MERIX CORP, S-3, 2000-03-16

MERIX CORP
S-3, 2000-03-16
PRINTED CIRCUIT BOARDS

Previous: LENNAR CORP /NEW/, 425, 2000-03-16

Next: VARIFLEX INC, 10-Q, 2000-03-16

<PAGE>
AS FILED WITH THE SECURITIES EXCHANGE COMMISSION ON MARCH 16, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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

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. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock........................... 3,450,000 $21.6875 $74,821,875 $19,753
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as
amended.
--------------------------

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 , 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>
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 14, 2000, the last reported sale price for the common stock on
the Nasdaq National Market was $22.25 per share.

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

Investing in our common stock involves certain risks. See "Risk Factors"
beginning 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
U.S. BANCORP PIPER JAFFRAY
NEEDHAM & COMPANY, INC.

The date of this prospectus is , 2000
<PAGE>
[ARTWORK]

2
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.............................. 4
Risk Factors......................... 8
Price Range of Common Stock.......... 16
Use of Proceeds...................... 17
Dividend Policy...................... 17
Capitalization....................... 18
Selected Financial Data.............. 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 20
Business............................. 30
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management........................... 39
Information Regarding the Selling
Shareholder........................ 41
Principal and Selling Shareholder.... 43
Underwriting......................... 45
Legal Matters........................ 46
Experts.............................. 47
Where You Can Find Additional
Information........................ 47
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.

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 CORPORATION

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
--------------------------------------------------
SIX MONTHS
YEARS ENDED ENDED
MAY 31, NOVEMBER 30,
---------------------- ----------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MARKET SEGMENTS:
Communications........................................... 26.2% 37.9% 30.3% 48.5%
Computing................................................ 27.9 32.8 31.9 24.2
Test and Measurement..................................... 42.1 25.4 35.1 24.2
Other.................................................... 3.8 3.9 2.7 3.1
----- ----- ----- -----
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,

4
<PAGE>
which has consistently exceeded 95%, and product return rate, which is less than
0.5%, are among the best in the industry. 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.

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.

RECENT DEVELOPMENTS

On March 16, 2000, we announced our results for the quarter ended
February 29, 2000. Net sales for this quarter were $39.7 million, a 30% increase
over the $30.5 million reported for the third quarter of fiscal 1999. Net income
was $1.7 million or $0.24 per diluted share. Net sales to our customers in the
communications segment of the electronics industry accounted for 52% of net
sales for this quarter and contributed to our increased backlog of
$28.6 million as of February 29, 2000, compared to $22.5 million as of
November 30, 1999.

5
<PAGE>
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................................... 8,510,490 shares

Use of proceeds.............................. We will receive net proceeds from the
offering of approximately $ million,
assuming a public offering price of
$ 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 1,472,615 shares of common stock issuable upon exercise of
outstanding options as of November 30,1999, at a weighted average exercise
price of $9.37 per share; and

- excludes shares issued under the Company's 401(k) plan after February 29,
1999.

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 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 six months
ended November 30, 1998 and 1999. 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>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
--------------------------------- ---------------------
1997 1998 1999 1998 1999
--------- --------- --------- -------- ----------
(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 $ 50,546 $69,980
Gross profit (loss)................... 21,856 27,520 3,448 (6,651) 12,239
Operating income (loss)............... 2,021 5,522 (31,447) (41,488) 5,237
Net income (loss)..................... 321 2,138 (20,681) (26,295) 2,230
Basic net income (loss) per share..... $ 0.05 $ 0.35 $ (3.30) $ (4.23) $ 0.35
Diluted net income (loss) per share... $ 0.05 $ 0.34 $ (3.30) $ (4.23) $ 0.34
Weighted average common shares
outstanding:
Basic............................... 6,146 6,194 6,269 6,221 6,408
Diluted............................. 6,260 6,272 6,269 6,221 6,591

OTHER FINANCIAL DATA:
EBITDA(1)............................. 10,920 15,493 (23,281) (37,317) 9,039
</TABLE>

<TABLE>
<CAPTION>
NOVEMBER 30, 1999
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 15,847 $
Working capital............................................. 17,745
Total assets................................................ 107,986
Long-term debt, less current portion........................ 29,150
Shareholders' equity........................................ $ 53,250 $
</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 net
proceeds from the sale of the 2,000,000 shares of common stock offered by Merix
at an estimated public offering price of $ 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
73.6%, 67.8% and 75.1% of our net sales in the first six months of fiscal 2000
and in fiscal 1999 and 1998, respectively. In fiscal 1999, Cisco Systems,
Motorola, Hewlett-Packard and Tektronix each accounted for more than 10% of our
net sales, and in the six-month period ended November 30, 1999, Cisco Systems,
Motorola, Teradyne and Tektronix 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

8
<PAGE>
industry, in general, or any of our major customers, in particular, may
adversely affect our operating results.

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.

9
<PAGE>
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.

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

10
<PAGE>
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.

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.

11
<PAGE>
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.

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.

12
<PAGE>
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.

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

13
<PAGE>
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.

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 8,510,490 shares of common stock
outstanding, approximately 8,810,490 if the underwriters' over-allotment options
are exercised in full, based on shares outstanding as of February 29, 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, these 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

14
<PAGE>
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.

15
<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 3/14/00).......................... 25.50 19.50
</TABLE>

On March 14, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $22.25 per share. As of February 29, 2000, there were
approximately 105 shareholders of record of our common stock.

16
<PAGE>
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 $
million, at an assumed public offering price of $ 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.

17
<PAGE>
CAPITALIZATION

The following table sets forth our actual capitalization as of November 30,
1999, 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 $ 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>
NOVEMBER 30, 1999
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $15,847 $
Long-term obligations, less current portion................. 29,150
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;
6,444 shares issued and outstanding, actual; 50,000
shares authorized, 8,444 shares issued and outstanding,
as adjusted............................................. 45,885
Retained earnings........................................... 7,365
Total shareholders' equity................................ 53,250
Total capitalization.................................... $82,400 $
</TABLE>

This table excludes the following shares:

- 1,472,615 shares issuable upon exercise of stock options outstanding as of
November 30, 1999 at a weighted average exercise price of $9.37 per share;
and

- 404,177 shares available for future grant or issuance under our stock
option plan as of November 30, 1999.

See Note 8 of Notes to Financial Statements.

18
<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,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," 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 audited financial statements included elsewhere in this prospectus. The
statement of operations data as of and for the six months ended November 30,
1998 and 1999 and the balance sheet data at November 30, 1999 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 six months ended
November 30, 1999 are not necessarily indicative of the results that may be
expected for the full year.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
--------------------------------- -------------------
1997 1998 1999 1998 1999
--------- --------- --------- -------- --------
(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 $ 50,546 $69,980
Cost of sales.................................... 134,328 151,100 110,534 57,197 57,741
Gross profit (loss).............................. 21,856 27,520 3,448 (6,651) 12,239
Operating expenses:
Engineering.................................... 6,013 5,854 4,100 2,047 2,111
Selling, general and administrative............ 13,822 14,266 9,045 4,911 4,891
Restructuring.................................. -- 1,878 21,750 27,879 --
Total operating expenses..................... 19,835 21,998 34,895 34,837 7,002
Operating income (loss).......................... 2,021 5,522 (31,447) (41,488) 5,237
Interest income.................................. 1,380 1,432 912 477 341
Interest expense................................. (3,247) (3,313) (2,906) (1,203) (1,605)
Other income (expense), net...................... 137 (290) 85 (198) (317)
Income (loss) before taxes....................... 291 3,351 (33,356) (42,412) 3,656
Income tax benefit (expense)..................... 30 (1,213) 12,675 16,117 (1,426)
Net income (loss)................................ $ 321 $ 2,138 $(20,681) $(26,295) $ 2,230
Net income (loss) per share:
Basic.......................................... $ 0.05 $ 0.35 $ (3.30) $ (4.23) $ 0.35
Diluted........................................ $ 0.05 $ 0.34 $ (3.30) $ (4.23) $ 0.34
Shares used in per share calculations:
Basic.......................................... 6,146 6,194 6,269 6,221 6,408
Diluted........................................ 6,260 6,272 6,269 6,221 6,591
OTHER FINANCIAL DATA:
EBITDA(1)........................................ $ 10,920 $ 15,493 $(23,281) $(37,317) $ 9,039
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
--------------------------------- ---------------------
1997 1998 1999 1998 1999
--------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 16,537 $ 15,430 $ 5,874 $ 14,249 $ 15,847
Working capital.............................. 45,586 40,755 14,322 4,374 17,746
Total assets................................. 130,449 135,168 109,383 113,359 107,986
Long-term debt, less current portion......... 42,390 40,000 34,299 32,000 29,150
Shareholders' equity......................... 67,416 70,191 50,326 44,132 53,250
</TABLE>

19
<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
November 30, 1999.

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 six months of fiscal 2000, we supplied our products and
services to 67 customers. Our five largest original equipment manufacturer, or
OEM, customers during this period were Cisco Systems, Hewlett-Packard, 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 six months of fiscal 2000, Cisco Systems, Motorola,
Tektronix 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 six
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%.

