phases of new electronic products and require rapid
manufacturing, with delivery times ranging from as little as 24 hours and as
long as 10 days. Larger volumes of printed circuit boards are needed as a
product progresses past the testing and design phases and into pre-production
and volume production. The worldwide market for rigid printed circuit boards in
1998 was $30.2 billion and is projected to grow to $43.0 billion in 2001.

Printed circuit boards are used in virtually all electronic equipment from
consumer products, such as personal computers, cellular telephones, and
televisions, to high-end commercial electronic equipment, such as data
communication routers and switches, wireless base stations, computer
workstations and network servers. Typically, printed circuit boards used in
consumer electronic products are less technologically sophisticated, employing
lower layer counts and lower performance materials and requiring less
manufacturing sophistication than printed circuit boards used in high-end
commercial equipment.

High-end commercial equipment manufacturers require more complex multilayer
interconnect solutions with advanced materials, narrow line widths and
separations of copper traces, precision cavities and small diameter vias and
through-holes to connect internal circuitry. The market for these more complex
printed circuit boards was 18.2% of the total market in 1998 and is projected to
grow to 24.3% of the total market in 2001. Sales of high performance printed
circuit boards are projected to grow at a compound annual growth rate of
approximately 25% over the next two years.

We manufacture complex multilayer printed circuit boards primarily for use
in high-end commercial equipment within the communications, computing and test
and measurement segments of the electronics industry. These industry segments
are characterized by high growth, rapid technological change and short product
life-cycles as OEMs continually develop new and technologically superior
products. We believe OEMs and contract manufacturers within these industry
segments will increasingly rely upon manufacturers with the engineering
expertise and process controls to quickly proceed to volume production of
advanced interconnect solutions.

Manufacturing increasingly sophisticated electronic interconnect products
requires substantial investment in advanced production facilities, engineering
and manufacturing expertise and process technology. These capital and technology
requirements have led to consolidation in recent years, reducing the number of
printed circuit board manufacturers in the United States from approximately 950
in 1992 to approximately 690 in 1998. Despite this consolidation, the printed
circuit board market remains fragmented, and we expect consolidation to
continue. Of the approximately 690 printed circuit board manufacturers in the
United States in 1998, only ten independent manufacturers had revenues in excess
of $100 million, and these manufacturers comprised 44% of the domestic printed
circuit board market.

There are several significant trends within the electronic interconnect
industry. These include:

INCREASING COMPLEXITY OF ELECTRONIC EQUIPMENT. The increasing complexity of
electronic equipment drives technological advancements in interconnect products.
OEMs are continually designing more complex and high performance electronic
equipment, which requires printed circuit boards that accommodate higher speeds,
component densities, frequencies and operating temperatures. We believe this
trend is increasing the demand for interconnect manufacturers with superior
manufacturing process techniques and engineering support.

29
<PAGE>
EXPANDING AND EMERGING MARKETS. The demand for more complex multilayer
printed circuit boards is being driven by the expansion of traditional markets
for high-end commercial electronic equipment, such as computing, communications
and test and measurement. In addition, we have seen the emergence of several new
high growth electronic markets, such as wireless communications and Internet
infrastructure. These emerging markets are growing rapidly as a result of
technological changes, demands for wider variety of electronic product features,
greater bandwidth and increasingly powerful electronic components.

SHORTER PRODUCT LIFE-CYCLES FOR ELECTRONIC PRODUCTS. Rapid advances in
technology have significantly shortened the life-cycles of complex electronic
products and placed increased pressure on OEMs to develop new products in
shorter periods of time. The time-to-market demands of OEMs have increased
emphasis on the engineering and quick-turn production of small unit volumes of
printed circuit boards in the prototype development stage. In addition, the
success of first-to-market products has heightened the demand for manufacturing
expertise and process controls that enable manufacturers to quickly proceed to
volume production.

INCREASED DEMAND FOR INTEGRATED PRODUCTS AND SERVICES. The accelerated
time-to-market and time-to-volume needs of OEMs of high-end equipment have
resulted in increased collaboration with interconnect providers that can offer
design and engineering support and manufacturing scalability throughout the
product life-cycle. Many OEMs are limiting their vendor base to a smaller number
of technically qualified providers that are able to offer a broad range of
interconnect products and services.

STRATEGY

- CONTINUE TO FOCUS ON BOTH MARKET AND TECHNOLOGY LEADERS IN SELECTED HIGH
GROWTH END MARKETS. Our OEM customer list includes market leading
providers of communications equipment such as Cisco Systems and Motorola;
computer workstations and servers, such as Hewlett-Packard and Intel; and
test and measurement equipment, such as Teradyne and Tektronix. We are
also focused on identifying and engaging emerging technology leaders, such
as Credence Systems, Sonus Networks, Spring Tide Networks, Sycamore
Networks and Telaxis Communications. Our contract manufacturer customer
list includes Celestica, Flextronics, Jabil Circuit, SCI Systems and
Solectron. We will continue to focus our marketing on both market and
technology leading manufacturers of sophisticated electronic equipment in
high growth segments of the electronic equipment industry.

- EXTEND TECHNOLOGY LEADERSHIP. We believe we are a leader in the
manufacture of advanced interconnect solutions employing high layer
counts, advanced materials, precision cavities, embedded passives, narrow
line widths and separations of copper traces and small diameter vias,
including microvias, and through-holes to connect internal circuitry. Our
average layer count, which is a widely used indication of manufacturing
sophistication, has increased from 7.7 in the first quarter of fiscal 1998
to 10.5 in the third quarter of fiscal 2000. In addition, many of our
printed circuit boards employ high performance materials, such as
Teflon-Registered Trademark- and Getek-Registered Trademark-. We intend to
continue to focus on producing next generation interconnect solutions that
enable OEMs to cost-effectively meet demand for increasingly sophisticated
electronic products.

30
<PAGE>
- PROVIDE INTEGRATED MANUFACTURING SOLUTION. We believe our ability to offer
our customers quick-turn prototypes and pre-production and volume
production of printed circuit boards through one manufacturing facility
provides us with a competitive advantage. By using the same processing
lines to manufacture prototype orders, our prototypes more accurately
represent our volume products. This allows us to shorten the time in
transition from the development of prototype designs to volume
manufacturing and facilitates the volume delivery of high quality complex
printed circuit boards in a timely fashion.

- ENHANCE REPUTATION AS THE CUSTOMER SERVICE LEADER. We are committed to
understanding our customers' needs and exceeding their expectations. We
believe our on-time delivery record and product return rate are among the
best in the industry. We have established programs that allow faster,
simpler and more accurate communications with our customers. These
programs include: Automated Tooling Interface, which allows our customers
to download their design data directly to our computer systems for
improved speed and accuracy; and Electronic Business Transactions with
Electronic Data Interchange, which streamlines forecasting and order
placement processes.

- INVEST IN CAPACITY AND TECHNOLOGY. We continually invest in our
manufacturing operations to increase our production capacity and maintain
the technological expertise our customers demand. We recently increased
our production capacity at our Forest Grove facility by adding
manufacturing space and new equipment, which also enhanced our
technological capabilities. We intend to continue to expand our production
capacity and further enhance our technological expertise.

- PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. The printed circuit board
market remains fragmented, and we expect consolidation to continue. We
will pursue strategic acquisitions and alliances with companies whose
products or technologies complement our current products, augment our
market coverage or enhance our technical capabilities or production
capacity.

THE MERIX ADVANTAGE

We believe Merix has the competitive strengths to continue to be a preferred
supplier to leading OEMs and contract manufacturers in high-growth segments of
the electronics industry. We supply our printed circuit boards primarily to
OEMs within the communications, computing and test and measurement segments of
the electronics industry, such as Cisco Systems, EMC(2), Intel, Motorola and
Teradyne. We are focused on producing next generation interconnect solutions and
have the manufacturing and technological capabilities to fabricate advanced
printed circuit boards in volume and deliver on time. We believe our on-time
delivery record, which has consistently exceeded 95%, and product return rate,
which is less than 0.5%, are among the best in the industry. In addition, we are
able to offer our customers quick-turn prototypes and pre-production and volume
production of printed circuit boards through one manufacturing facility, which
allows us to shorten the time in transition from the development of prototype
designs to volume manufacturing.

31
<PAGE>
PRODUCTS AND SERVICES

We offer a broad range of products and services designed to meet our
customers' needs for complex multilayer printed circuit boards, backplanes and
backplane assemblies. Our products and services span the period from product
conception through volume production and include the following:

DESIGN ASSISTANCE AND ENGINEERING SERVICES. We provide design assistance
and engineering services in the early stages of product development to ensure
that mechanical and electrical elements are integrated to achieve a high quality
and cost-effective product. We also evaluate customer designs for
manufacturability and, when appropriate, recommend design changes to reduce
manufacturing costs and lead times or increase manufacturing yields and the
quality of finished printed circuit boards. We believe this cooperative process
shortens the time in transition from the development of the prototype design to
volume manufacturing and facilitates the delivery of high quality products in a
timely fashion. By working closely with our customers throughout the design and
manufacturing process, we gain insight into their future product requirements.

QUICK-TURN PROTOTYPE AND PRE-PRODUCTION SERVICES. We produce quick-turn
prototypes with lead times of three to fifteen days for the product development
groups of our customers. We also produce prototypes in pre-production quantities
with lead times of ten to fifteen days for these customers. While some
manufacturers offer prototypes through dedicated facilities, we differentiate
ourselves by offering volume production and prototypes within the same facility.
By using the same processing lines to manufacture prototypes, our prototypes
more accurately represent our volume products. This allows us to shorten the
time in transition from the development of prototype designs to volume
manufacturing and facilitates the volume delivery of high quality complex
printed circuit boards in a timely fashion. We believe this strengthens our
long-term relationships with customers and helps us gain an advantage in
securing both new quick-turn, pre-production and volume production programs.

VOLUME PRODUCTION. Volume production is characterized by standard lead
times of four to five weeks, as printed circuit boards move to full-scale
commercial production. At this stage of production, quality, on-time delivery,
process capability and price are the factors most important to our customers.
Our engineering capability enables us to produce, in volume, technologically
sophisticated printed circuit boards of 34 layers utilizing high performance
materials and leading edge fabrication techniques. In addition, our extensive
manufacturing process controls enable us to meet the accelerated time-to-market
and time-to-volume requirements of our customers. Our proprietary
computer-integrated manufacturing system tracks shop-floor production in real
time, delivering critical information to every decision point using online
statistical process control tools and helps us analyze and continually improve
our products and processes. We believe we consistently deliver dependable, high
quality printed circuit boards with an industry leading on-time delivery record.

BACKPLANES AND BACKPLANE ASSEMBLIES. We produce backplanes and provide
backplane assemblies to our customers. Backplanes are generally larger and
thicker printed circuit boards on which connectors are mounted to interconnect
printed circuit boards, integrated circuits and other electronic components.
Backplane assemblies are printed circuit boards on which various electronic
components, such as integrated circuits, capacitors, microprocessors and
resistors, have been mounted. In addition to providing backplane fabrication and
assembly services, we also perform radio frequency testing services to evaluate
the performance of backplane circuits across a spectrum of frequencies.

