BENCHMARK ELECTRONICS INC, S-3, 1996-09-27

BENCHMARK ELECTRONICS INC
S-3, 1996-09-27
PRINTED CIRCUIT BOARDS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 1996.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

BENCHMARK ELECTRONICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
TEXAS
(STATE OR OTHER JURISDICTION OF 74-2211011
INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

CARY T. FU
BENCHMARK ELECTRONICS, INC.
3000 TECHNOLOGY DRIVE 3000 TECHNOLOGY DRIVE
ANGLETON, TEXAS 77515 ANGLETON, TEXAS 77515
(409) 849-6550 (409) 849-6550
(ADDRESS, INCLUDING ZIP CODE, AND (NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, TELEPHONE NUMBER, INCLUDING
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) AREA CODE, OF AGENT FOR SERVICE)
</TABLE>

COPIES TO:

<TABLE>
<S> <C>
JOHN R. BRANTLEY ROBERT H. WHILDEN, JR.
BRACEWELL & PATTERSON, L.L.P. VINSON & ELKINS L.L.P.
SOUTH TOWER PENNZOIL PLACE 2300 FIRST CITY TOWER
711 LOUISIANA STREET, SUITE 2900 1001 FANNIN
HOUSTON, TEXAS 77002-2781 HOUSTON, TEXAS 77002-6760
</TABLE>

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

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

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

If the only 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, please 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>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES PROPOSED MAXIMUM AMOUNT OF
TO BE AGGREGATE REGISTRATION
REGISTERED OFFERING PRICE(1) FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $0.10 per
share.............................. $44,023,438 $15,181
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes shares that the Underwriters may purchase to cover over-allotments,
if any, and is estimated pursuant to Rule 457(c) and (o) solely for the
purpose of calculating the registration fee. See "Underwriting."

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> 2

***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************

SUBJECT TO COMPLETION, DATED SEPTEMBER 27, 1996
PROSPECTUS

1,250,000 SHARES

[BENCHMARK ELECTRONICS, INC.]

COMMON STOCK

Of the 1,250,000 shares of common stock, par value $0.10 per share (the
"Common Stock"), of Benchmark Electronics, Inc. (the "Company") offered hereby
(the "Offering"), 1,000,000 shares are being sold by the Company and 250,000
shares are being sold by certain shareholders named herein (the "Selling
Shareholders"). The Company will not receive any of the proceeds from the sale
of shares by the Selling Shareholders. See "Principal and Selling Shareholders"
and "Underwriting."

The Common Stock is listed on the American Stock Exchange ("AMEX") under
the symbol "BHE." On September 26, 1996, the last reported sale price of the
Common Stock on the AMEX was $30.375 per share. See "Price Range of Common Stock
and Dividend Policy."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
PROCEEDS
PRICE TO UNDERWRITING PROCEEDS TO TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS(3)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
- ------------------------------------------------------------------------------------------------------
Total(4)...................... $ $ $ $
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $ .

(3) Before deducting expenses payable by the Selling Shareholders estimated at
$ .

(4) The Company has granted to the several Underwriters an option for 30 days to
purchase up to an additional 187,500 shares of Common Stock solely to cover
over-allotments, if any, on the same terms and conditions as the shares
offered hereby. If such option is exercised in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made on or about
, 1996.

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

STEPHENS INC. J.C. BRADFORD & CO. WHEAT FIRST BUTCHER SINGER

The date of this Prospectus is , 1996
<PAGE> 3

BENCHMARK ELECTRONICS, INC.

The Company provides contract electronics manufacturing and design services
to original equipment manufacturers in select industries, including medical
devices, communications equipment, industrial and business computers, testing
instrumentation and industrial controls.

[PHOTOGRAPHS OF ITEMS ASSOCIATED WITH EACH OF THE
FIVE INDUSTRIES TARGETED BY THE COMPANY]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

2
<PAGE> 4

SUMMARY

The following is a summary of certain information contained elsewhere in
this Prospectus. The summary is not intended to be a complete description of the
matters covered in this Prospectus and is subject to and qualified in its
entirety by reference to the more detailed information and financial statements
(including the notes thereto) appearing elsewhere or incorporated by reference
herein. Unless the context otherwise requires, references herein to the
"Company" are to Benchmark Electronics, Inc. and its consolidated subsidiaries.
Unless otherwise indicated, the information in this Prospectus assumes that the
Underwriters' over-allotment option is not exercised.