20
<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.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
------------------------------------ ----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<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 97.0 113.2 82.5
----- ----- ----- ----- -----
Gross profit (loss)............................... 14.0 15.4 3.0 (13.2) 17.5
Operating expenses:
Engineering..................................... 3.9 3.3 3.6 4.1 3.0
Selling, general and Administrative............. 8.9 8.0 7.9 9.7 7.0
Restructuring................................... -- 1.0 19.1 55.2 --
----- ----- ----- ----- -----
Total operating expenses...................... 12.7 12.3 30.6 68.9 10.0
----- ----- ----- ----- -----
Operating income (loss)........................... 1.3 3.1 (27.6) (82.1) 7.5
Interest income................................... 0.9 0.8 0.8 0.9 0.5
Interest expense.................................. (2.1) (1.8) (2.5) (2.3) (2.3)
Other income (expense), net....................... 0.1 (0.2) 0.1 (0.4) (0.5)
----- ----- ----- ----- -----
Income (loss) before taxes........................ 0.2 1.9 (29.2) (83.9) 5.2
Income tax benefit (expense)...................... -- (0.7) 11.1 31.9 (2.0)
----- ----- ----- ----- -----
Net income (loss)................................. 0.2% 1.2% (18.1)% (52.0)% 3.2%
===== ===== ===== ===== =====
</TABLE>

SIX MONTHS ENDED NOVEMBER 30, 1999 AND NOVEMBER 30, 1998 (UNAUDITED)

NET SALES

Our net sales for the first six months of fiscal 2000 were $70.0 million, an
increase of 38.4% from net sales of $50.5 million in the first six 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 six months of fiscal 1999 included five months of
sales from our Loveland manufacturing facility ($11.9 million), which we closed
in October 1998, and six

21
<PAGE>
months of sales from our Soladyne manufacturing facility ($3.8 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 six 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 73.6% of net sales in the first
six months of fiscal 2000 and 69.3% of net sales in the first six months of
fiscal 1999. Our sales to OEMs include sales made through contract
manufacturers. Our sales to contract manufacturers were 50.1% of net sales in
the first six months of fiscal 2000 and 24.7% of net sales in the first six
months of fiscal 1999. Four customers each accounted for more than 10% of our
net sales in the first six months of fiscal 2000, and two customers each
accounted for more than 10% of our net sales in the first six months of fiscal
1999.

Our 90-day backlog was $22.5 million at November 30, 1999, 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 six 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 17.5%
in the first six months of fiscal 2000 and (13.2)% in the first six months of
fiscal 1999. Gross margin in the first six months of fiscal 1999 was negatively
affected by a $2.1 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 six months of
fiscal 1999 was significantly below our historical capacity utilization levels.
Gross profit increased in the first six 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.

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 $2.1 million
and $2.0 million in the first six months of 2000 and 1999, respectively,
representing 3.0% and 4.1% of our net sales in those periods. Engineering
expenses were reduced in the first six 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

22
<PAGE>
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 $4.9 million and $4.9 million in the first six
months of fiscal 2000 and fiscal 1999, respectively, representing 7.0% and 9.7%
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>

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.

23
<PAGE>
INTEREST INCOME

Our interest income decreased to $341,000 in the first six months of fiscal
2000 from $477,000 in the first six months of fiscal 1999, primarily because we
had lower levels of cash.

INTEREST EXPENSE

Interest expense increased to $1.6 million in the first six months of fiscal
2000 from $1.2 million in the first six months of fiscal 1999, primarily because
we capitalized interest of approximately $400,000 related to the Forest Grove
expansion project in the first six 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 ($317,000) in the first six months of
fiscal 2000, as compared to ($198,000) in the first six months of fiscal 1999.
In the first six 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.

INCOME TAXES

Our effective tax rate was approximately 39% in the first six months of
fiscal 2000 compared to 38% in the first six 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.

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.

24
<PAGE>
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.

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.

25
<PAGE>
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.

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.

26
<PAGE>
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,
1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales........................... $ 20,515 $30,032 $30,503 $32,932 $34,098 $35,882
Cost of sales....................... 27,627 29,571 25,273 28,063 28,019 29,722
-------- ------- ------- ------- ------- -------
Gross profit (loss)................. (7,112) 461 5,230 4,869 6,079 6,160
Operating expenses:
Engineering....................... 1,027 1,021 1,010 1,042 1,028 1,083
Selling, general and
administrative.................. 2,802 2,109 2,121 2,013 2,375 2,516
Restructuring..................... 27,879 -- (6,129) -- -- --
-------- ------- ------- ------- ------- -------
Total operating expenses............ 31,708 3,130 (2,998) 3,055 3,403 3,599
-------- ------- ------- ------- ------- -------
Operating income (loss)............. (38,820) (2,669) 8,228 1,814 2,676 2,561
Interest and other expense, net..... (489) (434) (329) (657) (981) (600)
-------- ------- ------- ------- ------- -------
Income (loss) before taxes.......... (39,309) (3,103) 7,899 1,157 1,695 1,961
Income tax (expense) benefit........ 14,938 1,179 (3,002) (440) (661) (765)
-------- ------- ------- ------- ------- -------
Net income (loss)................... $(24,371) $(1,924) $ 4,897 $ 717 $ 1,034 $ 1,196
======== ======= ======= ======= ======= =======
</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.

LIQUIDITY AND CAPITAL RESOURCES

As of November 30, 1999, we had $15.9 million in cash and cash equivalents
and $29.2 million of long-term debt.

Cash provided by operating activities in the first six months of fiscal 2000
was $6.5 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 inventories. Our inventories increased as a
result of a higher level of production in the first six months of fiscal 2000.

Cash provided by investing activities in the first six months of fiscal 2000
was $7.4 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 six months of fiscal 2000 was
$3.9 million, which primarily consisted of a principal payment on our senior
unsecured notes.

27
<PAGE>
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 November 30,
1999, 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
November 30, 1999, 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 November 30, 1999, 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, an affiliate of U.S. Bancorp Piper Jaffray. We
have not made any borrowings under this line of credit as of the date of this
prospectus.

We had capital commitments of approximately $1.7 million as of November 30,
1999, 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,

28
<PAGE>
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.

29
<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

30
<PAGE>
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.

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.

31
<PAGE>
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.

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

32
<PAGE>
7.7 in the first quarter of fiscal 1998 to 10.2 in the second 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.

- 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, which has consistently exceeded 95%,
and product return rate, which is less than 0.5%, 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.

33
<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.

34
<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
----------------------------------------------------------------
SIX MONTHS
ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
------------------------------------ ----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
MARKED SEGMENTS:
Communications.................................... 20.7% 26.2% 37.9% 30.3% 48.5%
Computing......................................... 27.5 27.9 32.8 31.9 24.2
Test and Measurement.............................. 34.8 42.1 25.4 35.1 24.2
Contract Manufacturers(a)......................... 14.8 -- -- -- --
Other............................................. 2.2 3.8 3.9 2.7 3.1
----- ----- ----- ----- -----
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 67 customers in the first six
months of fiscal 2000. Our five largest OEM customers during this period were
Cisco Systems, Hewlett-Packard, 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 six months of fiscal
2000, Cisco Systems, Motorola, Tektronix 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 31.3%,
23.8% 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 six 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 November 30, 1999, we employed 27 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.

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

35
<PAGE>
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.

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

36
<PAGE>
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.

BACKLOG

Our 90-day backlog was approximately $22.5 million at November 30, 1999,
$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

37
<PAGE>
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 November 30, 1999 we had a total of 1,195 employees, of which 1,064
were regular employees and 131 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.

38
<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.............. 41 Chief Executive Officer, President and Director

Terri L. Timberman............. 41 Senior Vice President and Chief Administrative Officer

Janie S. Brown................. 54 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............. 46 Chair of the Board of Directors

Carlene M. Ellis............... 52 Director

William C. McCormick........... 64 Director

Carl W. Neun................... 55 Director

Dr. Koichi Nishimura........... 60 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.

39
<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.

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,

40
<PAGE>
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 Forest Grove 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.

41
<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 each of June 2000 and 2001 of $1.1 million 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%. 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.

42
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock, as of February 29, 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 6,510,490 shares
of common stock outstanding as of February 29, 2000, and also lists applicable
percentage ownership based on 8,510,490 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 29, 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) -- * *
</TABLE>

43
<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 29, 2000.

(6) Includes options to purchase 66,500 shares that are currently exercisable
or become exercisable before April 29, 2000.

(7) Includes options to purchase 53,750 shares that are currently exercisable
or become exercisable before April 29, 2000.

(8) Includes options to purchase 14,293 shares that are currently exercisable
or become exercisable before April 29, 2000.

(9) Includes options to purchase 6,875 shares that are currently exercisable or
become exercisable before April 29, 2000.

(10) Includes options to purchase 32,500 shares that are currently exercisable
or become exercisable before April 29, 2000.

(11) Includes options to purchase 11,250 shares that are currently exercisable
or become exercisable before April 29, 2000.

(12) Includes options to purchase 32,500 shares that are currently exercisable
or become exercisable before April 29, 2000.

(13) Includes options to purchase 5,000 shares that are currently exercisable
or become exercisable before April 29, 2000.

(14) Includes options to purchase 512,668 shares held by executive officers and
directors that are currently exercisable or become exercisable before
April 29, 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."

44
<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, U.S. Bancorp Piper Jaffray 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..................................
U.S. Bancorp Piper Jaffray..................................
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 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.

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>

45
<PAGE>
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 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.