32
<PAGE>
MARKETS AND CUSTOMERS

Our customers consist of both market and technology leaders in high growth
segments of the electronic equipment industry, including the communications,
computing and test and measurement segments. The following table shows, for the
periods indicated, the percentage of our net sales to the principal market
segments we serve:

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-----------------------------------------------------------------
NINE MONTHS
ENDED
YEAR ENDED MAY 31, FEBRUARY 28,
------------------------------------ ----------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
MARKET SEGMENTS:
Communications.................................. 20.7% 26.2% 37.9% 36.1% 49.7%
Computing....................................... 27.5 27.9 32.8 32.9 23.6
Test and Measurement............................ 34.8 42.1 25.4 27.3 23.8
Contract Manufacturers(a)....................... 14.8 -- -- -- --
Other........................................... 2.2 3.8 3.9 3.7 2.9
----- ----- ----- ----- -----
Total......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>

- ------------------------

(a) Sales to contract manufacturers in fiscal year 1998 and thereafter are
reflected as sales to the OEM served by the contract manufacturer.

We supplied our products and services to 74 customers in the first nine
months of fiscal 2000. Our five largest OEM customers during this period were
Cisco Systems, Intel, Motorola, Tektronix and Teradyne. Our five largest OEM
customers comprised 73.6%, 75.1% and 67.8% of our net sales during fiscal 1997,
1998 and 1999, respectively. For the first nine months of fiscal 2000, Cisco
Systems, Motorola and Teradyne each accounted for more than 10% of our net
sales. Cisco Systems, Hewlett-Packard, Motorola and Tektronix each accounted for
more than 10% of our net sales in fiscal 1999. Hewlett-Packard, Motorola and
Tektronix each accounted for more than 10% of our net sales in fiscal 1998.

We also manufacture and sell our products to contract manufacturers that
assemble components on our products for resale to OEMs. Approximately 31.2%,
23.7% and 14.8% of our net sales were through contract manufacturers in fiscal
1999, 1998 and 1997, respectively. Our largest contract manufacturer customers
for the first nine months of fiscal 2000 were Benchmark Electronics, Celestica,
SCI Systems and Solectron.

SALES AND MARKETING

We market our products through a field-based direct sales force, field
application engineers, manufacturers' representative firms and customer service
personnel. As of February 28, 2000, we employed 30 sales and marketing
employees. We employ four field application engineers in regions across the U.S.
These field application engineers serve as the technical interface between Merix
and customers' design engineering teams. The field application engineers
integrate into the customers' design teams as technical experts, providing
information and modeling data to assure that the final printed circuit board
design meets electrical performance requirements, cost goals, and design
guidelines for manufacturability. We are also represented by four independent
manufacturers' representative firms in the United States.

33
<PAGE>
Our sales force develops close relationships with our OEM customers
beginning at the earliest development and design phases and continuing
throughout all stages of production. In addition, because contract manufacturers
are increasingly being given discretionary authority from OEMs to award business
to printed circuit board manufacturers, we also target contract manufacturers as
well as OEMs and leverage our relationships with OEMs to access new business
with contract manufacturers.

SUPPLIER RELATIONSHIPS

We strive to develop and maintain good working relationships with our key
suppliers to enhance the operation of our business. We have established supplier
management programs to drive operational improvements and cost reductions. These
programs include periodic reviews with our suppliers in which we discuss joint
product and process development. In addition, suppliers participate in meetings
with our customers to gain a better understanding of our material requirements.
We also have on-site representatives from our suppliers that monitor material
requirements and usage and help us drive improvements in our manufacturing
process.

We have entered into strategic relationships with certain suppliers of
laminates, raw materials and services to reduce lead times and inventory
carrying costs, enhance the quality and reliability of the supply of raw
materials and reduce transportation and other logistics costs. For example,
Matsushita Electronics Materials, a key laminate supplier, operates an 82,000
square foot factory producing standard and high performance laminates adjacent
to our facility. Isola Laminate Systems Corp., another laminate supplier,
utilizes an independent warehouse distribution center adjacent to our facility
to offer just-in-time delivery of high-performance raw materials. In addition,
Probe Test Services, a wholly-owned subsidiary of Mania Technologies, Inc.
(USA), provides on-site electrical test services at our facility.

MANUFACTURING AND TECHNOLOGY

The increasing complexity of electronic products has driven technological
advancements in interconnect products and has placed increasingly more difficult
demands on the manufacturing process. We have invested in production technology
to manufacture dense multilayer printed circuit boards utilizing advanced
fabrication processes and high performance materials in volume production. We
employ numerous advanced manufacturing techniques and systems, including
dry-film imaging, automated optical inspection, computer controlled lamination,
computer controlled drilling and routing, multi-purpose metal plating,
photoimageable solder mask processing, dual-access electrical testing, and
surface coating. Our execution of these techniques enables us to manufacture
complex printed circuit boards of consistent quality in high-volume and on a
timely basis.

In general, we receive circuit designs directly from our customers in the
form of computer data files, which we review to ensure data accuracy and product
manufacturability. Using these computer files, we generate images of the circuit
patterns that we develop on individual layers using advanced photographic
processes. Through a variety of plating and etching processes, we selectively
add and remove conductive materials forming horizontal layers of thin traces or
circuits, which are separated by insulating material. A finished multilayer
circuit board laminates together a number of layers of circuitry, using intense
heat and pressure under vacuum. Vertical connections between layers are achieved
by plating through small holes called vias. Vias are made by highly specialized
drilling equipment capable of achieving extremely fine tolerances with high
accuracy. We specialize in high layer printed circuit boards with extremely fine
geometries and tolerances. Because of the tolerances involved, we use clean
rooms in certain manufacturing processes where tiny particles might otherwise
create defects on the circuit patterns, and use automated optical inspection
systems to ensure consistent quality.

34
<PAGE>
To organize and track our orders, materials and processes, we have developed
a proprietary computer-integrated manufacturing system called the Computer
On-Line Loading and Tracking system. This system tracks all phases and aspects
of shop-floor production in real time, delivering crucial information to every
decision point using online statistical process control tools. We believe this
system provides us with a competitive advantage through its high level of
automation and integration in support of our business processes.

Although we seek to protect certain proprietary technology and other
intangible assets through patents, we have relatively few patents and believe
our business depends on our effective execution of fabrication techniques and
our ability to improve our manufacturing processes to meet evolving industry
standards. In addition, because manufacturing printed circuit boards requires
our employees to have sufficient know-how to operate advanced equipment and to
conduct sensitive and complicated manufacturing processes, we depend to a large
extent on training, recruiting and retaining these employees.

We were recently chosen to participate in the Advanced Embedded Passive
Technology Consortium sponsored by the National Center for Manufacturing
Sciences. This consortium was designed to develop new materials, tools and
manufacturing techniques for embedding the majority of passive electrical
devices, such as resistors and capacitors, into the structure of a printed
circuit board. This new technology should reduce costs and space requirements
and improve the reliability and performance of many electrical devices. We
believe our participation in this project will help us maintain our technology
leadership and provide us with additional funding for our engineering research
in this area of interconnect product development.

FACILITIES

We manufacture all of our products on our 73-acre Forest Grove campus, which
includes a 215,000 square foot manufacturing facility and a 62,000 square foot
training and administration facility. Our manufacturing facility is ISO 9002
certified, and we use total quality management systems to meet the highest
industry standards for product quality.

In the third quarter of fiscal 1998, we commenced an expansion plan for our
Forest Grove facility to increase our production capacity and our technological
capabilities. This plan consisted of three phases. The first phase, which cost
approximately $20.0 million, involved converting non-manufacturing space to
manufacturing space and adding new equipment. This phase was completed at the
end of fiscal 1999. Our second phase involved transferring equipment from our
Loveland facility to Forest Grove and was completed in December 1999 with an
installation cost of approximately $2.0 million. The third phase, which we
expect to cost approximately $25.0 million, will involve increasing plant
capacity over the next two years through the addition of new equipment and
square footage to our Forest Grove facility. We expect this expansion to
increase our production capacity by approximately 30%.

COMPETITION

We believe our major competitors are the large U.S. and international
independent producers that also manufacture multilayer printed circuit boards
and provide backplane and other electronic assemblies, such as Hadco, Honeywell,
Multek (a division of DII Group), Sanmina, Tyco International and Viasystems. We
believe our ability to compete successfully depends upon a number of factors,
including our responsiveness to customers in delivery and service, our
technological capability; our product quality; and our pricing.

35
<PAGE>
BACKLOG

Our 90-day backlog was approximately $28.6 million at February 28, 2000,
$18.0 million at the end of fiscal 1999 and $15.8 million at the end of fiscal
1998. A substantial portion of our backlog is typically scheduled for delivery
within 60 days. If a customer cancels or postpones an order, we may charge the
customer a fee that varies depending upon the time of cancellation or
postponement. A substantial portion of our backlog is subject to cancellation or
postponement without significant penalty.

EMPLOYEES

As of February 28, 2000 we had a total of 1,200 employees, of which 1,079
were regular employees and 121 were temporary agency employees. None of our
employees is represented by a labor union. We have never experienced an
employee-related work stoppage. We believe our relationship with our employees
is good.

ENVIRONMENTAL MATTERS

We are required to comply with federal, state, county and municipal
regulations regarding protection of the environment. Printed circuit board
manufacturing requires the use of a variety of materials, including metals and
chemicals. As a result, we are subject to environmental laws relating to the
storage, use and disposal of chemicals, solid waste, and other hazardous
materials, as well as air quality regulations. Water used in the manufacturing
process must be treated to remove heavy metals and neutralized before it can be
discharged into the municipal sanitary sewer system. We operate and maintain
effluent water treatment systems and utilize approved laboratory testing
procedures at our manufacturing facility under effluent discharge permits issued
by authorized governmental agencies. These permits must be renewed periodically
and are subject to revocation in the event of violations of environmental laws.
Certain waste materials and byproducts generated by our manufacturing processes
are sent to approved third parties for recycling, reclamation, treatment or
disposal. We believe our environmental management complies with environmental
protection requirements in all material respects.

LEGAL PROCEEDINGS

We are not currently involved in any threatened or pending litigation. From
time to time we may be involved in litigation arising in the normal course of
our business.

36
<PAGE>
MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL

The following table sets forth certain information with respect to
directors, executive officers and certain key personnel of Merix:

<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS AGE POSITION
- -------------------------------- -------- --------
<S> <C> <C>
Mark R. Hollinger.............. 42 Chief Executive Officer, President and Director

Terri L. Timberman............. 42 Senior Vice President and Chief Administrative Officer

Janie S. Brown................. 55 Vice President and Chief Financial Officer

Daniel T. Olson................ 45 Vice President--Sales and Marketing

Anaya K. Vardya................ 37 Vice President--Operations

Deborah A. Coleman............. 47 Chair of the Board of Directors

Carlene M. Ellis............... 53 Director

William C. McCormick........... 66 Director

Carl W. Neun................... 56 Director

Dr. Koichi Nishimura........... 61 Director

Robert C. Strandberg........... 42 Director

<CAPTION>
CERTAIN KEY PERSONNEL
---------------------
Donald E. Barckley. 45 Director of Information Technology
<S> <C> <C>

John R. Johnston............... 49 Director of Materials

Rex J. Oxford.................. 41 Director of Engineering
</TABLE>

DIRECTORS AND EXECUTIVE OFFICERS

MARK R. HOLLINGER has served as Chief Executive Officer since
September 1999 and as President since May 1999. Mr. Hollinger was elected to the
Board of Directors in May 1999. Mr. Hollinger joined Merix in September 1997 as
Senior Vice President of Operations. 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.