THE COMPANY

The Company provides contract electronics manufacturing and design services
to original equipment manufacturers ("OEMs") in select industries, including
medical devices, communications equipment, industrial and business computers,
testing instrumentation and industrial controls. The Company specializes in
manufacturing high quality, technologically complex printed circuit board
assemblies with computer-automated equipment using surface mount and
pin-through-hole interconnection technologies for customers requiring low to
medium volume production runs. The Company frequently works with customers from
product design and prototype stages through ongoing production and, in some
cases, final assembly of the customers' products and provides manufacturing
services for successive product generations. As a result, the Company believes
that it is often an integral part of its customers' operations.

On July 30, 1996, the Company completed its acquisition (the "Acquisition")
of EMD Technologies, Inc. ("EMD"), an independent provider of contract
manufacturing and product design services for OEMs. On a pro forma basis for the
Acquisition, the Company's sales for the first six months of 1996 were $144.3
million compared to the Company's reported sales for the same period of $63.9
million. The Acquisition adds production facilities and capacity in Winona,
Minnesota to the Company's facilities in Angleton, Texas and Beaverton, Oregon.
The Company believes that the Acquisition has provided the Company with a
substantially broader customer base, access to an expanded geographic market,
design services capability that the Company did not previously have and the
ability to pursue larger contracts and to pursue additional operating
efficiencies. See "Risk Factors -- Integration of EMD" and
"Business -- Acquisition of EMD."

The Company's business strategy is to provide high quality contract
electronics manufacturing services to OEMs in targeted industries. The Company
seeks to provide services that reduce OEM costs and time to market and increase
OEM product quality. The Company's strategy to achieve these objectives includes
the following key elements: (i) establish and maintain long-term relationships
that build customer loyalty, (ii) target and maintain balance among select OEM
industries and customers that the Company believes have relatively stable
markets for their products, (iii) provide comprehensive design and manufacturing
services, (iv) successfully integrate EMD, (v) pursue opportunities for growth
and (vi) maintain flexibility to better serve its customers. See
"Business -- Business Strategy."

The basis for the development of the contract manufacturing industry in
recent years has been the increasing reliance by OEMs on contract manufacturing
specialists such as the Company for the manufacture of printed circuit board
assemblies. The Company expects the trend toward outsourcing to result in
continued growth in the contract manufacturing industry because of the
advantages of this arrangement to OEMs. A recent industry study forecasts that
the contract electronics manufacturing industry will grow at an

3
<PAGE> 5

approximate compound annual rate of 20% through the year 2000. The advantages of
contract manufacturing to OEMs include acceleration of time to market for
products, reduction of production costs, access to advanced technology,
improvement in manufacturing quality and the opportunity to focus resources. See
"Business -- The Contract Electronics Manufacturing Industry."

The Company's principal executive offices are located at 3000 Technology
Drive, Angleton, Texas 77515, and its telephone number is (409) 849-6550.

THE OFFERING

<TABLE>
<S> <C>
Common Stock to be sold by the Company.............. 1,000,000 shares
Common Stock to be sold by the Selling
Shareholders...................................... 250,000 shares
Common Stock to be outstanding after the Offering... 5,719,114 shares (1)
Use of Proceeds..................................... From the net proceeds to the Company
from the Offering, the Company
intends to repay all amounts
outstanding under the Company's
revolving credit facility ($14.5
million at September 26, 1996), and
the balance of the net proceeds will
be used for working capital and other
general corporate purposes. See "Use
of Proceeds."
AMEX symbol......................................... BHE
</TABLE>

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

(1) Does not include 558,100 shares subject to stock options, of which options
to purchase 154,830 are presently exercisable.