46
<PAGE>
EXPERTS

The financial statements as of May 31, 1998 and May 31, 1999 and for the
years ended May 31, 1997, May 30, 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.

47
<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,
--------------------- NOVEMBER 30,
1998 1999 1999
--------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 15,430 $ 5,874 $ 15,847
Short-term investments................................. 7,469 7,507 --
Accounts receivable, net of allowances of $259, $237
and $237(unaudited).................................. 19,303 15,784 16,329
Accounts receivable--affiliates........................ 2,501 1,724 1,080
Inventories............................................ 10,795 6,537 8,699
Income tax refund receivable........................... 759 -- --
Deferred tax asset..................................... 1,577 713 713
Other current assets................................... 2,454 941 664
-------- -------- --------
Total current assets................................... 60,288 39,080 43,332
======== ======== ========
Property, plant and equipment, net....................... 70,262 60,892 56,366
Goodwill, net of accumulated amortization of $432........ 2,027 -- --
Deferred tax asset....................................... -- 9,093 7,666
Other assets............................................. 2,591 318 622
-------- -------- --------
Total assets............................................. $135,168 $109,383 $107,986
======== ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 10,584 $ 12,104 $ 12,354
Accrued compensation................................... 2,512 2,512 2,627
Current portion of long-term debt...................... 4,529 8,000 9,149
Other accrued liabilities.............................. 1,908 2,142 1,456
-------- -------- --------
Total current liabilities.............................. 19,533 24,758 25,586
Long-term debt........................................... 40,000 34,299 29,150
Deferred tax liability................................... 4,171 -- --
Other liabilities........................................ 1,273 -- --
-------- -------- --------
Total liabilities...................................... 64,977 59,057 54,736
-------- -------- --------
Commitments and contingencies............................ -- -- --
Shareholders' equity:
Preferred stock, no par value, 10,000 shares;
authorized, none issued.............................. -- -- --
Common stock, no par value, and outstanding 1998:
, shares, 1997: 6,167 shares 50,000 shares
authorized; issued and outstanding: May 31, 1998:
6,203 shares, May 31, 1999; 6,370 shares;
November 30, 1999: 6,444 shares...................... 44,625 45,194 45,885
Unearned compensation.................................. (250) (3) --
Retained earnings...................................... 25,816 5,135 7,365
-------- -------- --------
Total shareholders' equity............................... 70,191 50,326 53,250
-------- -------- --------
Total liabilities and shareholders' equity............... $135,168 $109,383 $107,986
======== ======== ========
</TABLE>

See the accompanying Notes to Financial Statements.

F-3
<PAGE>
MERIX CORPORATION

STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MAY 31, NOVEMBER 30,
--------------------------------- -------------------
1997 1998 1999 1998 1999
--------- --------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................... $156,184 $178,620 $113,982 $ 50,546 $69,980
Cost of sales........................... 134,328 151,100 110,534 57,197 57,741
-------- -------- -------- -------- -------
Gross profit (loss)..................... 21,856 27,520 3,448 (6,651) 12,239
-------- -------- -------- -------- -------
Operating expenses:
Engineering........................... 6,013 5,854 4,100 2,047 2,111
Selling, general and administrative... 13,822 14,266 9,045 4,911 4,891
Restructuring......................... -- 1,878 21,750 27,879 --
-------- -------- -------- -------- -------
Total operating expenses............ 19,835 21,998 34,895 34,837 7,002
-------- -------- -------- -------- -------
Operating income (loss)................. 2,021 5,522 (31,447) (41,488) 5,237
Interest income......................... 1,380 1,432 912 477 341
Interest expense........................ (3,247) (3,313) (2,906) (1,203) (1,605)
Other income (expense), net............. 137 (290) 85 (198) (317)
-------- -------- -------- -------- -------
Income (loss) before taxes.............. 291 3,351 (33,356) (42,412) 3,656
Income tax benefit (expense)............ 30 (1,213) 12,675 16,117 (1,426)
-------- -------- -------- -------- -------
Net income (loss)....................... $ 321 $ 2,138 $(20,681) $(26,295) $ 2,230
======== ======== ======== ======== =======
Net income (loss) per share:
Basic................................. $ 0.05 $ 0.35 $ (3.30) $ (4.23) $ 0.35
======== ======== ======== ======== =======
Diluted............................... $ 0.05 $ 0.34 $ (3.30) $ (4.23) $ 0.34
======== ======== ======== ======== =======
Shares used in per share calculations:
Basic................................. 6,146 6,194 6,269 6,221 6,408
Diluted............................... 6,260 6,272 6,269 6,221 6,591
</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)................... -- -- -- 2,230 2,230
Exercise of stock options (unaudited).... 10 84 -- -- 84
Tax benefit related to stock-based
compensation (unaudited)............... -- 20 -- -- 20
Stock issued under defined contribution
plan (unaudited)....................... 64 587 -- -- 587
Amortization of unearned compensation
(unaudited)............................ -- -- 3 -- 3
----- ------- ----- -------- --------
Balance at November 30, 1999
(unaudited)............................ 6,444 $45,885 $ 0 $ 7,365 $ 53,250
===== ======= ===== ======== ========
</TABLE>

See the accompanying Notes to Financial Statements.

F-5
<PAGE>
MERIX CORPORATION

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MAY 31, NOVEMBER 30,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 321 $ 2,138 $(20,681) $(26,295) $ 2,230
Adjustments to reconcile net income (loss) to net cash
provided by Operating activities:
Depreciation and amortization............................. 8,762 10,261 8,081 4,369 4,119
Deferred income taxes..................................... 2,398 2,479 (12,400) (16,117) 1,427
Amortization of unearned compensation..................... 434 122 (90) (93) 3
Restructuring expense..................................... -- 1,149 16,798 19,624 --
Contribution of common stock to defined contribution
plan.................................................... -- -- 912 335 587
Other..................................................... (85) 68 169 285 227
Changes in assets and liabilities:
Accounts receivable..................................... 382 2,353 4,296 8,446 99
Inventories............................................. (2,207) (2,153) 4,258 3,947 (2,162)
Income tax refund receivable............................ (2,048) 1,671 759 -- --
Other current assets.................................... (1,228) (637) 1,513 1,191 277
Accounts payable........................................ 2,555 573 1,520 200 250
Accrued compensation.................................... (1,418) (572) -- 101 115
Income taxes payable.................................... (67) -- -- -- --
Other accrued liabilities............................... (428) (582) (1,044) 6,145 (665)
-------- -------- -------- -------- -------
Net cash provided by operating activities................... 7,371 16,870 4,091 2,138 6,507

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (17,769) (18,466) (15,914) (8,839) (4,695)
Short-term investments:
Purchases............................................... (15,110) (13,500) (11,016) (11,016) --
Maturities.............................................. 13,717 14,591 10,978 7,395 7,507
Net proceeds from sale-leaseback of equipment............. -- -- -- -- 4,492
Proceeds from sale of assets.............................. 422 507 4,537 253 78
Other assets.............................................. -- (1,306) -- -- --
-------- -------- -------- -------- -------
Net cash provided by (used in) investing activities......... (18,740) (18,174) (11,415) (12,207) 7,382

CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings:
Proceeds................................................ 40,000 -- -- -- --
Principal payments...................................... (23,951) (121) (2,230) (2,200) (4,000)
Exercise of stock options................................. 91 525 -- -- 84
Deferred financing costs.................................. (382) -- -- -- --
Reacquired common stock................................... (43) (207) (2) (2) --
-------- -------- -------- -------- -------
Net cash provided by (used in) financing activities......... 15,715 197 (2,232) (2,202) (3,916)
-------- -------- -------- -------- -------
Increase (decrease) in cash and cash equivalents............ 4,346 (1,107) (9,556) (12,271) 9,973
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 $ 3,159 $15,847
======== ======== ======== ======== =======

SUPPLEMENTAL DISCLOSURE:
Cash paid for:
Interest, net of amounts capitalized...................... $ 3,205 $ 3,116 $ 2,951 $ 1,395 $ 1,756
Noncash transactions:
Tax benefit related to stock-based compensation........... 261 122 (5) -- --
Surrender of unvested shares of restricted stock.......... 45 175 337 293 --
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 SIX MONTHS
ENDED NOVEMBER 30, 1998 AND NOVEMBER 30, 1999 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.

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 November 30, 1998
and November 30, 1999 and for the six 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
7 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 (loss) 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 183,002 for the six months
ended November 30, 1999 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
1,247,302 shares for the six months ended November 30, 1998 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 November 30, 1999, 188,890 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 transaction 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 11 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 at the Soladyne facility 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:

<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>

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 November 30, 1999, it had any significant credit risks.

NOTE 4. INVENTORIES

<TABLE>
<CAPTION>
MAY 31,
------------------- NOV. 30,
1998 1999 1999
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.................................. $ 3,684 $1,170 $1,003
Work in process................................ 3,638 4,144 4,489
Finished goods................................. 3,473 1,223 3,207
------- ------ ------
Total........................................ $10,795 $6,537 $8,699
======= ====== ======
</TABLE>

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
MAY 31,
--------------------- NOV. 30,
1998 1999 1999
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land....................................... $ 2,190 $ 2,190 $ 2,190
Buildings and grounds...................... 24,267 24,065 24,451
Machinery and equipment.................... 100,282 85,563 83,879
Construction in progress................... 2,828 1,618 1,412
-------- -------- --------
Total.................................... 129,567 113,436 111,932
Accumulated depreciation................... (59,305) (52,544) (55,566)
-------- -------- --------
Property, plant and equipment, net....... $ 70,262 $ 60,892 $ 56,366
======== ======== ========
</TABLE>

NOTE 6. LONG-TERM DEBT

<TABLE>
<CAPTION>
MAY 31,
------------------- NOV. 30,
1998 1999 1999
-------- -------- -----------
(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 November 30, 1999, which bears interest at 7.5%. The note is
payable as follows: $1,149 in June 2000 and $1,150 in June 2001.