TERRI L. TIMBERMAN has served as Senior Vice President and Chief
Administrative Officer since August 1998. Ms. Timberman served as Vice
President--Human Resources from the inception of Merix until August 1998.
Ms. Timberman joined the Circuit Board Division of Tektronix, Inc. in
February 1994. From 1992 until joining Merix, Ms. Timberman served in various
human resource management positions for Tektronix.

JANIE S. BROWN has served as Vice President and Chief Financial Officer
since August 1998 and Treasurer since September 1997. Ms. Brown served as
Corporate Controller from June 1995 until August 1998. From September 1982 until
joining Merix, Ms. Brown held various positions, including audit partner, with
Deloitte & Touche LLP.

DANIEL T. OLSON has served as Vice President--Sales and Marketing since
October 1999. From 1992 to April 1999, Mr. Olson held various positions,
including Director of Strategic Business for the Electronics Business Group of
MacDermid, Inc. From 1982 to 1991, Mr. Olson served in a number of sales roles,
including National Sales Manager, for Olin Corporation.

37
<PAGE>
ANAYA K. VARDYA has served as Vice President of Operations since December,
1999. Mr. Vardya joined Merix in October 1997 as Director of Forest Grove
Operations. Prior to joining Merix, Mr. Vardya was the Corporate Development
Manager for Continental Circuits Corporation from November 1994 to
October 1997. From 1985 to 1994, Mr. Vardya held a number of positions with IBM,
including Engineering Manager for IBM's Austin, Texas facility.

DEBORAH A. COLEMAN has served as Chair of the Board of Directors since
March 1994. Ms. Coleman served as Chief Executive Officer of Merix from
March 1994 to September 1999 and as President of Merix from March 1997 to
May 1999. 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 has served as a member of the Board of Directors since
1994. Ms. Ellis has served as Vice President of Education of Intel Corporation
since January 1999. She 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.

WILLIAM C. MCCORMICK has served as a member of the Board of Directors since
1997. 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 has served as a member of the Board of Directors since 1994.
Mr. Neun served as Senior Vice President and Chief Financial Officer of
Tektronix from June 1995 to January 2000. 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. Mr. Neun is Chairman of Wirex
Communications, Inc. and is a director of Powerwave Technologies.

DR. KOICHI NISHIMURA has served as a member of the Board of Directors since
1994. 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 has served as a member of the Board of Directors since
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.

38
<PAGE>
CERTAIN KEY PERSONNEL

DONALD E. BARCKLEY has been with Merix since 1996. He serves as Director of
Information Technology and previously served as Director of Applications
Development. Prior to joining Merix, Mr. Barckley was with Wacker Siltronic
Corporation, where he held a variety of engineering and manufacturing management
positions.

JOHN R. JOHNSTON has served as Director of Materials since October 1998, and
previously served as Manufacturing Manager of our Forest Grove facility and
Director of Operations at the Loveland, Colorado facility. Before joining Merix
in 1994, Mr. Johnston spent 25 years with Tektronix, Inc., where he served a
number of roles in management including Quality Manager for the
Electro-Mechanical and Component Group and Operational Manager for the Cathode
Ray Tube Division.

REX J. OXFORD serves as Director of Engineering, and previously served as
Director of Engineering for the Loveland, Colorado facility. Mr. Oxford joined
the Tektronix Circuit Board Division in 1988, ultimately acting as Senior
Director of Manufacturing Engineering.

39
<PAGE>
INFORMATION REGARDING THE SELLING SHAREHOLDER

Tektronix, Inc. is a test measurement and monitoring company providing
measurement solutions to industries including semiconductors, computers and
telecommunications. Merix was incorporated in March 1994 to succeed to the
business conducted by the Circuit Board Division of Tektronix. Under an asset
transfer agreement, dated as of May 31, 1994, all of the business of the Circuit
Board Division of Tektronix was transferred to Merix immediately prior to the
consummation of our initial public offering. Tektronix transferred to Merix all
of the assets used exclusively in its circuit board business and approximately
$17.5 million in cash in exchange for 6,000,000 shares of our common stock and a
note in the principal amount of $10.0 million. The note we issued to Tektronix
bears interest at the rate of 7.5% per annum and was originally payable over
five years. We granted Tektronix a security interest in our real property to
secure repayment of the note. In 1999 this note was amended to provide for
payment of accrued interest only in May 1999, in the amount of $171,920, and
payment in June 2000 and 2001 of $1.1 million and $1.2 million, respectively, in
principal plus accrued interest. Tektronix may set off any amounts not paid by
Merix when due under the note against any amounts Tektronix or its subsidiaries
owe Merix under any supply agreements.

Our asset transfer agreement with Tektronix provided that we would use all
reasonable efforts to nominate and maintain two individuals designated by
Tektronix and three additional independent individuals as members of our Board
of Directors so long as Tektronix held at least 25% of the outstanding shares of
our Common Stock. For fiscal 2000 Tektronix has nominated only Mr. Neun pursuant
to the agreement. After completion of this offering, we will no longer be
required to nominate and maintain any Tektronix nominees on our Board of
Directors.

Pursuant to a registration rights agreement, dated June 1, 1994, Tektronix
may demand, on two occasions, that we use our best efforts to register all or a
portion of the 6,000,000 shares of our stock issued to Tektronix in 1994 for
public resale. Tektronix also has "piggyback rights" with respect to the shares,
which allows Tektronix to require that we include all or a portion of the shares
in a registration under the Securities Act. After this offering Tektronix will
continue to have its demand and piggyback registration rights.

Tektronix is a significant customer of Merix. During fiscal 1999, our net
sales to Tektronix were $15.7 million, or 13.8% of our net sales. During the
first nine months of fiscal 2000, our net sales to Tektronix were $9.2 million,
or 8.4% of our net sales. In addition, Tektronix and we were parties to waste
management and services agreements covering certain environmental matters.
During fiscal 1999, we paid $90,000 to Tektronix under these agreements.

40
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock, as of February 28, 2000, by the following
individuals or groups:

- each person or entity who is known by us to own beneficially more than 5%
of our outstanding stock;

- each of our named executive officers;

- each of our directors; and

- all directors and executive officers as a group.

Unless otherwise indicated, the address for each shareholder on this table
is c/o Merix Corporation, 1521 Poplar Lane, Forest Grove, Oregon 97116. Except
as otherwise noted, and subject to applicable community property laws, to the
best of our knowledge, the persons named in this table have sole voting and
investing power with respect to all of the shares of common stock held by them.

This table lists applicable percentage ownership based on 6,509,759 shares
of common stock outstanding as of February 28, 2000, and also lists applicable
percentage ownership based on 8,509,759 shares of common stock outstanding after
completion of this offering. The total number of shares of common stock
outstanding used in calculating the percentage for each listed person includes
the shares of common stock underlying options held by that person that are
exercisable within 60 days of February 28, 2000 but excludes shares of common
stock underlying options held by any other person.

<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OUTSTANDING
NUMBER OF SHARES NUMBER OF --------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES OFFERED BEFORE OFFERING AFTER OFFERING
- ------------------------ ------------------ -------------- --------------- --------------
<S> <C> <C> <C> <C>
Tektronix, Inc. .................. 1,656,500 1,000,000(1) 25.4% 7.7%
PO Box 500
Beaverton, OR 97077
Paradigm Capital Mgmt, Inc. ...... 683,200(2) -- 10.5% 8.0%
Nine Elk Street
Albany, NY 12207
The TCW Group, Inc. .............. 456,000(3) -- 7.0% 5.4%
865 South Figueroa Street
Los Angeles, CA 90017
Dimensional Fund Advisors ........ 346,400(4) -- 5.3% 4.1%
1299 Ocean Avenue,
11th Floor
Los Angeles, CA 90401
Deborah A. Coleman ............... 423,784(5) -- 6.5% 5.0%
Mark R. Hollinger ................ 74,671(6) -- 1.1% *
Terri L. Timberman ............... 61,864(7) -- 1.0% *
Janie S. Brown ................... 21,937(8) -- * *
Daniel T. Olson .................. 268 -- *
Anaya K. Vardya .................. 8,763(9) -- * *
Carlene M. Ellis ................. 40,000(10) -- * *
William C. McCormick ............. 13,250(11) -- * *
Carl W. Neun ..................... 1,000 -- *
Dr. Koichi Nishimura ............. 32,500(12) -- * *
Robert C. Strandberg ............. 5,000(13) -- * *
All executive officers and
directors as a group
(11 people) .................... 683,037(14) -- 10.5% 8.0%
</TABLE>

41
<PAGE>
- ------------------------

* Less than 1% of the outstanding shares of common stock.

(1) Excludes an option, exercisable within 30 days, to purchase up to 150,000
shares granted to the underwriters to cover over allotments.

(2) Based upon a Schedule 13G/A filed with the Securities and Exchange
Commission on February 7, 2000 by Paradigm Capital Management, Inc.

(3) Based upon a Schedule 13G/A filed with the Securities and Exchange
Commission on February 11, 2000 by The TCW Group, Inc., a parent holding
company, and Robert Day, an individual who may be deemed to control the TCW
Group, Inc.

(4) Based upon a Schedule 13G filed with the Securities and Exchange Commission
on February 9, 2000 by Dimensional Fund Advisors Inc.

(5) Includes options to purchase 290,000 shares that are currently exercisable
or become exercisable before April 28, 2000.

(6) Includes options to purchase 66,500 shares that are currently exercisable
or become exercisable before April 28, 2000.

(7) Includes options to purchase 53,750 shares that are currently exercisable
or become exercisable before April 28, 2000.

(8) Includes options to purchase 14,293 shares that are currently exercisable
or become exercisable before April 28, 2000.

(9) Includes options to purchase 6,875 shares that are currently exercisable or
become exercisable before April 28, 2000.

(10) Includes options to purchase 32,500 shares that are currently exercisable
or become exercisable before April 28, 2000.

(11) Includes options to purchase 11,250 shares that are currently exercisable
or become exercisable before April 28, 2000.

(12) Includes options to purchase 32,500 shares that are currently exercisable
or become exercisable before April 28, 2000.

(13) Includes options to purchase 5,000 shares that are currently exercisable
or become exercisable before April 28, 2000.

(14) Includes options to purchase 512,668 shares held by executive officers and
directors that are currently exercisable or become exercisable before
April 28, 2000.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C.

LISTING

Our common stock is listed on the Nasdaq National Market under the trading
symbol "MERX."

42
<PAGE>
UNDERWRITING

Under the terms and conditions in an agreement among the underwriters and
us, each of the underwriters named below, through their representatives, Thomas
Weisel Partners LLC, William Blair & Company, L.L.C. and Needham &
Company, Inc., has severally agreed to purchase from us and the selling
shareholder the number of shares of common stock opposite its name below:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
<S> <C>
Thomas Weisel Partners LLC..................................
William Blair & Company, L.L.C..............................
Needham & Company, Inc......................................
---------
Total................................................... 3,000,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters are conditioned upon a number of factors, including approval of
legal matters by counsel. The nature of the underwriters' obligations commits
them to purchase and pay for all of the shares of common stock listed above if
any are purchased.