4
<PAGE> 6

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The following table sets forth summary historical financial information for
the Company for the periods indicated and summary pro forma financial
information reflecting the Acquisition as if it had occurred on January 1, 1995
for purposes of the statements of income information and on June 30, 1996 for
purposes of the balance sheet information. The summary pro forma financial
information is not necessarily representative of what the Company's results of
operations or financial position would have been had the Acquisition in fact
occurred on January 1, 1995 or June 30, 1996 and is not intended to project the
Company's results of operations or financial position for any future period or
date. The summary financial information should be read in conjunction with the
financial statements of the Company and the related notes thereto included
elsewhere or incorporated by reference in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------- ---------------------------------
PRO FORMA PRO FORMA
FOR FOR
ACQUISITION ACQUISITION
1993 1994 1995 1995 1995 1996 1996
-------- -------- -------- ----------- -------- -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME INFORMATION:
Sales................................... $ 75,859 $ 98,168 $ 97,353 $ 258,107 $ 46,761 $ 63,883 $ 144,266
Gross profit............................ 9,397 11,932 12,240 29,836 6,214 8,309 15,342
Income from operations.................. 6,590 8,778 9,250 15,938 4,781 6,323 8,945
Net income.............................. $ 4,582 $ 5,769 $ 6,148 $ 7,679 $ 3,157 $ 3,865 $ 4,358
======= ======= ======= ======== ======= ======= ========
Earnings per common share............... $ 1.13 $ 1.41 $ 1.50 $ 1.61 $ 0.77 $ 0.93 $ 0.90
======= ======= ======= ======== ======= ======= ========
Weighted average common and
equivalent shares outstanding......... 4,066 4,088 4,106 4,781 4,090 4,144 4,819
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
--------------------------------------------
PRO FORMA FOR PRO FORMA
ACTUAL ACQUISITION AS ADJUSTED(1)
------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital........................................................ $37,329 $ 69,807 $
Total assets........................................................... 72,258 160,631
Total debt............................................................. 5,000 53,203 30,605
Shareholders' equity................................................... 50,711 71,122
</TABLE>

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

(1) Sets forth the pro forma for Acquisition balance sheet information for the
Company, as adjusted to give effect to the sale of 1,000,000 shares of
Common Stock in the Offering and the application of the net proceeds
therefrom as described in "Use of Proceeds."

5
<PAGE> 7

RISK FACTORS

Prospective investors should carefully consider the following factors and
the other information contained in this Prospectus before purchasing any shares
of Common Stock.

INTEGRATION OF EMD

The Acquisition represents a significant expansion in the scope of the
Company's operations, and the integration and consolidation of EMD into the
Company will require substantial management, financial and other resources.
During the integration process, the financial performance of the Company will be
subject to the risks commonly associated with the acquisition of businesses,
including the financial impact of expenses incurred in connection with an
acquisition and the potential disruptions associated with the integration of
businesses. The integration process may place a significant strain on the
Company's management, production, technical, financial and other resources, and
may pose risks with respect to production, customer service and market share.

The Company's future success is dependent upon its ability to effectively
integrate EMD into the Company, including its ability to implement potentially
available marketing and cost saving opportunities, some of which may involve
operational changes. There can be no assurance as to the timing or amount of any
marketing opportunities or cost savings that may be realized as the result of
operational changes implemented during the integration process. Further, there
can be no assurance that the Company will not experience difficulties with
customers, personnel or other parties as a result of the Acquisition, that the
Acquisition will enhance the Company's competitive position and business
prospects or that the combination of the Company and EMD will be successful. See
"Business -- Acquisition of EMD."

CUSTOMER CONCENTRATION

A substantial percentage of the Company's sales have been to a small number
of customers, and the loss of a major customer would adversely affect the
Company. In 1995, the Company's three largest customers accounted for 54.7% of
the Company's sales, and the Company's largest customer, Sequent Computer
Systems, Inc. ("Sequent"), accounted for 27.6% of sales. As a result of its
decision to second source some of its products, Sequent accounted for less than
10% of the Company's sales in the first six months of 1996. On a pro forma basis
for the six months ended June 30, 1996, the three largest customers of the
Company and EMD accounted for 44.8% of sales, and the largest customer, Stratus
Computer Corporation, accounted for 27.4% of sales. One of these customers,
International Business Machines Corporation ("IBM"), which accounted for 8.7% of
pro forma combined sales in the first six months of 1996, has begun using an
offshore source for its products. The Company does not expect any significant
sales to IBM in the foreseeable future. The Company's future sales are dependent
on the success of its customers, some of which operate in businesses associated
with rapid technological change and consequent product obsolescence.
Developments adverse to the Company's major customers or their products could
have an adverse effect on the Company. In addition, the Company could be
adversely affected if a major customer were unable to pay for components and
services. See "Business -- Marketing and Customers."