At November 30, 1999, 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
November 30, 1999, 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
November 30, 1999, 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 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.............................................. 290,575 9.61
Canceled............................................. (68,274) 18.35
Exercised............................................ (10,576) 7.96
--------- ------
Outstanding at November 30, 1999 (unaudited)........... 1,472,615 $ 9.37
========= ======
</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.......................................... -- --
Canceled........................................ -- --
------- ---------------------
Unvested balance at November 30, 1999
(unaudited)..................................... 400 $16.50
======= =====================
</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

F-15
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 8. STOCK-BASED COMPENSATION PLAN (CONTINUED)
options granted during fiscal years 1997, 1998 and 1999 using the Black-Scholes
option pricing model as prescribed by SFAS 123 using the following weighted
average assumptions:

<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED MAY 31, ENDED
------------------------------------ NOVEMBER 30,
1997 1998 1999 1999
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Risk-free interest rate.................... 6.06% 5.98% 5.12% 5.71%
Expected dividend yield.................... 0% 0% 0% 0%
Expected lives............................. 2.97 years 3.16 years 2.61 years 3.11 years
Expected volatility........................ 59% 57% 71% 76%
</TABLE>

F-16
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED) (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 8. STOCK-BASED COMPENSATION PLAN (CONTINUED)

Using the Black-Scholes methodology, the total value of stock options
granted during the 1997, 1998 and 1999 fiscal years, and the six month period
ended November 30, 1999, was $3,330, $2,909, $2,016, and $1,471, 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 six month period
ended November 30, 1999, was $7.30, $7.59, $3.20 and $5.06 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>
SIX MONTHS
YEARS ENDED MAY 31, ENDED
------------------------------ NOVEMBER 30,
1997 1998 1999 1999
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net income (loss) as reported....................... $ 321 $2,138 $(20,681) $2,230
Net income (loss) pro forma......................... (866) 834 (21,492) 1,842
Reported diluted net income (loss) per share........ $ 0.05 $ 0.34 $ (3.30) $ 0.34
Pro forma diluted net income (loss) per share....... $(0.14) $ 0.13 $ (3.43) $ 0.28
</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.

The following table summarizes information about stock options outstanding
at November 30, 1999 (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--$5.63 363,800 7.68 $4.24 75,832 $ 3.96
5.88--8.75 88,050 6.04 7.16 5,311 6.20
9.00--9.00 333,470 4.42 9.00 333,095 9.00
9.25--10.06 422,020 6.31 9.98 150,683 9.94
10.38--31.38 265,275 6.69 16.65 105,152 20.60
- --------------------- --------- ---- ----- ------- ------
$3.06--$31.38 1,472,615 6.27 $9.37 670,073 $10.44
===================== ========= ==== ===== ======= ======
</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

F-17
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED) (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 9. SHAREHOLDER RIGHTS PLAN (CONTINUED)
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.

The provision for (benefit from) income taxes consisted of the following:

<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <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)
State........................................ 41 243 (1,438)
------- ------- --------
Total deferred............................. 2,398 2,479 (12,400)
------- ------- --------
Income tax (benefit) expense................... $ (30) $ 1,213 $(12,675)
======= ======= ========
</TABLE>

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

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

F-18
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED) (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,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax asset (liability):
Inventories............................................. $ 654 $ 445
Vacation accrual........................................ 274 337
State loss carryforward................................. 624 --
Other................................................... 25 (69)
------- ------
Deferred tax asset--current........................... $ 1,577 $ 713
======= ======
Deferred tax asset (liability):
Intangible basis difference............................. $ 317 $ 187
Fixed asset basis difference............................ (4,219) (4,168)
Net operating loss...................................... -- 12,919
Other................................................... (269) 155
------- ------
Deferred tax asset (liability)--long-term............. $(4,171) $9,093
======= ======
</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 six month period ended
November 30, 1999, the Company's contribution expense was $1,094, $1,153,
$1,145, and $587, 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 six months of fiscal year 2000, four customers represented 26.6%,
13.4%, 13.3% and 10.4%, respectively, of net sales.

NOTE 13. RELATED PARTY TRANSACTIONS

Included in net sales for fiscal years 1997, 1998 and 1999 are product sales
to Tektronix, a major shareholder of the Company, of $28,766, $29,688 and
$15,720, respectively. Accounts receivable-affiliates at May 31, 1998 and 1999
and at November 30, 1999 consists of amounts receivable from Tektronix of
$2,501, $1,724 and $1,080.

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

F-19
<PAGE>
MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED) (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 13. RELATED PARTY TRANSACTIONS (CONTINUED)
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 and $1,036 in
fiscal years 1997, 1998 and 1999, 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
- ------------------ ---------------------
<S> <C>
2000................................................... $ 763,350
2001................................................... 1,107,283
2002................................................... 1,107,283
2003................................................... 1,107,283
2004................................................... 1,107,283
2005................................................... 276,821
----------
Total Minimum Lease Payments....................... $5,469,303
==========
</TABLE>

F-20
<PAGE>
[ARTWORK?]
<PAGE>
PROSPECTUS , 2000

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

[LOGO]

3,000,000 Shares
Common Stock

THOMAS WEISEL PARTNERS LLC
U.S. BANCORP PIPER JAFFRAY
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................................
Legal fees and expenses.....................................
Printing and related expenses...............................
Blue sky legal fees and expenses............................
Transfer agent and registrar fees and expenses..............
Miscellaneous expenses......................................
--------
Total..................................................... $
========
</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

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 registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Portland, Oregon, on the 16th 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>
POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Mark R. Hollinger and Janie S. Brown, and
each of them, attorneys-in-fact for the undersigned, each with full power of
substitution, for the undersigned in any and all capacities, to sign any or all
amendments to this Registration Statement and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection with this Registration Statement, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that any of said attorneys-in-fact and agents, or
his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
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 16, 2000
MARK R. HOLLINGER (PRINCIPAL EXECUTIVE OFFICER)

VICE PRESIDENT AND CHIEF
/s/ JANIE S. BROWN FINANCIAL OFFICER
- ------------------------------------ (PRINCIPAL FINANCIAL AND March 16, 2000
JANIE S. BROWN ACCOUNTING OFFICER)

/s/ DEBORAH A. COLEMAN
- ------------------------------------ CHAIR OF THE BOARD OF DIRECTORS March 16, 2000
DEBORAH A. COLEMAN

/s/ CARLENE M. ELLIS
- ------------------------------------ DIRECTOR March 16, 2000
CARLENE M. ELLIS

/s/ WILLIAM C. MCCORMICK
- ------------------------------------ DIRECTOR March 16, 2000
WILLIAM C. MCCORMICK

/s/ CARL W. NEUN
- ------------------------------------ DIRECTOR March 16, 2000
CARL W. NEUN

/s/ DR. KOICHI NISHIMURA
- ------------------------------------ DIRECTOR March 16, 2000
DR. KOICHI NISHIMURA

/s/ ROBERT C. STRANDBERG
- ------------------------------------ DIRECTOR March 16, 2000
ROBERT C. STRANDBERG
</TABLE>

II-6

<PAGE>
Merix Corporation

EXECUTIVE SEVERANCE AGREEMENT

Anaya Vardya JANUARY 18, 2000
14937 N.W. Fawnlilly Drive
Portland, Oregon 97229

Merix Corporation
an Oregon corporation
PO Box 3000
Forest Grove, Oregon 97116

Merix considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of
Merix and its shareholders. In this connection, Merix recognizes that, as is the
case with many publicly held corporations, the possibility of a change of
control may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of Merix and its shareholders. In order
to induce Executive to remain employed by Merix in the face of uncertainties
about the long-term strategies of Merix and possible change of control of Merix
and their potential impact on Executive's position with Merix, this Agreement,
which has been approved by the Board of Directors of Merix, sets forth the
severance benefits that Merix will provide to Executive in the event Executive's
employment by Merix is terminated under the circumstances described in this
Agreement.

1. EMPLOYMENT RELATIONSHIP. Executive is currently employed by Merix as Vice
President Operations. Executive and Merix acknowledge that either party may
terminate this employment relationship at any time and for any or no reason,
subject to the obligation of Merix to provide the severance benefits specified
in this Agreement in accordance with the terms hereof.

2. RELEASE OF CLAIMS. In consideration for and as a condition precedent to
receiving the severance benefits outlined in this Agreement, Executive agrees to
execute a Release of Claims in the appropriate form attached as Exhibit A
("Release of Claims"). Executive promises to execute and deliver the Release of
Claims to Merix within the later of (a) 45 days from the date Executive receives
the Release of Claims or (b) the last day of Executive's active employment.