The underwriting agreement provides that the selling shareholder and we will
indemnify the underwriters against liabilities specified in the underwriting
agreement under the Securities Act of 1933, or will contribute to payments that
the underwriters may be required to make relating to these liabilities.

OVER-ALLOTMENT OPTIONS

We and the selling shareholder have granted 30-day over-allotment options to
the underwriters to purchase up to 300,000 and 150,000 additional shares of
common stock, respectively, at the public offering price less the underwriting
discount and commissions as shown on the cover page of this prospectus. If the
underwriters exercise these options in whole or in part, then each of the
underwriters will be severally committed, provided the conditions described in
the underwriting agreement are satisfied, to purchase the additional shares of
common stock in proportion to their respective purchase commitments shown in the
above table.

COMMISSIONS AND DISCOUNTS

The underwriters propose to offer the shares of common stock directly to the
public at the public offering price shown on the cover page of this prospectus,
and at that price less a concession not in excess of $ per share of common
stock to other dealers specified in a master agreement among underwriters that
are members of the National Association of Securities Dealers, Inc. The
underwriters may allow, and those dealers may reallow, concessions not in excess
of $ per share of common stock to these other dealers. After this offering,
the offering price, concessions and other selling terms may be changed by the
underwriters. The common stock is offered upon receipt and acceptance by the
underwriters and to other conditions, including the right to reject orders in
whole or in part.

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<PAGE>
This table summarizes the compensation to be paid to the underwriters by us
and the selling shareholder and the expenses payable by us:

<TABLE>
<CAPTION>
TOTAL
-------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions paid by us.........
Underwriting discounts and commissions paid by the selling
shareholder.............................................
Expenses..................................................
</TABLE>

The underwriters do not expect to confirm sales of common stock to any
accounts over which they exercise discretionary authority.

NO SALES OF SIMILAR SECURITIES

In addition, we have agreed that for a period of 90 days after the date of
this prospectus we will not, without the prior written consent of Thomas Weisel
Partners LLC, offer, sell or otherwise dispose of any shares of our capital
stock, except for the shares of common stock being offered and the shares of
common stock issuable upon the exercise of options and warrants outstanding on
the date of this prospectus.

INFORMATION REGARDING THOMAS WEISEL PARTNERS LLC

Due to the fact that Thomas Weisel Partners LLC, one of the representatives
of the underwriters, was organized within the last three years, we are providing
you the following information. Thomas Weisel Partners LLC was organized and
registered as a broker-dealer in December 1998. Since December 1998, Thomas
Weisel Partners has been named as a lead or co-manager of, or as a syndicate
member in, numerous public offerings of equity securities. Thomas Weisel
Partners does not have any material relationship with us or any of our officers,
directors or other controlling persons, except with respect to its contractual
relationship with us pursuant to the underwriting agreement entered into in
connection with this offering.

MARKET STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

To facilitate this offering, persons participating in the offering may
engage in transactions that stabilize, maintain or otherwise affect the price of
the common stock during and after this offering. Specifically, the underwriters
may over-allot or otherwise create a short position in the common stock for
their own account by selling more shares of common stock than we have sold to
them. The underwriters may elect to cover any short position by purchasing
shares of common stock in the open market or by exercising the over-allotment
options granted to the underwriters. In addition, the underwriters may stabilize
or maintain the price of the common stock by bidding for or purchasing shares of
common stock in the open market and may impose penalty bids. Under these penalty
bids, selling concessions that are allowed to syndicate members or other
broker-dealers participating in this offering are reclaimed if shares of common
stock previously distributed in this offering are repurchased, usually to
stabilize the market. The effect of these transactions may be to stabilize or
maintain the market price at a level above that which might otherwise prevail in
the open market. No representation is made as to the magnitude or effect of any
stabilization or other

44
<PAGE>
transactions. These transactions may be affected on the Nasdaq National Market
or otherwise and may be discontinued at any time after they are commenced.

LEGAL MATTERS

Perkins Coie LLP, Portland, Oregon, will pass upon the validity of the
issuance of the shares of common stock offered hereby. Latham & Watkins, Menlo
Park, California, will pass upon certain legal matters in connection with this
offering for the underwriters.

EXPERTS

The financial statements as of May 31, 1998 and May 31, 1999 and for the
years ended May 31, 1997, May 31, 1998 and May 31, 1999 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing in this prospectus and have been so included in
reliance upon the report of this firm given upon their authority as experts in
accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We file reports, proxy statements and other information with the Securities
and Exchange Commission. You may read any document we file at the SEC's public
reference rooms in Washington, D.C., Chicago, Illinois and New York, New York.
Please call the SEC toll free at 1-800-732-0330 for information about its public
reference rooms. You may also read our filings at the SEC's web site at
www.sec.gov.

We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933. This prospectus does not contain all of the information
in the registration statement. We have omitted parts of the registration
statement, as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC's public
reference rooms or from its web site. Our statements in this prospectus about
the contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.

The SEC allows us to "incorporate by reference" into this prospectus
information we file with it. This means that we can disclose important
information to you by referring you to those documents. The information we
incorporate by reference is considered a part of this prospectus, and later
information we file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below:

1. Our Quarterly Reports on Form 10-Q for the quarters ended August 28,
1999 and November 27, 1999;

2. Our Annual Report on Form 10-K for the fiscal year ended May 29, 1999;

3. Our Proxy Statement on Schedule 14A, filed on August 18, 1999;

4. The description of our capital stock that is contained in our
registration statement on Form 8-A filed under the Exchange Act and all
amendments or reports filed for the purpose of updating this description;
and

5. All other documents filed by Merix pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this prospectus and prior
to the termination of this offering.

You may obtain copies of these documents, other than exhibits, free of
charge by contacting our corporate secretary at our principal offices, which are
located at 1521 Poplar Lane, Forest Grove, Oregon 97116, telephone number
(503) 359-9300.

45
<PAGE>
MERIX CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report................................ F-2

Balance Sheets.............................................. F-3

Statements of Operations.................................... F-4

Statement of Shareholders' Equity........................... F-5

Statements of Cash Flows.................................... F-6

Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

MERIX CORPORATION

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Merix Corporation

We have audited the accompanying balance sheets of Merix Corporation as of
May 30, 1998 and May 29, 1999 and the related statements of operations,
shareholders' equity, and cash flows for the years ended May 31, 1997, May 30,
1998 and May 29, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Merix Corporation as of May 30, 1998 and
May 29, 1999, and the results of its operations and its cash flows for the years
ended May 31, 1997, May 30, 1998 and May 29, 1999 in conformity with generally
accepted accounting principles.

DELOITTE & TOUCHE LLP

Portland, Oregon
June 25, 1999

F-2
<PAGE>
MERIX CORPORATION

BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
MAY 31,
--------------------- FEBRUARY 28,
1998 1999 2000
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 15,430 $ 5,874 $ 16,538
Short-term investments............................... 7,469 7,507 --
Accounts receivable, net of allowances of $259, $237
and $237........................................... 19,303 15,784 20,758
Accounts receivable--affiliates...................... 2,501 1,724 1,256
Inventories.......................................... 10,795 6,537 9,206
Income tax refund receivable......................... 759 -- --
Deferred tax asset................................... 1,577 713 713
Other current assets................................. 2,454 941 749
-------- -------- --------
Total current assets................................. 60,288 39,080 49,220
Property, plant and equipment, net..................... 70,262 60,892 56,854
Goodwill, net of accumulated amortization of $432...... 2,027 -- --
Deferred tax asset..................................... -- 9,093 6,608
Other assets........................................... 2,591 318 613
-------- -------- --------
Total assets........................................... $135,168 $109,383 $113,295
======== ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 10,584 $ 12,104 $ 13,325
Accrued compensation................................. 2,512 2,512 3,718
Current portion of long-term debt.................... 4,529 8,000 9,149
Other accrued liabilities............................ 1,908 2,142 2,242
-------- -------- --------
Total current liabilities............................ 19,533 24,758 28,434
Long-term debt......................................... 40,000 34,299 29,150
Deferred tax liability................................. 4,171 -- --
Other liabilities...................................... 1,273 -- --
-------- -------- --------
Total liabilities.................................... 64,977 59,057 57,584
-------- -------- --------
Commitments and contingencies.......................... -- -- --
Shareholders' equity:
Preferred stock, no par value, 10,000 shares
authorized; none issued............................ -- -- --
Common stock, no par value, 50,000 shares authorized;
issued and outstanding: May 31, 1998: 6,203 shares,
May 31, 1999; 6,370 shares; February 28, 2000:
6,510 shares....................................... 44,625 45,194 46,689
Unearned compensation................................ (250) (3) --
Retained earnings.................................... 25,816 5,135 9,022
-------- -------- --------
Total shareholders' equity............................. 70,191 50,326 55,711
-------- -------- --------
Total liabilities and shareholders' equity............. $135,168 $109,383 $113,295
======== ======== ========
</TABLE>

See the accompanying Notes to Financial Statements.

F-3
<PAGE>
MERIX CORPORATION

STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED MAY 31, FEBRUARY 28,
--------------------------------- --------------------
1997 1998 1999 1999 2000
--------- --------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................ $156,184 $178,620 $113,982 $ 81,050 $109,654
Cost of sales........................ 134,328 151,100 110,534 82,471 89,885
-------- -------- -------- -------- --------
Gross profit (loss).................. 21,856 27,520 3,448 (1,421) 19,769
-------- -------- -------- -------- --------
Operating expenses:
Engineering........................ 6,013 5,854 4,100 3,058 3,269
Selling, general and
administrative................... 13,822 14,266 9,045 7,032 7,874
Restructuring...................... -- 1,878 21,750 21,750 --
-------- -------- -------- -------- --------
Total operating expenses......... 19,835 21,998 34,895 31,840 11,143
-------- -------- -------- -------- --------
Operating income (loss).............. 2,021 5,522 (31,447) (33,261) 8,626
Interest income...................... 1,380 1,432 912 700 520
Interest expense..................... (3,247) (3,313) (2,906) (2,071) (2,362)
Other income (expense), net.......... 137 (290) 85 119 (412)
-------- -------- -------- -------- --------
Income (loss) before taxes........... 291 3,351 (33,356) (34,513) 6,372
Income tax benefit (expense)......... 30 (1,213) 12,675 13,115 (2,485)
-------- -------- -------- -------- --------
Net income (loss).................... $ 321 $ 2,138 $(20,681) $(21,398) $ 3,887
======== ======== ======== ======== ========
Net income (loss) per share:
Basic.............................. $ 0.05 $ 0.35 $ (3.30) $ (3.43) $ 0.60
======== ======== ======== ======== ========
Diluted............................ $ 0.05 $ 0.34 $ (3.30) $ (3.43) $ 0.58
======== ======== ======== ======== ========
Shares used in per share
calculations:
Basic.............................. 6,146 6,194 6,269 6,245 6,428
Diluted............................ 6,260 6,272 6,269 6,245 6,667
</TABLE>

See the accompanying Notes to Financial Statements.