ABSENCE OF LONG-TERM SALES CONTRACTS

The level and timing of purchase orders placed by the Company's customers
are affected by a number of factors, including variation in demand for
customers' products, customer attempts to manage inventory and changes in the
customers' manufacturing strategies. The Company typically does not obtain
long-term purchase orders or commitments but instead works with its customers to
develop nonbinding forecasts of the future volume of orders. Based on such
nonbinding forecasts, the Company makes commitments regarding the level of
business that it will seek and accept, the timing of production schedules and
the levels and utilization of personnel and other resources. A variety of
conditions, both specific to each individual customer and generally affecting
each customer's industry, may cause customers to cancel, reduce or delay orders
that were either previously made or anticipated. Generally, customers may
cancel, reduce or delay purchase orders and commitments without penalty, except
for payment for services rendered, materials purchased and, in certain

6
<PAGE> 8

circumstances, charges associated with such cancellation, reduction or delay.
Significant or numerous cancellations, reductions or delays in orders by
customers, or any inability by customers to pay for services provided by the
Company or to pay for components and materials purchased by the Company on such
customers' behalf, could have an adverse effect on the Company's business,
financial condition and results of operations.

DEPENDENCE ON CERTAIN INDUSTRIES

The Company is dependent upon the continued viability, growth and financial
stability of its customers, which are, in turn, substantially dependent on the
growth of the medical devices, communications equipment, industrial and business
computers, testing instrumentation and industrial controls industries. Certain
of these industries have been characterized by rapid technological change,
vigorous competition, short product life cycles and pricing and margin
pressures. Additionally, certain of the industries served by the Company are
subject to economic cycles and have in the past experienced, and are likely in
the future to experience, recessionary periods. These factors, to the extent
they affect the industries served by the Company in general, and the Company's
customers in particular, could have an adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Business
Strategy" and "Business -- Marketing and Customers."

AVAILABILITY OF RESOURCES

Substantially all of the Company's sales are derived from turnkey
manufacturing services in which the Company purchases customer-specified
components. Under turnkey contracts, if significant shortages of components
occur, the Company may be forced to delay manufacturing and shipments, which
could have a material adverse effect on the Company's results of operations. In
addition, the Company in some instances bears the risk of component price
increases, which could adversely affect the Company's gross profit margins.
Significant lead times also are involved in acquiring certain equipment used in
the Company's manufacturing process. Although the Company has increased its
manufacturing capacity in response to the expansion of its customer base, there
can be no assurance that the Company will have sufficient capacity at any given
time to meet its customers' demands if such demands exceed anticipated levels.
See "Business -- Suppliers."

DEPENDENCE ON KEY EXECUTIVES

The Company depends significantly on its three executive officers, Donald
E. Nigbor, Steven A. Barton and Cary T. Fu. The unexpected loss of the services
of any one of these executive officers could have an adverse effect on the
Company. See "Management."

COMPETITION

The Company competes against numerous providers of contract electronics
manufacturing services. Several of the Company's competitors are more
established in the industry and have substantially greater manufacturing,
marketing and financial resources than the Company. The Company also faces
competition from current and prospective customers that are manufacturing or may
decide to manufacture printed circuit board assemblies in-house. To remain
competitive in its targeted markets, the Company believes that it must continue
to provide technologically advanced manufacturing services, maintain strict
quality standards, respond flexibly and rapidly to customers' design and
schedule changes, and deliver products on a reliable basis and at competitive
prices. The Company's inability to continue to compete effectively in any of
these areas could have an adverse effect on the Company. See
"Business -- Competition."

PRODUCT LIABILITY

The Company's sales are generated from customers in its targeted
industries. Sales in these markets entail the risk of involvement in product
liability actions. This risk may be enhanced by the Company's increased
involvement in the design of its customers' products as a result of the
Acquisition. Although the Company has product liability insurance coverage,
there is no assurance that current or future policy limits

7
<PAGE> 9

will be sufficient to cover all possible liabilities. Further, there can be no
assurance that adequate product liability insurance will continue to be
available in the future or that it can be maintained at reasonable cost to the
Company. In the event of a successful product liability claim against the
Company, lack or insufficiency of insurance coverage could have an adverse
effect on the Company.