3. COMPENSATION UPON TERMINATION. In the event of a Termination of Executive's
Employment (as defined in Section 8.1) at any time other than for Cause (as
defined in Section 8.2 of this Agreement), death or Disability (as defined in
Section 8.4 of this Agreement), and contingent upon Executive's execution of the
Release of Claims and compliance with Section 10, Executive shall be entitled to
the following benefits:

<PAGE>
Merix Corporation

3.1 As severance pay and in lieu of any other compensation for periods
subsequent to the date of termination, Merix shall pay Executive, in a single
payment after employment has ended and eight days have passed following
execution of the Release of Claims without revocation, an amount in cash equal
to one year of Executive's annual base pay at the rate in effect immediately
prior to the date of termination.

3.2 Executive is entitled to extend coverage under any group health plan in
which Executive and Executive's dependents are enrolled at the time of
termination of employment under the COBRA continuation laws for the 18-month
statutory period, or so long as Executive remains eligible under COBRA. Merix
will pay Executive a lump sum payment in an amount equivalent to the reasonably
estimated cost Executive may incur to extend for a period of 18 months under the
COBRA continuation laws Executive's group health and dental plan coverage in
effect at the time of termination. Executive may use this payment, as well as
any payment made under Section 3.1, for such COBRA continuation coverage or for
any other purpose.

3.3 Executive shall be entitled to a portion of the benefits under any annual
cash incentive plans in effect at the time of termination equal to the greater
of (a) 50 percent of Executive's target benefit under such plan for the year or
(b) a prorated amount representing the portion of the plan year during which
Executive was a participant. For purposes of this Agreement, Executive's
participation in any such plan will be considered to have ended on Executive's
last day of active employment. In making the proration calculation, the amount
of Executive's award if Executive had been a participant for the full incentive
period shall be divided by the total number of days in the incentive period and
the result multiplied by the actual number of days Executive participated in the
plan. The payment amount shall be calculated at the end of the incentive period
and the amount shall not be due and payable by Merix to Executive until the date
that all awards are payable to other eligible employees after the close of the
incentive period, except that Executive may elect at any time after termination,
by written notice to Merix, to receive 50 percent of Executive's target benefit
instead of the prorated amount, in which case the payment shall be made within
20 days of such election. If the applicable plan provides for a greater payment
for a participant whose employment terminates prior to the end of an incentive
period, the applicable plan payment shall be made.

3.4 Merix will pay up to $12,500 to a third party outplacement firm selected by
Executive to provide career counseling assistance to Executive for a period of
one year following Executive's termination date. Executive may elect to receive
the $12,500 in cash in lieu of payment to a third party outplacement firm.

3.5 All outstanding stock options, restricted stock, stock bonuses or other
stock awards shall be governed by the terms of the applicable agreement or plan.

3.6 In the event that Executive's employment with Merix terminates for any
reason prior to a Change of Control (as defined in Section 8.3), other than at
the direction of a person who has entered into an agreement with Merix, the
consummation of which will constitute a Change of Control, Executive shall not
be entitled to benefits under Section 4 of this Agreement.

<PAGE>
Merix Corporation

4. ADDITIONAL COMPENSATION UPON TERMINATION FOLLOWING A CHANGE OF CONTROL. In
the event of a Termination of Executive's Employment other than for Cause, death
or Disability within 24 months following a Change of Control, or prior to a
Change of Control at the direction of a person who has entered into an agreement
with Merix, the consummation of which will constitute a Change of Control, and
contingent upon Executive's execution of the Release of Claims and compliance
with Sections 5 and 10, Executive shall be entitled to the following benefits,
which benefits shall be in addition to the benefits provided in Section 3:

4.1 Merix shall pay Executive, in a single payment within the latter of (a)
eight days after the last day of employment, including employment during the up
to the six months employment period referred to in Section 5 if Merix or the
surviving company has requested Executive to continue employment during such
period and (b) eight days after execution of the Release of Claims without
revocation, an amount in cash equal to one year of Executive's annual base
compensation at the rate in effect immediately prior to the date of termination.

4.2 Executive shall be entitled to receive an amount such that the amount
payable pursuant to Section 3.3 plus the amount payable pursuant to this Section
4.2 equals 100 percent of the Executive's target benefit for the year under
annual cash incentive plans in effect at the time of termination. The amount
payable pursuant to Section 4.2 shall be paid on the same date that the Section
4.1 payment is payable.

4.3 Merix shall maintain in full force and effect, at its sole cost and
expense, for Executive's continued benefit for a period terminating 18 months
after the date of termination a life insurance policy insuring Executive's life
with coverage equal to two times Executive's annual base pay in effect
immediately prior to termination, provided that Executive's continued
participation is possible under the general terms and provisions of such policy.
At Executive's election or in the event that Executive's continued participation
in such policy is barred, Merix shall make a lump sum payment to Executive equal
to the total premiums that would have been paid by Merix for such 18 month
period. The maximum amount that Merix shall be obligated to pay pursuant to this
Section 4.3 in premiums and payments to Executive shall be $5,000.

4.4 The possibility of forfeiture to Merix of all stock issued to Executive
under all Executive Stock Bonus Agreements shall immediately lapse.

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

<PAGE>
Merix Corporation

4.6 Notwithstanding any provision in this Agreement, in the event that
Executive would receive a greater after-tax benefit from the Capped Benefit (as
defined in the next sentence) than from the payments pursuant to this Agreement
(the "Specified Benefits"), the Capped Benefit shall be paid to Executive and
the Specified Benefits shall not be paid. The Capped Benefit is the Specified
Benefits, reduced by the amount necessary to prevent any portion of the
Specified Benefits from being "parachute payments" as defined in section
280G(b)(2) of the Internal Revenue Code of 1986, as amended ("IRC"), or any
successor provision. For purposes of determining whether Executive would receive
a greater after-tax benefit from the Capped Benefit than from the Specified
Benefits, there shall be taken into account all payments and benefits Executive
will receive upon a change in control of the Company (collectively, excluding
the Specified Benefits, the "Change of Control Payments"). To determine whether
Executive's after-tax benefit from the Capped Benefit would be greater than
Executive's after-tax benefit from the Specified Benefits, there shall be
subtracted from the sum of the before-tax Specified Benefits and the Change of
Control Payments (including the monetary value of any non-cash benefits) any
excise tax that would be imposed under IRC ss. 4999 and all federal, state and
local taxes required to be paid by Executive in respect of the receipt of such
payments, assuming that such payments would be taxed at the highest marginal
rate applicable to individuals in the year in which the Specified Benefits are
to be paid or such lower rate as Executive advises Merix in writing is
applicable to Executive.

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

6. TAX WITHHOLDING; SUBSEQUENT EMPLOYMENT.

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

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

<PAGE>
Merix Corporation

7. OTHER AGREEMENTS. This Agreement replaces and supersedes the Executive
Severance Agreement dated June 1, 1994 between Executive and Merix. In the event
that severance benefits are payable to Executive under any other agreement with
Merix in effect at the time of termination (including but not limited to any
employment agreement, but excluding for this purpose any stock option agreement
or stock bonus agreement or stock appreciation right agreement that may provide
for accelerated vesting or related benefits upon the occurrence of a change in
control), the benefits provided in this Agreement shall not be payable to
Executive. Executive may, however, elect to receive all of the benefits provided
for in this Agreement in lieu of all of the benefits provided in all such other
agreements. Any such election shall be made with respect to the agreements as a
whole, and Executive cannot select some benefits from one agreement and other
benefits from this Agreement.

8. DEFINITIONS.

8.1 TERMINATION OF EXECUTIVE'S EMPLOYMENT. Termination of Executive's
Employment means that Merix has terminated Executive's employment with Merix
(including any subsidiary of Merix). For purposes of Section 3, if Executive is
assigned additional or different titles, tasks or responsibilities from those
currently held or assigned, consistent with Executive's areas of professional
expertise and with no decrease in annual base compensation, whether at Merix or
any subsidiary of Merix, such circumstances shall not constitute a Termination
of Executive's Employment. For purposes of Section 4, Termination of Executive's
Employment shall include termination by Executive, within 24 months of a Change
of Control, by written notice to Merix referring to the applicable paragraph of
Section 8.1, for "Good Reason" based on:

(a) the assignment to Executive of a different title, job or
responsibilities that results in a decrease in the level of
responsibility of Executive with respect to the surviving company
after the Change of Control when compared to Executive's level of
responsibility for Merix' operations prior to the Change of
Control; provided that Good Reason shall not exist if Executive
continues to have the same or a greater general level of
responsibility for the former Merix operations after the Change
of Control as Executive had prior to the Change of Control even
if the former Merix operations are a subsidiary or division of
the surviving company;

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

(c) a significant reduction by Merix or the surviving
company in total benefits available to Executive under cash
incentive, stock incentive and other employee benefit plans after
the Change of Control compared to the

<PAGE>
Merix Corporation

total package of such benefits as in effect prior to the Change
of Control;

(d) Merix or the surviving company requires Executive to be
based more than 50 miles from where Executive's office is located
immediately prior to the Change of Control except for required
travel on company business to an extent substantially consistent
with the business travel obligations which Executive undertook on
behalf of Merix prior to the Change of Control; or

(e) the failure by Merix to obtain from any successor
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or
assets of Merix ("Successor") the assent to this Agreement
contemplated by Section 9 hereof.