F-4
<PAGE>
MERIX CORPORATION

STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK
------------------- UNEARNED RETAINED
SHARES AMOUNT COMPENSATION EARNINGS TOTAL
-------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Balance at May 31, 1996.................. 6,133 $43,733 $(737) $ 23,357 $ 66,353
Net income............................... -- -- -- 321 321
Exercise of stock options................ 35 316 -- -- 316
Tax benefit related to stock-based
compensation........................... -- 261 -- -- 261
Restricted stock awards.................. 19 364 (364) --
Amortization of unearned compensation.... -- -- 434 -- 434
Shares surrendered or canceled........... (20) (314) 45 -- (269)
----- ------- ----- -------- --------
Balance at May 31, 1997.................. 6,167 44,360 (622) 23,678 67,416
Net income............................... -- -- -- 2,138 2,138
Exercise of stock options................ 55 525 -- -- 525
Tax benefit related to stock-based
compensation........................... -- 122 -- -- 122
Amortization of unearned compensation.... -- -- 122 -- 122
Shares surrendered or canceled........... (19) (382) 250 -- (132)
----- ------- ----- -------- --------
Balance at May 31, 1998.................. 6,203 44,625 (250) 25,816 70,191
Net loss................................. -- -- -- (20,681) (20,681)
Stock issued under defined contribution
plan................................... 184 907 -- -- 907
Amortization of unearned compensation.... -- -- (90) -- (90)
Shares surrendered or canceled........... (17) (338) 337 -- (1)
----- ------- ----- -------- --------
Balance at May 31, 1999.................. 6,370 45,194 (3) 5,135 50,326
Net income (unaudited)................... -- -- -- 3,887 3,887
Exercise of stock options (unaudited).... 54 432 -- -- 432
Tax benefit related to stock-based
compensation (unaudited)............... -- 171 -- -- 171
Stock issued under defined contribution
plan (unaudited)....................... 86 894 -- -- 894
Amortization of unearned compensation
(unaudited)............................ -- -- 3 -- 3
Shares surrendered or canceled
(unaudited)............................ -- (2) (2)
----- ------- ----- -------- --------
Balance at February 28, 2000
(unaudited)............................ 6,510 $46,689 $ 0 $ 9,022 $ 55,711
===== ======= ===== ======== ========
</TABLE>

See the accompanying Notes to Financial Statements.

F-5
<PAGE>
MERIX CORPORATION

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED MAY 31, FEBRUARY 28,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $ 321 $ 2,138 $(20,681) $(21,398) $ 3,887
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 8,762 10,261 8,081 6,125 6,129
Deferred income taxes................................... 2,398 2,479 (12,400) (13,115) 2,485
Amortization of unearned compensation................... 434 122 (90) 42 3
Restructuring expense................................... -- 1,149 16,798 16,798 --
Contribution of common stock to defined contribution
plan.................................................. -- -- 912 608 894
Other................................................... (85) 68 169 31 266
Changes in assets and liabilities:
Accounts receivable................................... 382 2,353 4,296 6,634 (4,506)
Inventories........................................... (2,207) (2,153) 4,258 3,807 (2,669)
Income tax refund receivable.......................... (2,048) 1,671 759 -- --
Other current assets.................................. (1,228) (637) 1,513 940 192
Accounts payable...................................... 2,555 573 1,520 1,471 1,221
Accrued compensation.................................. (1,418) (572) -- 212 1,206
Income taxes payable.................................. (67) -- -- -- --
Other accrued liabilities............................. (428) (582) (1,044) 2,464 271
-------- -------- -------- -------- -------
Net cash provided by operating activities................. 7,371 16,870 4,091 4,619 9,379

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (17,769) (18,466) (15,914) (12,922) (7,315)
Short-term investments:
Purchases............................................. (15,110) (13,500) (11,016) (11,016) --
Maturities............................................ 13,717 14,591 10,978 9,546 7,507
Net proceeds from sale-leaseback of equipment........... -- -- -- -- 4,492
Proceeds from sale of assets............................ 422 507 4,537 4,504 171
Other assets............................................ -- (1,306) -- -- --
-------- -------- -------- -------- -------
Net cash provided by (used in) investing activities....... (18,740) (18,174) (11,415) (9,888) 4,855

CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings:
Proceeds.............................................. 40,000 -- -- -- --
Principal payments.................................... (23,951) (121) (2,230) (2,230) (4,000)
Exercise of stock options............................... 91 525 -- -- 432
Deferred financing costs................................ (382) -- -- -- --
Reacquired common stock................................. (43) (207) (2) (2) (2)
-------- -------- -------- -------- -------
Net cash provided by (used in) financing activities....... 15,715 197 (2,232) (2,232) (3,570)
-------- -------- -------- -------- -------
Increase (decrease) in cash and cash equivalents.......... 4,346 (1,107) (9,556) (7,501) 10,664
Cash and cash equivalents at beginning of period.......... 12,191 16,537 15,430 15,430 5,874
-------- -------- -------- -------- -------
Cash and cash equivalents at end of period................ $ 16,537 $ 15,430 $ 5,874 $ 7,929 $16,538
======== ======== ======== ======== =======

SUPPLEMENTAL DISCLOSURE:
Cash paid for:
Interest, net of amounts capitalized.................... $ 3,205 $ 3,116 $ 2,951 $ 1,367 $ 1,756
Noncash transactions:
Tax benefit related to stock-based compensation......... 261 122 (5) 5 171
Surrender of unvested shares of restricted stock........ 45 175 337 337 --
Receipt of common stock for exercise of stock options... 225 -- -- -- --
</TABLE>

See the accompanying Notes to Financial Statements.

F-6
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

ALL INFORMATION SUBSEQUENT TO MAY 31, 1999 AND INFORMATION FOR THE NINE MONTHS
ENDED FEBRUARY 28, 1999 AND FEBRUARY 28, 2000 IS UNAUDITED.

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Merix Corporation (the Company or Merix), an Oregon corporation, was formed
in March 1994 to succeed the business conducted by the Circuit Board Division of
Tektronix, Inc. (Tektronix). On June 1, 1994, the Company acquired the assets
and assumed certain liabilities of the division in connection with the initial
public offering of its common stock, and began to operate as an independent
corporation.

BUSINESS

The Company is a leading manufacturer of technologically advanced electronic
interconnect solutions for use in sophisticated electronic equipment. The
Company's principal products are complex multilayer printed circuit boards,
which are the basic platforms used to interconnect microprocessors, integrated
circuits and other components that are essential to the operation of electronic
products and systems. The Company provides solutions to original equipment
manufacturers and contract manufacturers in various segments of the electronics
industry, including the communications, computer, and test and measurement
segments. The Company provides its customers with a broad range of products and
services including quick-turn prototypes, volume and pre-production of printed
circuit boards as well as backplanes and backplane assemblies.

FISCAL YEAR

The Company's fiscal year is the 52 or 53-week period ending the last
Saturday in May. Fiscal year 1999 was a 52-week year ending May 29, fiscal year
1998 was a 52-week year ended May 30 and fiscal year 1997 was a 53-week year
ended May 31. For convenience, all of the Company's fiscal years are presented
as ended on May 31, and all interim periods are presented as ended on the last
day of the last calendar month of the period, with February always ending on
February 28.

UNAUDITED INTERIM FINANCIAL INFORMATION

All information subsequent to May 31, 1999 is unaudited. In the opinion of
management, the unaudited interim financial statements as of February 28, 1999
and February 28, 2000 and for the nine month periods then ended have been
prepared on the same basis as the annual financial statements and reflect all
adjustments that are necessary for the fair presentation of results for the
periods shown. The results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year or for any interim
period.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during the reporting
period. Actual results could differ from those estimates.

F-7
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BALANCE SHEET FINANCIAL INSTRUMENTS: FAIR VALUES

The carrying amounts reported in the balance sheet for investments, accounts
receivable and accounts payable approximate fair value because of the immediate
or short-term maturity of these financial instruments. The carrying amount for
long-term debt approximates its fair value because the related interest rates
are comparable to rates currently available to the Company for debt with similar
terms and maturities.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents are comprised of cash in banks and highly liquid
investments with maturities of three months or less when purchased.

SHORT-TERM INVESTMENTS

The Company classifies securities at acquisition into one of three
categories: held to maturity, available for sale, or trading. At May 31, 1998
and 1999, all of the Company's investments with original maturities of more than
90 days were classified as held to maturity and valued at amortized cost.

INVENTORIES

Inventories are valued at the lower of cost or market and include materials,
labor and manufacturing overhead. Cost is determined on the first-in, first-out
(FIFO) basis.

PROPERTY AND DEPRECIATION

Property, plant and equipment is carried at cost less accumulated
depreciation. Costs of improvements, including interest, are capitalized.
Depreciation is calculated based on the estimated useful lives of depreciable
assets as follows: 40 years for buildings, 10 to 20 years for grounds, 3 to
10 years for machinery and equipment, and is provided using the straight-line
method.

LONG-LIVED ASSETS

The Company's long-lived assets are reviewed for impairment when
circumstances indicate that the carrying amount may not be recoverable. If the
sum of expected undiscounted future cash flows is less than the carrying amount
of the asset, a loss is recognized.

GOODWILL

The cost of goodwill is amortized on a straight-line basis over the
estimated period benefited of 15 years. Goodwill amortization for fiscal years
1997, 1998 and 1999 was $169, $167, and $41, respectively.

F-8
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION

Revenue from product sales is recognized at the time of shipment. Service
revenue is recognized as services are provided.

ENGINEERING EXPENSE

Expenditures for engineering of products and manufacturing processes are
expensed as incurred.

WARRANTY

The Company generally warrants its products for a period of up to four
months from shipment. Accordingly, a provision for the estimated cost of the
warranty is recorded upon shipment.

NET INCOME (LOSS) PER SHARE

Basic net income per share is computed using the weighted average number of
shares of common stock outstanding for the period. Diluted income per share is
computed using the weighted average number of shares of common stock and
dilutive common equivalent shares related to stock options outstanding during
the period. Incremental shares, related to outstanding stock options of 114,061
and 78,501 for fiscal years 1997 and 1998 and 239,558 for the nine months ended
February 28, 2000 were included in the calculations of diluted net income per
share.

Diluted net loss per share is computed using the weighted average number of
shares of common stock outstanding for the period. Stock options to purchase
1,199,445 shares for the nine months ended February 28, 1999 and 1,260,890
shares for fiscal year 1999 were not included in the net loss per share
calculations, because to do so would have been antidilutive. Of the stock
options outstanding at February 28, 2000, 171,977 had exercise prices above the
market price of the underlying common stock at that date.

COMPREHENSIVE INCOME (LOSS)

The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income" which establishes requirements for
reporting comprehensive income (loss) in financial statements. Comprehensive
income (loss) as defined, includes all changes in equity during a period from
non-owner sources. The Company has not had any transactions that are required to
be reported in comprehensive (loss) income in the periods presented, except for
net income (loss).

INCOME TAXES

The Company accounts for income taxes under the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are

F-9
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.

SEGMENT REPORTING

The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" (SFAS 131). Based on definitions contained
within SFAS 131, the Company has determined that it operates within one segment.
Additionally, the Company has no material revenues from external customers
outside the United States and has no long-lived assets outside the United
States. See Note 12 for information regarding significant customers.