AUTHORIZED PREFERRED STOCK

The Company has the authority under its Restated Articles of Incorporation
to issue 5,000,000 shares of preferred stock on terms to be established by its
Board of Directors. The Company has not issued, and has no present plans to
issue, any shares of preferred stock. If the Company decided to do so, however,
the provisions of the preferred stock may include, among others, extraordinary
voting, dividend, redemption, conversion or exchange rights that could
discourage unsolicited takeovers of the Company and limit the opportunity of the
holders of Common Stock to receive a premium over the prevailing market price
for the Common Stock. See "Description of Capital Stock."

FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements regarding
future financial condition and results of operations and the Company's business
operations. The words "expect," "estimate," "anticipate," "predict," and similar
expressions are intended to identify forward-looking statements. Such statements
involve risks, uncertainties and assumptions, including but not limited to
industry and economic conditions and customer actions and the other factors
discussed in this Prospectus (including but not limited to statements under the
caption "Risk Factors") and in the Company's filings with the Securities and
Exchange Commission. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may vary materially from those indicated.

8
<PAGE> 10

USE OF PROCEEDS

The net proceeds to the Company from the Offering are expected to be
approximately $ million ($ if the Underwriters' over-allotment
option is exercised in full). The Company will use the net proceeds of the
Offering to repay all amounts outstanding ($14.5 million at September 26, 1996)
under the Company's revolving credit facility (the "Credit Facility") with Texas
Commerce Bank National Association. Borrowings under the Credit Facility
currently bear interest at a rate of approximately 6.5%. The Credit Facility
terminates, and outstanding principal is due, on July 31, 2000. The borrowings
under the Credit Facility to be repaid with the proceeds of the Offering were
used to pay a portion of the cash consideration for the Acquisition, to
refinance revolving credit debt of the Company and EMD and to fund working
capital requirements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." The
balance of the net proceeds to the Company from the Offering will be used for
working capital and other general corporate purposes.

CAPITALIZATION

The following table sets forth (i) the historical capitalization of the
Company as of June 30, 1996, (ii) the pro forma capitalization of the Company as
of June 30, 1996 after giving effect to the Acquisition, borrowings under the
Credit Facility in connection with the Acquisition and the issuance of the
Senior Note, and (iii) the pro forma capitalization of the Company as of June
30, 1996, as adjusted to give effect to the sale of 1,000,000 shares of Common
Stock in the Offering and the application of the net proceeds therefrom as
described in "Use of Proceeds." This table should be read in conjunction with
the Company's financial statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere or incorporated by reference in this Prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
----------------------------------------
PRO FORMA PRO FORMA
FOR AS
HISTORICAL ACQUISITION ADJUSTED
---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 72 $ 594 $
======= ======== =======
Line of credit.............................................. $ 5,000 $ -- $ --
Revolving credit facility................................... -- 22,598 --
Senior note................................................. -- 30,000 30,000
Capital lease obligations................................... -- 605 605
------- -------- -------
Total debt........................................ 5,000 53,203 30,605
------- -------- -------
Shareholders' equity:
Preferred shares, par value $0.10 per share; 5,000,000
shares authorized, none issued......................... -- -- --
Common shares, par value $0.10 per share; 10,000,000
shares authorized; issued -- 4,060,192, 4,735,156 and
5,735,156, respectively; outstanding -- 4,035,400,
4,710,364 and 5,710,364, respectively.................. 404 471 571
Additional paid-in capital................................ 20,028 40,472
Retained earnings......................................... 30,339 30,339 30,339
Less treasury shares, at cost, 24,742 shares.............. (60) (60) (60)
Unearned ESOP shares...................................... -- (100) (100)
------- -------- -------
Total shareholders' equity........................ 50,711 71,122
------- -------- -------
Total capitalization.............................. $ 55,711 $ 124,325 $
======= ======== =======
</TABLE>

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<PAGE> 11

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock is listed on the AMEX under the symbol "BHE."
The following table sets forth the high and low sale prices for the Common Stock
as reported by the AMEX for the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1994
First quarter.......................................... $26 3/8 $23
Second quarter......................................... 26 1/8 22 1/2
Third quarter.......................................... 25 1/2 23
Fourth quarter......................................... 28 23 1/2
1995
First quarter.......................................... 27 1/4 22 3/4
Second quarter......................................... 26 3/8 20 1/4
Third quarter.......................................... 31 7/8 24 7/8
Fourth quarter......................................... 29 1/4 23 1/2
1996
First quarter.......................................... 29 7/8 24 1/8
Second quarter......................................... 32 28
Third quarter (through September 26, 1996)............. 34 1/4 28 5/8
</TABLE>

On September 26, 1996 the last reported sale price of the Common Stock on
the AMEX was $30.375 per share.