8.2 CAUSE. Termination of Executive's Employment for "Cause" shall mean
termination upon (a) the willful and continued failure by Executive to perform
substantially Executive's reasonably assigned duties with Merix (other than any
such failure resulting from Executive's incapacity due to physical or mental
illness) after a demand for substantial performance is delivered to Executive by
the Board, the Chief Executive Officer or the President of Merix which
specifically identifies the manner in which the Board or Merix believes that
Executive has not substantially performed Executive's duties or (b) the willful
engaging by Executive in illegal conduct which is materially and demonstrably
injurious to Merix. No act, or failure to act, on Executive's part shall be
considered "willful" unless done, or omitted to be done, by Executive without
reasonable belief that Executive's action or omission was in, or not opposed to,
the best interests of Merix. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or based upon the
advice of counsel for Merix shall be conclusively presumed to be done, or
omitted to be done, by Executive in the best interests of Merix.

8.3 CHANGE OF CONTROL. A Change of Control shall mean that one of the following
events has taken place:

(a) The shareholders of Merix approve one of the following
("Approved Transactions"):

(i) Any merger or statutory plan of exchange involving
Merix ("Merger") in which Merix is not the continuing or
surviving corporation or pursuant to which Common Stock
would be converted into cash, securities or other property,
other than a Merger involving Merix in which the holders of
Common Stock immediately prior to the Merger have the same
proportionate ownership of Common Stock of the surviving
corporation after the Merger; or

<PAGE>
Merix Corporation

(ii) Any sale, lease, exchange, or other transfer (in
one transaction or a series of related transactions) of all
or substantially all of the assets of Merix or the adoption
of any plan or proposal for the liquidation or dissolution;

(b) A tender or exchange offer, other than one made by (i)
Merix or (ii) Tektronix, Inc. at a time when Merix is in default
under any of the Supply Agreements between Tektronix or any of
its subsidiaries and Merix, is made for Common Stock (or
securities convertible into Common Stock) and such offer results
in a portion of those securities being purchased and the offeror
after the consummation of the offer is the beneficial owner (as
determined pursuant to Section 13(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), directly or
indirectly, of securities representing at least 20 percent of the
voting power of outstanding securities of Merix;

(c) Merix receives a report on Schedule 13D of the Exchange
Act reporting the beneficial ownership by any person (other than
Tektronix, Inc. or any of its affiliates) of securities
representing 20 percent or more of the voting power of
outstanding securities of Merix, except that (i) if such receipt
shall occur as the result of sale of Common Stock (or securities
convertible into Common Stock) by Tektronix, Inc. or any of its
affiliates, it shall not constitute a Change of Control, or (ii)
if such receipt shall occur during a tender offer or exchange
offer described in (b) above, a Change of Control shall not take
place until the conclusion of such offer; or

(d) During any period of 12 months or less, individuals who
at the beginning of such period constituted a majority of the
Board of Directors cease for any reason to constitute a majority
thereof unless the nomination or election of such new directors
was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such
period.

Notwithstanding anything in the foregoing to the contrary, no Change of Control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results in Executive, or a group of persons which includes
Executive, acquiring, directly or indirectly, securities representing 20 percent
or more of the voting power of outstanding securities of Merix.

<PAGE>
Merix Corporation

8.4 DISABILITY. Termination of Executive's Employment based on "Disability"
shall mean termination without further compensation under this Agreement, due to
Executive's absence from Executive's full-time duties with Merix for 180
consecutive days as a result of Executive's incapacity due to physical or mental
illness, unless within 30 days after notice of termination by Merix following
such absence Executive shall have returned to the full-time performance of
Executive's duties.

9. SUCCESSORS; BINDING AGREEMENT.

9.1 This Agreement shall be binding on and inure to the benefit of Merix and
its Successors and assigns. Upon Executive's written request, Merix will seek to
have any Successor by agreement, assent to the fulfillment by Merix of its
obligations under this Agreement. If such a request is made, failure of Merix to
obtain such assent prior to or at the time a company becomes a Successor shall
constitute Good Reason for termination by Executive of his or her employment
and, if a Change of Control of the Company has occurred, shall entitle Executive
to the benefits pursuant to Section 4.

9.2 This Agreement shall inure to the benefit of and be enforceable by
Executive and Executive's legal representatives, executors, administrators and
heirs.

10. RESIGNATION OF CORPORATE OFFICES. Executive will resign Executive's office,
if any, as a director, officer or trustee of Merix, its subsidiaries or
affiliates and of any other corporation or trust of which Executive serves as
such at the request of Merix, effective as of the date of termination of
employment. Executive agrees to provide Merix such written resignation(s) upon
request and that no severance will be paid until after such resignation(s) are
provided.

11. GOVERNING LAW, ARBITRATION. This Agreement shall be construed in accordance
with and governed by the laws of the State of Oregon. Any dispute or controversy
arising under or in connection with this Agreement or the breach thereof, shall
be settled exclusively by arbitration under the Mutual Agreement to Arbitrate
Claims signed by the Executive, and judgment upon the award rendered by the
Arbitrator may be entered in any Court having jurisdiction thereof.
Notwithstanding any provision in the Mutual Agreement to Arbitrate Claims, Merix
shall pay all arbitration fees and reasonable attorney's fees and expenses
(including at trial and on appeal) of Executive in enforcing its rights under
this Agreement in the event of a Termination of Executive's Employment within 24
months following a Change of Control.

<PAGE>
Merix Corporation

12. AMENDMENT. No provision of this Agreement may be modified unless such
modification is agreed to in writing signed by Executive and Merix.

13. SEVERABILITY. If any of the provisions or terms of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other terms of this Agreement, and this Agreement shall be
construed as if such unenforceable term had never been contained in this
Agreement.

MERIX CORPORATION

By:

Title: Executive

<PAGE>

EXHIBIT A

RELEASE OF CLAIMS

1. PARTIES.

The parties to Release of Claims (hereinafter "Release") are ___________
and Merix Corporation, an Oregon corporation, as hereinafter defined.

1.1 EXECUTIVE.

For the purposes of this Release, "Executive" means ____________,
and his or her attorneys, heirs, executors, administrators, assigns, and
spouse.

1.2 THE COMPANY.

For purposes of this Release the "Company" means Merix Corporation, an
Oregon corporation, its predecessors and successors, corporate affiliates, and
all of each corporation's officers, directors, employees, insurers, agents, or
assigns, in their individual and representative capacities.

2. BACKGROUND AND PURPOSE.

Executive was employed by Company. Executive's employment is ending
effective __________ [following a Change in Control as defined in Section 8.3
("Change in Control") of Amended Executive Severance Agreement ("Agreement")].
Executive has elected pursuant to the terms of Section 3.3 of the [Amended
Executive Severance Agreement ("Agreement")/Agreement] to receive [50 percent of
target/the applicable prorated amount] of Executive's annual cash incentive and
elected pursuant to Section 3.4 of the Agreement to [receive $12,500 (less
proper withholding) in lieu of outplacement services/have payments up to $12,500
paid directly to a third party outplacement firm.] [Pursuant to Section 4.3 of
the Agreement, Merix shall pay [the cash equivalent not exceeding $5,000 (less
proper withholding) of] the cost and expense of maintaining a life insurance
policy for the Executive's benefit for 18 months.]

The purpose of this Release is to settle, and the parties hereby settle,
fully and finally, any and all claims Executive may have against Company,
whether asserted or not, known or unknown, including, but not limited to, claims
arising out of or related to Executive's employment, any claim for reemployment,
or any other claims whether asserted or not, known or unknown, past or future,
that relate to Executive's employment, reemployment, or application for
reemployment.

3. RELEASE.

Except as reserved in paragraphs 3 or 3.1, Executive waives, acquits and
forever discharges Company from any obligations Company has and all claims
Executive may have including but not limited to obligations and/or claims
arising from the Agreement or any other document or oral agreement relating to
employment compensation, benefits severance or post-employment issues. Except as
reserved in

<PAGE>

Paragraph 3.1, Executive hereby releases Company from any and all claims,
demands, actions, or causes of action, whether known or unknown, arising from or
related in any way to any employment of or past or future failure or refusal to
employ Executive by Company, or any other past or future claim (except as
reserved by this Release or where expressly prohibited by law) that relates in
any way to Executive's employment, compensation, benefits, reemployment, or
application for employment, with the exception of any claim Executive may have
against Company for enforcement of this Release. This release includes any and
all claims, direct or indirect, which might otherwise be made under any
applicable local, state or federal authority, including but not limited to any
claim arising under the Oregon statutes dealing with employment, discrimination
in employment, Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1991, the Americans With Disabilities Act, the Family and Medical Leave Act
of 1993, the Equal Pay Act of 1963, Executive Order 11246, the Rehabilitation
Act of 1973, the Uniformed Services Employment and Reemployment Rights Act of
1994, the Age Discrimination in Employment Act, the Fair Labor Standards Act,
Oregon wage and hour statutes, all as amended, any regulations under such
authorities, and any applicable contract, tort, or common law theories.

3.1 RESERVATIONS OF RIGHTS.

This Release shall not affect any rights which Executive may have
under any medical insurance, disability plan, workers' compensation,
unemployment compensation, applicable company stock incentive plan(s),
indemnifications, or the 401(k) plan maintained by the Company.

3.2 NO ADMISSION OF LIABILITY.

It is understood and agreed that the acts done and evidenced hereby
and the release granted hereunder is not an admission of liability on the part
of Executive or Company, by whom liability has been and is expressly denied.