STOCK-BASED COMPENSATION

The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") and complies with the
disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." Under APB No. 25, compensation expense is based on the
difference, if any, on the date of grant, between the exercise price of the
instrument granted and the fair value of the underlying stock.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting
and reporting standards requiring every derivative instrument be recorded in the
balance sheet as either an asset or liability measured at its fair value.
SFAS 133 also requires changes in the derivative's fair value be recognized
currently in results of operations unless specific hedge accounting criteria are
met. SFAS 133, as amended by SFAS 137, is effective for fiscal years beginning
after June 15, 2000. The Company does not expect SFAS 133 to have a material
impact on its financial statements.

NOTE 2. RESTRUCTURING

In the first quarter of fiscal 1999, the Company implemented a restructuring
plan designed to improve capacity utilization and lower its cost structure. The
Company closed its Loveland, Colorado facility in October 1998 and laid off
approximately 340 manufacturing and support employees located there, sold its
Soladyne facility in San Diego, California and laid off approximately 35
employees from administrative, engineering and support functions at its Forest
Grove, Oregon location. The Company also transferred a portion of the
manufacturing equipment used in the Loveland facility to its Forest Grove site.
Installation of the manufacturing equipment was completed in December 1999.

F-10
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 2. RESTRUCTURING (CONTINUED)
In the third quarter of fiscal 1999, the Company reversed $7,109 of the
restructuring expense taken in the first quarter of fiscal 1999, primarily
because lease termination costs at Loveland were $3,059 less than the Company
had anticipated, the Company was able to realize a higher value on inventory
than it had previously written down and it realized $2,826 more from the sale of
equipment than it had expected. The Company also spent less on severance
benefits than it expected.

The components of the restructuring expense, and the subsequent reversal,
were as follows:

Cash proceeds from asset sales of $4.8 million are reflected in the amounts
shown above for write-down and write-off of manufacturing equipment and
inventory. All cash payments for severance benefits, lease termination costs and
other costs related to the restructuring expense were paid in fiscal 1999. As of
May 31, 1999, there were no outstanding liabilities associated with the
restructuring plan.

In the second quarter of fiscal year 1998, the Company recorded a $1,878
charge for the costs associated with a restructuring plan undertaken to improve
the Company's profitability, which included a work force reduction, the
write-off of certain manufacturing equipment and other miscellaneous costs. All
liabilities associated with the restructuring plan were paid in the third
quarter of fiscal year 1998.

NOTE 3. CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable and investments.
In total, six customers represented approximately 73% of the accounts receivable
balance at May 31, 1999, individually ranging from 5% to 19%. The risk in trade
accounts receivable is limited due to the creditworthiness of companies
comprising the Company's customer base and their dispersion across many
different

F-11
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 3. CONCENTRATIONS OF CREDIT RISK (CONTINUED)
sectors of the electronics industry and geographies. The Company has not had
significant losses related to its accounts receivable in the past. The risk in
investments is limited due to the creditworthiness of investees comprising the
portfolio and the diversity of the portfolio. The Company does not believe that
at May 31, 1999, and at February 28, 2000, it had any significant credit risks.

NOTE 4. INVENTORIES

<TABLE>
<CAPTION>
MAY 31,
------------------- FEBRUARY 28,
1998 1999 2000
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.............................. $ 3,684 $1,170 $1,594
Work in process............................ 3,638 4,144 4,281
Finished goods............................. 3,473 1,223 3,331
------- ------ ------
Total.................................... $10,795 $6,537 $9,206
======= ====== ======
</TABLE>

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
MAY 31,
--------------------- FEBRUARY 28,
1998 1999 2000
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Land.................................... $ 2,190 $ 2,190 $ 2,190
Buildings and grounds................... 24,267 24,065 24,685
Machinery and equipment................. 100,282 85,563 85,102
Construction in progress................ 2,828 1,618 1,466
-------- -------- --------
Total................................. 129,567 113,436 113,443
Accumulated depreciation................ (59,305) (52,544) (56,589)
-------- -------- --------
Property, plant and equipment, net.... $ 70,262 $ 60,892 $ 56,854
======== ======== ========
</TABLE>

NOTE 6. LONG-TERM DEBT

<TABLE>
<CAPTION>
MAY 31,
------------------- FEBRUARY 28,
1998 1999 2000
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Senior unsecured notes.................... $40,000 $40,000 $36,000
Note payable to Tektronix................. 4,437 2,299 2,299
Other..................................... 92 -- --
------- ------- -------
Total................................... 44,529 42,299 38,299
Less current portion.................... (4,529) (8,000) (9,149)
------- ------- -------
Long-term debt.......................... $40,000 $34,299 $29,150
======= ======= =======
</TABLE>

F-12
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 6. LONG-TERM DEBT (CONTINUED)
The Company has a secured note payable to Tektronix, Inc. with $2,299
outstanding at February 28, 2000, which bears interest at 7.5%. The note is
payable as follows: $1,149 in June 2000 and $1,150 in June 2001.

At February 28, 2000, the Company has $36,000 outstanding under a private
placement of senior unsecured notes with two insurance companies, with interest
payable semi-annually at 7.92%. The notes provide for semi-annual principal
payments of $4,000, which commenced in September 1999 with a final principal
payment of $8,000 payable in September 2003. The notes contain certain financial
covenants, including minimum net worth, debt ratio and interest coverage. As of
February 28, 2000, the Company was in compliance with all covenants.

Future principal payments of long-term debt are as follows: 2000, $4,000;
2001, $9,149; 2002, $9,150; 2003, $8,000; and 2004, $8,000.

NOTE 7. LEASE AGREEMENT

In August 1999, the Company entered into a lease agreement, which allows for
the sale and leaseback up to $5,000 of manufacturing equipment. As of
February 28, 2000, the Company had sold $4,997 of equipment under this
agreement. Gains resulting from these sales are deferred and amortized on a
straight-line basis over the life of the lease. The lease is classified as an
operating lease in accordance with SFAS No. 13, "Accounting for Leases."

NOTE 8. STOCK-BASED COMPENSATION PLAN

The Company has a 1994 Stock Incentive Plan (the 1994 Plan) for employees,
consultants and directors of the Company. The 1994 Plan, as amended, covers
2,100,000 shares of common stock and permits the grant of incentive stock
options, non-qualified stock options, stock appreciation rights, stock and cash
bonus rights, restricted stock awards and performance based awards to employees,
independent contractors and consultants. A committee of the Board of Directors
has the authority to determine non-qualified stock option prices. To date, all
options have been granted at the fair market value of the stock at the date of
grant. The 1994 Plan provides for automatic option grants to directors not
affiliated with Merix or Tektronix of 20,000 shares at the time first elected to
the board and 5,000 shares annually thereafter. The options generally become
exercisable ratably over a four-year period beginning one year after the date of
grant and expire between six and ten years after the date of grant.

F-13
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 8. STOCK-BASED COMPENSATION PLAN (CONTINUED)
A summary of non-qualified stock option activity is as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF PRICE
SHARES PER SHARE
--------- ---------
<S> <C> <C>
Outstanding at May 31, 1996............................ 907,406 $18.33
Granted.............................................. 457,506 19.73
Canceled............................................. (284,041) 28.76
Exercised............................................ (34,939) 9.04
--------- ------
Outstanding at May 31, 1997............................ 1,045,932 16.42
Granted.............................................. 392,120 17.40
Canceled............................................. (190,481) 19.79
Exercised............................................ (54,902) 9.57
--------- ------
Outstanding at May 31, 1998............................ 1,192,669 16.52
Granted.............................................. 852,902 7.29
Canceled............................................. (784,656) 17.32
Exercised............................................ (25) 5.13
--------- ------
Outstanding at May 31, 1999............................ 1,260,890 9.79
Granted.............................................. 340,850 9.95
Canceled............................................. (77,010) 17.20
Exercised............................................ (54,069) 7.99
--------- ------
Outstanding at February 28, 2000 (unaudited)........... 1,470,661 $ 9.50
========= ======
</TABLE>

The Company's Board of Directors approved a plan which allowed employees,
except executive officers, to reprice existing stock options to the fair market
value of the underlying stock on June 30, 1998. Under the plan, employees
received nine options in exchange for every 10 options they elected to reprice.
The vesting schedule and term of repriced options remained the same as the
original option. During fiscal year 1999, options to purchase 332,820 shares at
a weighted average price per share of $18.39 were exchanged for options to
purchase 298,977 shares at a weighted average price per share of $9.94.

Restricted stock awards are subject to vesting and other terms as specified
at the time of issuance by a committee of the Board of Directors. Generally,
restricted stock awards vest ratably over a three-year period beginning on the
first anniversary of their issuance. Unearned compensation expense is recognized
ratably over the vesting period. There were no restricted stock awards in fiscal
years 1998 or 1999. The weighted average per share fair value of restricted
stock awards issued was $18.79 in fiscal year 1997.

F-14
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 8. STOCK-BASED COMPENSATION PLAN (CONTINUED)
A summary of restricted stock award activity is as follows:

<TABLE>
<CAPTION>
NUMBER
OF VALUE
SHARES PER SHARE
-------- ---------------------
<S> <C> <C>
Unvested balance at May 31, 1996.................. 57,702 $9.00--$37.75
Awarded......................................... 19,400 16.50--21.25
Vested.......................................... (27,167) 9.00--37.75
Canceled........................................ (5,000) 9.00
------- ---------------------
Unvested balance at May 31, 1997.................. 44,935 9.00--37.75
Awarded......................................... -- --
Vested.......................................... (20,135) 13.62--19.12
Canceled........................................ (6,600) 17.12--33.25
------- ---------------------
Unvested balance at May 31, 1998.................. 18,200 16.50--37.25
Awarded......................................... -- --
Vested.......................................... (1,200) 5.75--11.13
Canceled........................................ (16,600) 19.00--37.25
------- ---------------------
Unvested balance at May 31, 1999.................. 400 16.50
Awarded......................................... -- --
Vested.......................................... (400) 11.38
Canceled........................................ -- --
------- ---------------------
Unvested balance at February 28, 2000
(unaudited)..................................... 0 $0
======= =====================
</TABLE>

SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) defines a
fair value based method of accounting for employee stock options and similar
equity instruments and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation cost for those plans using
the method of accounting prescribed by Accounting Principles Board Opinion
No. 25 (APB 25). Entities electing to remain with the accounting in APB 25 must
make pro forma disclosures of net income (loss) and, if presented, net income
(loss) per share, as if the fair value based method of accounting defined in
SFAS 123 had been adopted.

The Company has elected to account for its stock-based compensation plans
under APB 25; however, the Company has computed, for pro forma disclosure
purposes, the value of all stock options granted during fiscal years 1997, 1998,
1999 and the nine month period ended

F-15
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 8. STOCK-BASED COMPENSATION PLAN (CONTINUED)
February 28, 2000 using the Black-Scholes option pricing model as prescribed by
SFAS 123 using the following weighted average assumptions:

<TABLE>
<CAPTION>
NINE
MONTHS
YEARS ENDED MAY 31, ENDED
------------------------------------ FEBRUARY 28,
1997 1998 1999 2000
---------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Risk-free interest rate................... 6.06% 5.98% 5.12% 5.75%
Expected dividend yield................... 0% 0% 0% 0%
Expected lives............................ 2.97 years 3.16 years 2.61 years 2.99 years
Expected volatility....................... 59% 57% 71% 79%
</TABLE>

Using the Black-Scholes methodology, the total value of stock options
granted during the 1997, 1998 and 1999 fiscal years, and the nine month period
ended February 28, 2000, was $3,330, $2,909, $2,016, and $1,774, respectively,
which would be amortized on a pro forma basis over the vesting period of the
options (typically four years). The weighted average fair value of options
granted during the 1997, 1998 and 1999 fiscal years, and the nine month period
ended February 28, 2000, was $7.30, $7.59, $3.20 and $5.20 per share,
respectively.