The Company has not paid any cash dividends on the Common Stock in the past
and anticipates that, for the foreseeable future, it will retain any earnings
available for dividends for use in its business. The credit agreement relating
to the Credit Facility and the purchase agreement relating to a $30 million
senior note (the "Senior Note") issued by the Company in connection with the
Acquisition limit the amount of dividends that may be declared on the Common
Stock. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

10
<PAGE> 12

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The following table sets forth selected historical financial information
for the Company for the periods indicated and selected pro forma financial
information reflecting the Acquisition as if it had occurred on January 1, 1995
for purposes of the statements of income information and on June 30, 1996 for
purposes of the balance sheet information. The selected historical financial
information for each year in the five-year period ended December 31, 1995 is
derived from the audited consolidated financial statements of the Company for
each such year. The selected historical financial information as of June 30,
1996 and for the six-month periods ended June 30, 1995 and 1996 is derived from
the unaudited financial statements of the Company for such periods. In the
opinion of management, all adjustments consisting of normal recurring accruals
considered necessary for a fair presentation have been made. The results of
operations for the six months ended June 30, 1996 are not necessarily indicative
of the actual results for the full 1996 fiscal year. The selected pro forma
financial information is not necessarily representative of what the Company's
results of operations or financial position would have been had the Acquisition
in fact occurred on January 1, 1995 or June 30, 1996 and is not intended to
project the Company's results of operations or financial position for any future
period or date. The selected financial information should be read in conjunction
with the financial statements of the Company and the related notes thereto
included elsewhere or incorporated by reference in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------- ---------------------------------------
PRO FORMA PRO FORMA
FOR FOR
ACQUISITION ACQUISITION
1991 1992 1993(1) 1994 1995 1995 1995 1996 1996
------- ------- ------- ------- ------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME
INFORMATION:
Sales................. $33,332 $50,647 $75,859 $98,168 $97,353 $ 258,107 $ 46,761 $ 63,883 $ 144,266
Cost of sales......... 28,637 43,683 66,462 86,236 85,113 228,271 40,547 55,574 128,924
------- ------- ------- ------- ------- -------- ------- ------- --------
Gross profit.... 4,695 6,964 9,397 11,932 12,240 29,836 6,214 8,309 15,342
Selling, general and
administrative
expenses............ 1,772 2,697 2,870 3,154 2,990 12,253 1,433 1,986 5,574
Amortization of
goodwill(2)......... (108) (108) (63) -- -- 1,645 -- -- 823
------- ------- ------- ------- ------- -------- ------- ------- --------
Income from
operations.... 3,031 4,375 6,590 8,778 9,250 15,938 4,781 6,323 8,945
Interest and other
income.............. 246 384 470 263 281 1,037 166 36 729
Interest expense...... -- -- -- -- -- (3,869) -- (86) (2,278)
------- ------- ------- ------- ------- -------- ------- ------- --------
Income before
income tax
expense....... 3,277 4,759 7,060 9,041 9,531 13,106 4,947 6,273 7,396
Income tax expense.... (1,173) (1,629) (2,478) (3,272) (3,383) (5,427) (1,790) (2,408) (3,038)
------- ------- ------- ------- ------- -------- ------- ------- --------
Net income...... $ 2,104 $ 3,130 $ 4,582 $ 5,769 $ 6,148 $ 7,679 $ 3,157 $ 3,865 $ 4,358
======= ======= ======= ======= ======= ======== ======= ======= ========
Earnings per common
share............... $ 0.66 $ 0.83 $ 1.13 $ 1.41 $ 1.50 $ 1.61 $ 0.77 $ 0.93 $ 0.90
======= ======= ======= ======= ======= ======== ======= ======= ========
Weighted average
common and
equivalent shares
outstanding......... 3,190 3,762 4,066 4,088 4,106 4,781 4,090 4,144 4,819
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
--------------------------------------------
PRO FORMA
PRO FORMA FOR AS
ACTUAL ACQUISITION ADJUSTED>(3)
------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital......................................................... $37,329 $ 69,807 $
Total assets............................................................ 72,258 160,631
Total debt.............................................................. 5,000 53,203 30,605
Shareholders' equity.................................................... 50,711 71,122
</TABLE>