4. CONSIDERATION TO EXECUTIVE.

After receipt of this Release fully endorsed by Executive, and the
expiration of the seven- (7) day revocation period provided by the Older Workers
Benefit Protection Act without Executive's revocation, Company shall pay:

(a) the lump sum of ________________________________ and __/100
Dollars ($__________) to Executive (less proper withholding) for severance and
the reasonable estimate of COBRA continuation coverage as provided in Section[s]
3.1, 3.2 [and 4.1 and 4.6] of the Agreement;

(b) Company will pay [up to $12,500 directly to the third party
outplacement firm selected by Executive for up to one year's outplacement
services as needed/$12,500 (less proper withholding) in lieu of outplacement
services];

(c) the amount of annual cash incentive when due based on the terms of
Section[s] 3.3 [and 4.2] of the Agreement [as elected by Executive];[and]

<PAGE>

[(d) [the cash equivalent (less proper withholding) of] the premium to
maintain Executive's life insurance plan for 18 months as provided in Section
4.3 of the Agreement.]

5. NO DISPARAGEMENT.

Executive agrees that henceforth Executive will not disparage or make false
or adverse statements about Company. The Company should report to Executive any
actions or statements that are attributed to Executive that the Company believes
are disparaging. The Company may take actions consistent with breach of this
Release should it determine that Executive has disparaged or made false or
adverse statements about Company. The Company agrees to follow the applicable
policy(ies) regarding release of employment reference information.

6. CONFIDENTIALITY, PROPRIETARY, TRADE SECRET AND RELATED INFORMATION.

Executive acknowledges the duty and agrees not to make unauthorized use or
disclosure of any confidential, proprietary or trade secret information learned
as an employee about Company, its products, customers and suppliers, and
covenants not to breach that duty. Moreover, Executive acknowledges that,
subject to the enforcement limitations of applicable law, the Company reserves
the right to enforce the terms of Executive's Employment Agreement with Company
and any paragraph(s) therein. Should Executive, Executive's attorney or agents
be requested in any judicial, administrative, or other proceeding to disclose
confidential, proprietary or trade secret information Executive learned as an
employee of Company, Executive shall promptly notify the Company of such request
by the most expeditious means in order to enable the Company to take any
reasonable and appropriate action to limit such disclosure.

7. ARBITRATION OF CERTAIN DISPUTES.

Executive and Company agree that should the issue arise of whether either
party to this Agreement has failed to satisfy or has breached the terms of this
Agreement, any dispute regarding the issue, except for any claim excepted under
the Mutual Agreement to Arbitration Claims, shall be submitted to arbitration
pursuant to the Mutual Agreement to Arbitrate Claims signed by Executive. In
such event, [each party shall pay its own costs and attorneys'
fees/notwithstanding contrary language in the Mutual Agreement to Arbitrate
Claims, because this Release follows a Change in Control, the reasonable
attorneys fees incurred by Executive to seek enforcement of this Release shall
be paid by the Company].

<PAGE>

8. SCOPE OF RELEASE.

The provisions of this Release shall be deemed to obligate, extend to, and
inure to the benefit of the parties; Company's parents, subsidiaries,
affiliates, successors, predecessors, assigns, directors, officers, and
employees; and each parties insurers, transferees, grantees, legatees, agents
and heirs, including those who may assume any and all of the above-described
capacities subsequent to the execution and effective date of this Release.

9. OPPORTUNITY FOR ADVICE OF COUNSEL.

Executive acknowledges that Executive has been encouraged to seek advice of
counsel with respect to this Release and has had the opportunity to do so.

10. ENTIRE RELEASE.

This Release, the Mutual Agreement to Arbitrate Claims, [as modified
herein] and the Employment Agreement signed by Executive contain the entire
agreement and understanding between the parties and, except as reserved in
paragraph 3 and 3.1, supersede and replace all prior agreements written or oral
including but not limited to the Agreement and the Executive Stock Bonus
Agreement, prior negotiations and proposed agreements, written or oral.
Executive and Company acknowledge that no other party, nor agent nor attorney of
any other party, has made any promise, representation, or warranty, express or
implied, not contained in this Release concerning the subject matter of this
Release to induce this Release, and Executive and Company acknowledge that they
have not executed this Release in reliance upon any such promise,
representation, or warranty not contained in this Release.

11. SEVERABILITY.

Every provision of this Release is intended to be severable. In the event
any term or provision of this Release is declared to be illegal or invalid for
any reason whatsoever by a court of competent jurisdiction or by final and
unappealed order of an administrative agency of competent jurisdiction, such
illegality or invalidity should not affect the balance of the terms and
provisions of this Release, which terms and provisions shall remain binding and
enforceable.

12. PARTIES MAY ENFORCE RELEASE.

Nothing in this Release shall operate to release or discharge any parties
to this Release or their successors, assigns, legatees, heirs, or personal
representatives from any rights, claims, or causes of action arising out of,
relating to, or connected with a breach of any obligation of any party contained
in this Release.

<PAGE>

13. COSTS AND ATTORNEY'S FEES.

[The parties each agree to bear their own costs and attorneys' fees which
have been or may be incurred in connection with any matters released herein or
in connection with the negotiation and consummation of this Release. In the
event of any administrative or civil action to enforce the provisions of this
Release, the prevailing party shall be entitled to attorney fees and costs
through trial and/or on appeal. Because this Release follows a Change of
Control, reasonable attorneys' fees which have been or may be incurred in
connection with any matters released herein or in connection with the
negotiation and consummation of this Release shall be paid by Company. In the
event of any administrative or civil action to enforce the provisions of this
Release, the Company shall pay Executive's reasonable attorneys' fees through
trial and/or on appeal.]

14. ACKNOWLEDGMENTS.

Executive acknowledges that the Release provides severance pay and benefits
which the Company would otherwise have no obligation to provide.

Executive acknowledges that Company has provided the following information:
(a) the class or group of employees offered the opportunity to obtain severance
benefits similar to those in the Release, (b) the eligibility factors required
to obtain severance benefits similar to those in the Release, (c) the time
limits required to obtain severance benefits similar to those in the Release,
(d) the job titles and ages of employees eligible or selected for severance
benefits similar to those in the Release, and (e) the ages of employees in the
same classification either not eligible or not selected.

<PAGE>

15. REVOCATION.

As provided by the Older Workers Benefit Protection Act, Executive's is
entitled to have forty-five (45) days to consider this Release. For a period of
seven (7) days from execution of this Release, Executive may revoke this
Release. Upon receipt of Executive's signed Release and the end of the
revocation period, payment by Company as described in paragraph 4 above will be
forwarded by mail in a timely manner as provided herein.

Dated: ________________, 199_

[Name of Executive]

STATE OF OREGON )
) ss.
County of _________ )

Personally appeared the above named __________________ and acknowledged
the foregoing instrument to be his or her voluntary act and deed.

Before me:_________________________________
Notary Public for Oregon

MERIX CORPORATION

By: Dated:

Its:

On Behalf of "Company"

<PAGE>

INDEMNITY AGREEMENT

This Agreement is made as of December 20, 1999, by and between Merix
Corporation, an Oregon corporation (the "Corporation"), and ANAYA VARDYA
("Indemnitee"), an officer of the Corporation.

WHEREAS, it is essential to the Corporation to retain and attract as
directors and officers of the Corporation and its subsidiaries the most capable
persons available; and

WHEREAS, corporate litigation subjects directors and officers to
expensive litigation risks at the same time that adequate coverage of directors'
and officers' liability insurance may be unavailable; and

WHEREAS, the Articles of Incorporation of the Corporation require
indemnification of the officers and directors of the Corporation to the fullest
extent permitted by law. The Articles and the Oregon Business Corporation Act
(the "Act") expressly provide that the indemnification provisions set forth in
the Act are not exclusive, and thereby contemplate that contracts may be entered
into between the Corporation and members of the Board of Directors and officers
with respect to indemnification of directors and officers; and

WHEREAS, Indemnitee does not regard the protection available under the
Corporation's Articles of Incorporation, Bylaws and insurance adequate in the
present circumstances, and may not be willing to serve as a director or officer
without adequate protection, and the Corporation desires Indemnitee to serve in
such capacity.

NOW THEREFORE, the Corporation and Indemnitee agree as follows:

1. AGREEMENT TO SERVE. Indemnitee agrees to serve or continue to serve as a
director and/or officer of the Corporation and/or one or more of its
subsidiaries for so long as Indemnitee is duly elected or appointed or until
such time as Indemnitee tenders a resignation in writing.

2. DEFINITIONS. As used in this Agreement:

(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought in the right of the
Corporation or otherwise, whether of a civil, criminal, administrative or
investigative nature, and whether formal or informal, in which Indemnitee may be
or may have been involved as a party or otherwise, by reason of the fact that
Indemnitee is or was a director and/or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise,

<PAGE>

whether or not serving in such capacity at the time any liability or expense is
incurred for which indemnification or reimbursement can be provided under this
Agreement.

(b) The term "Expenses" includes, without limitation thereto, expense
of investigations, judicial or administrative proceedings or appeals, amounts
paid in settlement by Indemnitee, attorneys' fees and disbursements and any
expenses of establishing a right to indemnification under Section 7 of this
Agreement, but shall not include the amount of judgments or fines against
Indemnitee.

(c) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise tax assessed with respect
to any employee benefit plan; references to "serving at the request of the
corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner reasonably believed to be in the interest of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Agreement.