If the Company had accounted for its 1994 Plan in accordance with SFAS 123,
the Company's net income (loss) and net income (loss) per share would
approximate the pro forma disclosures below:

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED MAY 31, ENDED
------------------------------ FEBRUARY 28,
1997 1998 1999 2000
-------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss) as reported..................... $ 321 $2,138 $(20,681) $3,887
Net income (loss) pro forma....................... (866) 834 (21,492) 3,203
Reported diluted net income (loss) per share...... $ 0.05 $ 0.34 $ (3.30) $ 0.58
Pro forma diluted net income (loss) per share..... $(0.14) $ 0.13 $ (3.43) $ 0.48
</TABLE>

The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to
June 1, 1995, and additional awards are anticipated in future years.

F-16
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 8. STOCK-BASED COMPENSATION PLAN (CONTINUED)

The following table summarizes information about stock options outstanding
at February 28, 2000 (unaudited):

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------- -----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE NUMBER OF AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE SHARES EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- ------------------------ ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$3.06--$5.63 349,012 7.38 $ 4.27 64,243 $ 4.02
5.88--8.75 86,763 5.76 7.17 4,449 6.18
9.00--9.00 326,220 4.17 9.00 325,845 9.00
9.25--10.06 394,766 6.10 9.98 161,050 9.95
10.38--31.38 313,900 6.19 15.90 105,230 20.61
- ------------------------ --------- ---- -------- ------- --------
$3.06--$31.38 1,470,661 5.97 $ 9.50 660,817 $ 10.58
======================== ========= ==== ======== ======= ========
</TABLE>

NOTE 9. SHAREHOLDER RIGHTS PLAN

On March 25, 1997, the Board of Directors adopted a Shareholder Rights Plan
(the Plan) designed to preserve and enhance shareholder value and the Company's
ability to carry out its long-term business strategy, and reserved 500,000
shares of Series A Preferred Stock for purposes of the Plan. In connection with
the adoption of the Plan, the Board of Directors declared a dividend
distribution of one Right per share of common stock, payable to the shareholders
of record on April 25, 1997. A Right enables the holder, under certain
circumstances, to purchase either Series A Preferred or Common Stock of the
Company. The Company may redeem the Rights for $0.001 per Right under certain
circumstances.

NOTE 10. INCOME TAXES

Income tax expense consists of federal and state income taxes. Deferred
income taxes are determined based on differences between the financial reporting
and tax bases of assets and liabilities, using currently enacted tax rates.

F-17
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 10. INCOME TAXES (CONTINUED)
The provision for (benefit from) income taxes consisted of the following:

<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
YEARS ENDED MAY 31, FEBRUARY 28,
------------------------------ -------------
1997 1998 1999 2000
-------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current:
Federal.......................... $(2,428) $(1,266) $ (275) $ --
State............................ -- -- -- --
------- ------- -------- --------
Total current.................. (2,428) (1,266) (275) --
Deferred:
Federal.......................... 2,357 2,236 (10,962) 2,206
State............................ 41 243 (1,438) 279
------- ------- -------- --------
Total deferred................. 2,398 2,479 (12,400) 2,485
------- ------- -------- --------
Income tax (benefit) expense....... $ (30) $ 1,213 $(12,675) $ 2,485
======= ======= ======== ========
</TABLE>

The principal differences between taxes on income computed at the federal
statutory rate of 34% in fiscal years 1997, 1998, 1999 and for the nine months
ended February 28, 2000 and recorded income tax expense (benefit) were as
follows:

<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
YEARS ENDED MAY 31, FEBRUARY 28,
------------------------------ -------------
1997 1998 1999 2000
-------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Tax computed at statutory rate........ $102 $1,173 $(11,341) $ 2,166
State income taxes, net of federal
benefit............................. -- 107 (1,422) 272
Tax exempt interest................... (182) (22) -- --
Other, net............................ 50 (45) 88 47
---- ------ -------- --------
Income tax (benefit) expense.......... $(30) $1,213 $(12,675) $ 2,485
==== ====== ======== ========
</TABLE>

F-18
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 10. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax asset and liability
were as follows:

<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
------------------- ------------
1998 1999 2000
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax asset (liability):
Inventories................................. $ 654 $ 445 $ 492
Vacation accrual............................ 274 337 361
State loss carryforward..................... 624 -- --
Other....................................... 25 (69) (140)
------- ------ -------
Deferred tax asset--current............... $ 1,577 $ 713 $ 713
======= ====== =======
Deferred tax asset (liability):
Intangible basis difference................. $ 317 $ 187 $ 315
Fixed asset basis difference................ (4,219) (4,168) (5,878)
Net operating loss.......................... -- 12,919 11,568
Other....................................... (269) 155 603
------- ------ -------
Deferred tax asset
(liability)--long-term.................. $(4,171) $9,093 $ 6,608
======= ====== =======
</TABLE>

NOTE 11. BENEFIT PLAN

The Company has a defined contribution plan, which meets the requirements of
Section 401(k) of the Internal Revenue Code, for all regular employees. Under
this plan, the Company matches employee contributions as follows; 100% of the
first 3% of an employee's base pay and 50% of the next 3% of an employee's base
pay. The Company's contributions may be made in cash or in the Company's stock.
During fiscal years 1997, 1998 and 1999, and the nine month period ended
February 28, 2000, the Company's contribution expense was $1,094, $1,153,
$1,145, and $893, respectively.

NOTE 12. SIGNIFICANT CUSTOMERS

In fiscal year 1997, three customers represented 25.4%, 18.4%, and 13.0%,
respectively, of net sales. In fiscal year 1998, three customers represented
29.3%, 16.6%, and 13.6%, respectively, of net sales. In fiscal year 1999, four
customers represented 20.7%, 15.0%, 13.8% and 10.9%, respectively, of net sales.
In the first nine months of fiscal year 2000, three customers represented 25.8%,
14.0%, and 12.5%, respectively, of net sales.

NOTE 13. RELATED PARTY TRANSACTIONS

Included in net sales for fiscal years 1997, 1998, 1999 and in the nine
month period ended February 28, 2000, are product sales to Tektronix, a major
shareholder of the Company, of $28,766, $29,688, $15,720 and $9,205,
respectively. Accounts receivable-affiliates at May 31, 1998 and 1999 and at
February 28, 2000 consists of amounts receivable from Tektronix of $2,501,
$1,724 and $1,256.

F-19
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 13. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company had an agreement with Tektronix for certain environmental and
waste management services to be provided by Tektronix. The fiscal year 1997,
1998 and 1999 expense related to these services was $291, $451 and $90,
respectively. The agreement was terminated effective June 1, 1999.

NOTE 14. COMMITMENTS AND CONTINGENCIES

LITIGATION

In the normal course of business, the Company may be party to various legal
claims, actions and complaints, including actions involving patent infringement
and other intellectual property claims. The Company believes that the
disposition of these matters will not have a material adverse effect on the
Company's financial position and results of operations.

OPERATING LEASES

Rental expense under operating leases was $2,376, $2,346, $1,036 and $487 in
fiscal years 1997, 1998, 1999 and in the nine month period ended February 28,
2000, respectively.

The Company entered into a operating lease for manufacturing equipment
during fiscal year 2000. Minimum rental payments under this lease, which has a
lease term in excess of 12 months, are as follows:

<TABLE>
<CAPTION>
MINIMUM PAYMENTS
YEARS ENDED MAY 31, UNDER OPERATING LEASE
- ------------------- ---------------------
(UNAUDITED)
<S> <C>
2000................................................... $ 277
2001................................................... 1,108
2002................................................... 1,107
2003................................................... 1,107
2004................................................... 1,107
2005................................................... 277
----------
Total Minimum Lease Payments....................... $ 4,983
==========
</TABLE>

F-20
<PAGE>
[ARTWORK]
<PAGE>
-------

[LOGO]
PROSPECTUS , 2000

- ------------------------------------------------------------
-------

[LOGO]

3,000,000 Shares
Common Stock

THOMAS WEISEL PARTNERS LLC
WILLIAM BLAIR & COMPANY
NEEDHAM & COMPANY, INC.

------------------------------------------------------------

You may rely on the information contained or incorporated in this prospectus.
Neither we nor any of the underwriters or the selling shareholder has authorized
anyone to provide information different from that contained in this prospectus.
When you make a decision about whether to invest in our common stock, you should
not rely upon any information other than the information in this prospectus.
Neither the delivery of this prospectus nor sale of common stock means that
information contained or incorporated in this prospectus is correct after the
date of this prospectus. This prospectus is not an offer to sell or solicitation
of an offer to buy these shares of the common stock in any circumstances under
which the offer or solicitation is unlawful.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than the
underwriting discounts and commissions, to be paid by Merix in connection with
the sale of the shares of common stock being registered hereby. All amounts are
estimates except for the Securities and Exchange Commission registration fee,
the NASD filing fee and the Nasdaq National Market filing fee.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 19,753
Accounting fees and expenses................................ 125,000
Legal fees and expenses..................................... 150,000
Printing and related expenses............................... 75,000
Blue sky legal fees and expenses............................ 2,500
Transfer agent and registrar fees and expenses.............. 5,000
Miscellaneous expenses...................................... 162,747
--------
Total..................................................... $540,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As an Oregon corporation, the Registrant is subject to the laws of the State
of Oregon governing private corporations and the exculpation from liability and
indemnification provisions contained therein. Pursuant to
Section 60.047(2)(d) of the Oregon Revised Statutes ("ORS"), the Registrant's
Second Restated Articles of Incorporation (the "Articles") eliminates the
liability of the Registrant's directors to the Registrant or its shareholders
except for any liability related to (i) breach of the duty of loyalty;
(ii) acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law; (iii) any unlawful distribution under ORS 60.367;
or (iv) any transaction from which the director derived an improper personal
benefit.

ORS Section 60.391 allows corporations to indemnify their directors and
officers against liability where the director or officer has acted in good faith
and with a reasonable belief that actions taken were in the best interests of
the corporation or at least not opposed to the corporation's best interests and,
if in a criminal proceeding, the individual had no reasonable cause to believe
the conduct in question was unlawful. Under ORS Sections 60.387 to 60.414,
corporations may not indemnify a director or officer against liability in
connection with a claim by or in the right of the corporation or for any
improper personal benefit in which the director or officer was adjudged liable
to the corporation. ORS Section 60.394 mandates indemnification for all
reasonable expenses incurred in the successful defense of any claim made or
threatened whether or not such claim was by or in the right of the corporation.
Finally, pursuant to the ORS Section 60.401, a court may order indemnification
in view of all the relevant circumstances, whether or not the director or
officer met the good-faith and reasonable belief standards of conduct set out in
ORS Section 60.391.