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

(1) Includes cumulative effect of change in accounting for income taxes of
$116,000 (or $0.03 per common share) recorded in 1993.

(2) For the years ended December 31, 1991, 1992 and 1993, the amortization of
goodwill is income, representing the amortization of negative goodwill.

(3) Sets forth the pro forma for Acquisition balance sheet information for the
Company, as adjusted to give effect to the sale of 1,000,000 shares of
Common Stock in the Offering and the application of the net proceeds
therefrom as described in "Use of Proceeds."

11
<PAGE> 13

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

GENERAL

The Company sells its products from its manufacturing facilities in
Angleton, Texas, Beaverton, Oregon and Winona, Minnesota. Revenues are
recognized at the time products are shipped to the customer and may vary due to
the timing of customer orders, product mix and availability of component parts.
Substantially all of the Company's business is performed on a turnkey basis,
which involves the procurement of component parts. The gross profit margin for
such materials is generally lower than the gross profit margin associated with
the manufacturing process and other value-added services. The Company
anticipates that selling, general and administrative expenses will continue to
increase in nominal terms as the Company continues to build the internal
management and support systems necessary to support higher revenue levels. The
following discussion should be read in conjunction with the unaudited financial
statements of the Company and EMD and the pro forma financial statements for the
Acquisition included elsewhere in this Prospectus.

The following table sets forth for the periods indicated certain items in
the Company's Condensed Statements of Income, EMD's Condensed Consolidated
Statements of Income and the Pro Forma Condensed Combined Statement of Income as
a percentage of sales:

<TABLE>
<CAPTION>
THE COMPANY EMD PRO FORMA
--------------- --------------- ----------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
--------------- --------------- ----------
1995 1996 1995 1996 1996
----- ----- ----- ----- ----------
<S> <C> <C> <C> <C> <C>
Sales........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................................... 86.7 87.0 88.2 91.3 89.4
----- ----- ----- ----- -----
Gross profit.................................. 13.3 13.0 11.8 8.7 10.6
Selling, general and administrative expenses.... 3.1 3.1 5.4 4.7 3.9
Amortization of goodwill........................ -- -- -- -- 0.5
----- ----- ----- ----- -----
Income from operations........................ 10.2 9.9 6.4 4.0 6.2
Interest and other income....................... 0.3 0.1 0.4 0.9 0.5
Interest expense................................ 0.0 (0.1) (0.6) (0.9) (1.6)
----- ----- ----- ----- -----
Income before income tax expense.............. 10.5 9.9 6.2 4.0 5.1
Income tax expense.............................. (3.8) (3.8) (2.5) (1.2) (2.1)
----- ----- ----- ----- -----
Net income.................................... 6.7% 6.1% 3.7%* 2.8% 3.0%
===== ===== ===== ===== =====
</TABLE>

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

* Represents income from continuing operations

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

Sales. On a pro forma basis, assuming the Acquisition had occurred at
January 1, 1995, the combined sales of the Company and EMD were $144.3 million
for the six months ended June 30, 1996.

Sales by the Company increased 36.6% to $63.9 million during the six months
ended June 30, 1996 from $46.8 million during the six months ended June 30,
1995. This increase resulted primarily from increased production volumes made
possible by the expansion of surface mount assembly capacity at the Company's
Angleton, Texas facility, which was completed during the second quarter of 1996.
In addition, the increase in production volumes was attributable in part to the
fulfillment during the first quarter of 1996 of orders that were subject to
customers' changes in production schedules and product mix experienced by the
Company in the last quarter of 1995 and to the absence of component shortages
during the first six months of 1996 which had caused delays during the
corresponding period in 1995.