3. INDEMNITY IN THIRD PARTY PROCEEDINGS. The Corporation shall indemnify
Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is
a party to or threatened to be made a party to any Proceeding (other than a
Proceeding by or in the right of the Corporation to procure a judgment in its
favor) against all Expenses, judgments and fines actually and reasonably
incurred by Indemnitee in connection with such Proceeding, but only if
Indemnitee acted in good faith and in a manner which Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation and,
in the case of a criminal proceeding, in addition, had no reasonable cause to
believe that Indemnitee's conduct was unlawful. The termination of any such
Proceeding by judgment, order of court, settlement, conviction or upon a plea of
nolo contendere, or its equivalent, shall not, of itself, create a presumption
that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in the best interest of the Corporation, and with
respect to any criminal proceeding, that such person had reasonable cause to
believe that Indemnitee's conduct was unlawful.

Pursuant to this Agreement, the Corporation specifically will, and
hereby does, indemnify, to the fullest extent permitted by law, Indemnitee
against any and all losses, claims, damages, liabilities and expenses, joint or
several, (or actions or proceedings, whether commenced or threatened, in respect
thereof) to which Indemnitee may become subject, as a result of serving as a
director and/or officer of Merix, under the Securities Act or any other statute
or common law, including any amount paid in settlement of any litigation,
commenced or threatened, and to reimburse them for any legal or other expenses
incurred by them in

<PAGE>

connection with investigating any claims and defending any actions, insofar as
any such losses, claims, damages, liabilities, expenses or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact regarding Merix, or the omission or alleged omission to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify Indemnitee in accordance with the provisions of this
Section 4 if Indemnitee is a party to or threatened to be made a party to any
Proceeding by or in the right of the Corporation to procure a judgment in its
favor against all Expenses actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such Proceeding, but only if
Indemnitee acted in good faith and in a manner which Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification for Expenses shall be made under this Section 4
in respect of any claim, issue or matter as to which such person shall have been
finally adjudged by a court to be liable for negligence or misconduct in the
performance of Indemnitee's duty to the Corporation, unless and only to the
extent that any court in which such Proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity.

5. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any
other provisions of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise, in defense of any Proceeding or in
defense of any claim, issue or matter therein, including the dismissal of an
action without prejudice, Indemnitee shall be indemnified against all Expenses
incurred in connection therewith.

6. ADVANCES OF EXPENSES. The Expenses incurred by Indemnitee pursuant to
Sections 3, 4 and 8 in any Proceeding shall be paid by the Corporation in
advance at the written request of Indemnitee, if Indemnitee shall undertake to
repay such amount to the extent that it is ultimately determined by a court that
Indemnitee is not entitled to be indemnified by the Corporation and shall
furnish the Corporation a written affirmation of the Indemnitee's good faith
belief that Indemnitee is entitled to be indemnified by the Corporation under
this Agreement. Such advances shall be made without regard to Indemnitee's
ability to repay such expenses.

7. RIGHT OF INDEMNITEE TO INDEMNIFICATION UPON APPLICATION; PROCEDURE UPON
APPLICATION. Any indemnification or advances under Sections 3, 4, 6 or 8 shall
be made no later than 45 days after receipt of the written request of
Indemnitee, unless a determination is made within such 45 day period by (a) the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such proceeding, or (b) independent legal

<PAGE>

counsel in a written opinion (which counsel shall be appointed if such quorum is
not obtainable), that the Indemnitee has not met the relevant standards for
indemnification set forth in Section 3, 4 or 8 or an exclusion set forth in
Section 9 is applicable.

The right to indemnification or advances as provided by this Agreement
shall be enforceable by Indemnitee in any court of competent jurisdiction. The
burden of proving that indemnification or advances are not appropriate shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors or independent legal counsel) to have made a determination prior to
the commencement of such action that indemnification or advances are proper in
the circumstances because Indemnitee has met the applicable standard of conduct
nor an actual determination by the Corporation (including its Board of Directors
or independent legal counsel) that Indemnitee has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that Indemnitee has not met the applicable standard of conduct. Indemnitee's
expenses incurred in connection with successfully establishing Indemnitee's
right to indemnification or advances, in whole or in part, in any such
Proceeding shall also be indemnified by the Corporation.

8. ADDITIONAL INDEMNIFICATION.

(a) Notwithstanding any limitation in Sections 3 or 4, the Corporation
shall indemnify Indemnitee in accordance with the provisions of this Section
8(a) to the fullest extent permitted by law if Indemnitee is party to or
threatened to be made a party to any Proceeding (including a Proceeding by or in
the right of the Corporation to procure a judgment in its favor) involving a
claim against Indemnitee for breach of fiduciary duty by Indemnitee against all
Expenses, judgments and fines actually and reasonably incurred by Indemnitee in
connection with such Proceeding, provided that no indemnity shall be made under
this Section 8(a) on account of Indemnitee's conduct which constitutes a breach
of Indemnitee's duty of loyalty to the Corporation or its stockholders or is an
act or omission not in good faith or which involves intentional misconduct or a
knowing violation of the law or with respect to an unlawful distribution under
ORS 60.367.

(b) Notwithstanding any limitation in Sections 3, 4 or 8(a), the
Corporation shall indemnify Indemnitee if Indemnitee is a party to or threatened
to be made a party to any Proceeding (including a Proceeding by or in the right
of the Corporation to procure a judgment in its favor) against all Expenses,
judgments and fines actually and reasonably incurred by Indemnitee in connection
with such Proceeding to the fullest extent permitted by the Act, including the
nonexclusivity provision of ORS 60.414(1) and any successor provision and
including any amendments to the Act adopted after the date hereof that may
increase the extent to which a corporation may indemnify its officers and
directors.

<PAGE>

(c) The indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under the
Restated Articles of Incorporation, the Bylaws, any other agreement, any vote of
shareholders or directors, the Act, or otherwise, both as to action in
Indemnitee's official capacity or as to action in another capacity while holding
such office. The indemnification under this Agreement shall continue as to
Indemnitee even though Indemnitee may have ceased to be a director or officer
and shall inure to the benefit of the heirs and personal representatives of
Indemnitee.

9. EXCLUSIONS. Notwithstanding any provision in this Agreement, the
Corporation shall not be obligated under this Agreement to make any
indemnification or advances in connection with any claim made against
Indemnitee:

(a) for which payment is required to be made to or on behalf of
Indemnitee under any insurance policy, except with respect to any excess beyond
the amount of required payment under such insurance, unless payment under such
insurance policy is not made after reasonable effort by Indemnitee to obtain
payment. The Corporation shall be subrogated with respect to any other rights of
Indemnitee with respect to any payment made by the Corporation to or on behalf
of the Corporation under this Agreement;

(b) for any transaction from which Indemnitee derived an improper
personal benefit; or

Indemnitee of securities of the Corporation within the meaning of Section 16(b)
of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any state statutory law or common law.

10. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provisions
of this Agreement to indemnification by the Corporation for some or a portion of
the Expenses, judgments and fines actually and reasonably incurred by Indemnitee
in the investigation, defense, appeal or settlement of any Proceeding but not,
however, for the total amount thereof, the Corporation shall nevertheless
indemnify Indemnitee for the portion of such Expenses, judgments or fines to
which Indemnitee is entitled.

11. BUSINESS TRANSACTIONS. The Corporation agrees that it will not effect
any Business Transaction (as defined in Article XI of the Restated Articles of
Incorporation of the Corporation) which has not been approved by the Continuing
Directors (as defined in Article XI of the Restated Articles of Incorporation of
the Corporation) of the Corporation unless the other party to the transaction
agrees in writing to (a) use its best efforts to maintain for the subsequent two
year period any and all directors' and officers' liability insurance in effect
prior to any discussions or announcement relating to such Business Transaction
and (b) assume all obligations of the Corporation under this Agreement and
indemnify Indemnitee and advance litigation expenses in accordance with this
Agreement.

<PAGE>

12. SEVERABILITY. If this Agreement or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify Indemnitee as to Expenses, judgments
and fines with respect to any Proceeding to the full extent permitted by any
applicable portion of this Agreement that shall not have been invalidated or by
any other applicable law.

13. NOTICE. Indemnitee shall, as a condition precedent to Indemnitee's
right to be indemnified under this Agreement, give to the Corporation notice in
writing as soon as practicable of any claim made against Indemnitee for which
indemnity will or could be sought under this Agreement. Notice to the
Corporation shall be directed to Merix Corporation, 1521 Poplar Lane, Forest
Grove, Oregon 97116, Attention: Secretary (or such other address as the
Corporation shall designate in writing to Indemnitee). Notice shall be deemed
received three days after the date postmarked if sent by prepaid mail, properly
addressed. In addition, Indemnitee shall give the Corporation such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.

14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.

15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with Oregon law.

16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Corporation and its successors and assigns.

IN WITNESS WHEREOF, the parties hereby have caused this Agreement to
be duly executed and signed as of the day and year first above written.

MERIX CORPORATION

By ___________________________

Chief Executive Officer and President

INDEMNITEE

______________________________
Anaya Vardya

<PAGE>
INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Merix Corporation on
Form S-3 of our report dated June 25, 1999, appearing in the Prospectus, which
is part of this Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

DELOITTE & TOUCHE LLP
Portland, Oregon
March 15, 2000