ORS Section 60.414 also provides that the statutory indemnification
provisions are not deemed exclusive of any other rights to which directors or
officers may be entitled under a corporation's articles of incorporation or
bylaws, any agreement, general or specific action of the board of directors,
vote of shareholders, or otherwise.

The Articles provide that the Registrant is required to indemnify to the
fullest extent not prohibited by law any current or former director who is made,
or threatened to be made, a party to an action or proceeding by reason of the
fact that such person serves or served as a director of the Registrant. The
Articles also provide that the Registrant is permitted to indemnify to the
fullest extent not prohibited by law any current or former officer who is made,
or threatened to be made, a party

II-1
<PAGE>
to an action or proceeding by reason of the fact that such person is or was an
officer of the Registrant.

ITEM 16. EXHIBITS

(a) The following exhibits are filed with, or incorporated by reference
into, this Registration Statement on Form S-3:

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------------------- -----------
<C> <S>
1.1** Form of Underwriting Agreement

3.1 Articles of Incorporation of the Company, as amended,
incorporated by reference to Exhibit 3.1 to the Company's
Form 10-K for the fiscal year ended May 31, 1996.

3.2 Bylaws of the Company, as amended, incorporated by reference
to Exhibit 3.2 to the Company's Form 10-K for the fiscal
year ended May 31, 1997.

4.1 Shareholder Rights Agreement dated March 25, 1997,
incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed on April 10, 1997.

5.1** Opinion of Perkins Coie LLP

10.1 Asset Transfer Agreement between Tektronix and the Company
(including Note and Trust Deed and Assignment of Rents and
Leases), incorporated by reference to Exhibit 10.1 to the
Company's Form 10-K for the fiscal year ended May 28, 1994.

10.2 Amendment No. 1 to Promissory Note dated June 1, 1994 from
the Company to Tektronix, Inc., incorporated by reference to
Exhibit 10.33 to the Company's Form 10-Q for the quarterly
period ended February 27, 1999.

10.3 Registration Rights Agreement between the Company and
Tektronix, incorporated by reference to Exhibit 10.2 to the
Company's Form 10-K for the fiscal year ended May 28, 1994.

10.4 Waste Management Agreement between the Company and
Tektronix, incorporated by reference to Exhibit 10.3 to the
Company's Form 10-K for the fiscal year ended May 28, 1994.

10.5 Services Agreement between the Company and Tektronix,
incorporated by reference to Exhibit 10.4 to the Company's
Form 10-K for the fiscal year ended May 28, 1994.

10.6* Stock Incentive Plan of the Company, as amended,
incorporated by reference to Appendix A of the Company's
Proxy Statement for the 1995 Annual Meeting of Shareholders.

10.7* Indemnity Agreement between the Company and Deborah A.
Coleman as of April 4, 1994, incorporated by reference to
Exhibit 10.6 to the Company's Form 10-K for the fiscal year
ended May 28, 1994.

10.8* Indemnity Agreement between the Company and Carl W. Neun as
of April 4, 1994, incorporated by reference to
Exhibit 10.10 to the Company's Form 10-K for the fiscal year
ended May 28, 1994.

10.9* Indemnity Agreement between the Company and Carlene M. Ellis
as of May 24, 1994, incorporated by reference to
Exhibit 10.11 to the Company's Form 10-K for the fiscal year
ended May 28, 1994.

10.10* Indemnity Agreement between the Company and Dr. Koichi
Nishimura as of May 24, 1994, incorporated by reference to
Exhibit 10.13 to the Company's Form 10-K for the fiscal year
ended May 28, 1994.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------------------- -----------
<C> <S>
10.11* Indemnity Agreement between the Company and Terri L.
Timberman as of May 25, 1994, incorporated by reference to
Exhibit 10.14 to the Company's Form 10-K for the fiscal year
ended May 27, 1995.

10.12* Indemnity Agreement between the Company and Janie S. Brown
as of August 11, 1998, incorporated by reference to
Exhibit 10.31 to the Company's Form 10-Q for the quarterly
period ended August 29, 1998.

10.13* Amended Executive Severance Agreement between the Company
and Deborah A. Coleman, incorporated by reference to
Exhibit 10.16 to the Company's Form 10-K for the fiscal year
ended May 31, 1997.

10.14* Amended Executive Severance Agreement between the Company
and Terri L. Timberman, incorporated by reference to
Exhibit 10.17 to the Company's Form 10-K for the fiscal year
ended May 31, 1997.

10.15* Executive Severance Agreement between the Company and
Janie S. Brown, incorporated by reference to Exhibit 10.32
to the Company's Form 10-Q for the quarterly period ended
November 28,1998.

10.16* Executive Severance Agreement between the Company and
Mark R. Hollinger, incorporated by reference to
Exhibit 10.33 to the Company's Form 10-Q for the quarterly
period ended August 30, 1997.

10.17* Indemnity Agreement between the Company and Mark R.
Hollinger as of September 2, 1997, incorporated by
reference to Exhibit 10.32 to the Company's Form 10-Q for
the quarterly period ended August 30, 1997.

10.18* Indemnity Agreement between the Company and William C.
McCormick as of October 21, 1997, incorporated by reference
to Exhibit 10.35 to the Company's Form 10-Q for the
quarterly period ended November 29, 1997.

10.19* Indemnity Agreement between the Company and Robert C.
Strandberg as of June 30, 1998, incorporated by reference
to Exhibit 10.30 to the Company's Form 10-K for the fiscal
year ended May 30, 1998.

10.20 Note Purchase Agreement dated September 10, 1996,
incorporated by reference to Exhibit 10.1 to the Company's
Form 10-Q for the quarterly period ended August 31, 1996.

10.21 Amendment to Note Purchase Agreement dated May 28, 1997,
incorporated by reference to Exhibit 10.26 to the Company's
Form 10-K for the fiscal year ended May 31, 1997.

10.22 Second Amendment to Note Purchase Agreement dated
August 29, 1997, incorporated by reference to Exhibit 10.29
to the Company's Form 10-Q for the quarterly period ended
August 30, 1997.

10.23 Third Amendment to Note Purchase Agreement dated
November 28, 1997, incorporated by reference to
Exhibit 10.34 to the Company's Form 10-Q for the quarterly
period ended November 29, 1997.

10.24 Fourth Amendment to Note Purchase Agreement dated May 28,
1999, incorporated by reference to Exhibit 10.24 to the
Company's Form 10-K for the fiscal year ended May 29, 1999.

10.25*+ Executive Severance Agreement between the Company and
Anaya K. Vardya, dated as of January 18, 2000

10.26*+ Indemnity Agreement between the Company and Anaya K. Vardya
as of December 20, 1999
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------------------- -----------
<C> <S>
23.1 Consent of Deloitte & Touche LLP, independent auditors

23.2** Consent of Perkins Coie LLP (included in Exhibit 5.1)

24.1 Power of Attorney (see page II-6)
</TABLE>

- ------------------------

* This Exhibit constitutes a management contract or compensatory plan or
arrangement.

** To be filed by amendment

+ Previously filed

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Portland, Oregon, on the 29th day of March, 2000.

<TABLE>
<S> <C> <C>
MERIX CORPORATION

By: /s/ MARK R. HOLLINGER
-----------------------------------------
MARK R. HOLLINGER
CHIEF EXECUTIVE OFFICER AND PRESIDENT
</TABLE>

II-5
<PAGE>

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:

<TABLE>
<S> <C> <C>
/s/ MARK R. HOLLINGER CHIEF EXECUTIVE OFFICER,
- ------------------------------------ PRESIDENT AND DIRECTOR March 29, 2000
MARK R. HOLLINGER (PRINCIPAL EXECUTIVE OFFICER)

VICE PRESIDENT AND CHIEF
* FINANCIAL OFFICER
- ------------------------------------ (PRINCIPAL FINANCIAL AND ACCOUNTING March 29, 2000
JANIE S. BROWN OFFICER)

*
- ------------------------------------ CHAIR OF THE BOARD OF DIRECTORS March 29, 2000
DEBORAH A. COLEMAN

*
- ------------------------------------ DIRECTOR March 29, 2000
CARLENE M. ELLIS

*
- ------------------------------------ DIRECTOR March 29, 2000
WILLIAM C. MCCORMICK

*
- ------------------------------------ DIRECTOR March 29, 2000
CARL W. NEUN

*
- ------------------------------------ DIRECTOR March 29, 2000
DR. KOICHI NISHIMURA

*
- ------------------------------------ DIRECTOR March 29, 2000
ROBERT C. STRANDBERG
</TABLE>

* The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 2 to Registration Statement pursuant to the Power of Attorney
executed by the above named officers and directors and filed with the
Securities and Exchange Commission on behalf of such officers and directors.

<TABLE>
<S> <C> <C>
*By: /s/ MARK R. HOLLINGER
--------------------------------------
Mark R. Hollinger
ATTORNEY-IN-FACT
</TABLE>

II-6
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------------------- -----------
<C> <S>
1.1** Form of Underwriting Agreement

3.1 Articles of Incorporation of the Company, as amended,
incorporated by reference to Exhibit 3.1 to the Company's
Form 10-K for the fiscal year ended May 31, 1996.

3.2 Bylaws of the Company, as amended, incorporated by reference
to Exhibit 3.2 to the Company's Form 10-K for the fiscal
year ended May 31, 1997.

4.1 Shareholder Rights Agreement dated March 25, 1997,
incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed on April 10, 1997.

5.1** Opinion of Perkins Coie LLP

10.3 Registration Rights Agreement between the Company and
Tektronix, incorporated by reference to Exhibit 10.2 to the
Company's Form 10-K for the fiscal year ended May 28, 1994.

10.4 Waste Management Agreement between the Company and
Tektronix, incorporated by reference to Exhibit 10.3 to the
Company's Form 10-K for the fiscal year ended May 28, 1994.

10.5 Services Agreement between the Company and Tektronix,
incorporated by reference to Exhibit 10.4 to the Company's
Form 10-K for the fiscal year ended May 28, 1994.

10.6* Stock Incentive Plan of the Company, as amended,
incorporated by reference to Appendix A of the Company's
Proxy Statement for the 1995 Annual Meeting of Shareholders.

10.7* Indemnity Agreement between the Company and Deborah A.
Coleman as of April 4, 1994, incorporated by reference to
Exhibit 10.6 to the Company's Form 10-K for the fiscal year
ended May 28, 1994.

10.8* Indemnity Agreement between the Company and Carl W. Neun as
of April 4, 1994, incorporated by reference to
Exhibit 10.10 to the Company's Form 10-K for the fiscal year
ended May 28, 1994.

10.9* Indemnity Agreement between the Company and Carlene M. Ellis
as of May 24, 1994, incorporated by reference to
Exhibit 10.11 to the Company's Form 10-K for the fiscal year
ended May 28, 1994.

10.11* Indemnity Agreement between the Company and Terri L.
Timberman as of May 25, 1994, incorporated by reference to
Exhibit 10.14 to the Company's Form 10-K for the fiscal year
ended May 27, 1995.

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------------------- -----------
<C> <S>
10.13* Amended Executive Severance Agreement between the Company
and Deborah A. Coleman, incorporated by reference to
Exhibit 10.16 to the Company's Form 10-K for the fiscal year
ended May 31, 1997.