12
<PAGE> 14

Sales by EMD decreased 8.2% to $80.4 million during the six months ended
June 30, 1996 from $87.6 million during the six months ended June 30, 1995. The
decrease was due primarily to reduced sales to IBM, which accounted for 55.1% of
net sales in the first six months of 1995 compared to 15.6% of sales during the
first six months of 1996. The decrease in sales to IBM was the result of IBM's
decision in 1994 to use an offshore source for new products. The Company does
not expect any material sales to IBM in the foreseeable future. The decrease in
sales to IBM was partially offset by sales to other customers during the first
six months of 1996. Stratus Computer Corporation accounted for approximately
49.2% of EMD's sales during this period.

Gross Profit. Gross profit was $15.3 million for the six months ended June
30, 1996 on a pro forma basis. Pro forma gross profit margin was 10.6% for the
six month period compared to pro forma gross profit margin of 11.6% for the year
ended December 31, 1995. The Company expects gross profit margins to fluctuate
based on product mix and customer mix. However, the Company believes that the
integration of EMD may provide opportunities for cost savings in materials
purchasing.

Gross profit for the Company increased 33.7% to $8.3 million during the six
months ended June 30, 1996 from $6.2 million during the six months ended June
30, 1995. The increase in gross profit was due primarily to higher sales
volumes, improved manufacturing efficiencies and normal changes in product mix
and customer mix. Gross profit margin decreased to 13.0% for the first six
months of 1996 from 13.3% for the first six months of 1995. The decrease in
gross profit margin was due primarily to the initiation of new programs during
the first quarter of 1996 which had not yet reached full production and
secondarily to the use during the first quarter of 1995 of some components that
had been previously reserved as obsolete.

Gross profit for EMD decreased 31.9% to $7.0 million during the six months
ended June 30, 1996 from $10.3 million during the same period in 1995. Gross
profit margin decreased to 8.7% during the 1996 period from 11.8% during the
1995 period. This decrease was the result primarily of the higher level of
material content in assembly sales during the 1996 period. In addition, labor
and overhead costs did not decline in proportion to the decline in sales volume.

Selling, General and Administrative Expenses. On a pro forma basis,
selling, general and administrative expenses for the six months ended June 30,
1996 were $5.6 million. As a percentage of sales, selling, general and
administrative expenses were 3.9% on a pro forma basis for the six months ended
June 30, 1996, compared with 4.7% on a pro forma basis for the year ended
December 31, 1995, reflecting lower selling, general and administrative expenses
for EMD for the six month period. Pro forma selling, general and administrative
expenses reflect the elimination of certain duplicative executive functions at
EMD.

Selling, general and administrative expenses for the Company increased
38.6% to $2.0 million during the six months ended June 30, 1996 from $1.4
million during the six months ended June 30, 1995. In order to satisfy the
increased level of business activity and to continue the development and
improvement of the systems and processes necessary to accommodate future growth,
the Company has added management personnel. The increase in selling, general and
administrative expenses during the first six months of 1996 reflects these
additional personnel and related departmental expenses, as well as the
additional administrative expenses, such as travel and communication costs,
incurred in connection with the Acquisition. Selling, general and administrative
expenses as a percentage of sales remained relatively flat at 3.1% during the
comparable periods of 1995 and 1996.

Selling, general and administrative expenses for EMD decreased 19.5% to
$3.8 million during the six months ended June 30, 1996 from $4.7 million during
the same period in 1995. The decrease resulted primarily from lower amounts
contributed to EMD's profit sharing plan. Selling, general and administrative
expenses as a percentage of sales decreased to 4.7% during the 1996 period from
5.4% during the corresponding 1995 period.

Amortization of Goodwill. The amortization of goodwill on a pro forma basis
for the six months ended June 30, 1996 was approximately $823,000.

Income from Operations. On a pro forma basis, income from operations was
$8.9 million for the six months ended June 30, 1996. Pro forma income from
operations as a percentage of sales for the six month period and the year ended
December 31, 1995 was 6.2%.

13
<PAGE> 15

As a result of factors described above, income from operations for the
Company increased 32.3% to $6.3 million during the six months ended June 30,
1996 from $4.8 million during the six months ended June 30, 1995. Income from
operations as a percentage of sales decreased to 9.9% during the 1996 period
from 10.2% during the 1995 period.

As a result of factors described above, income from operations for EMD
decreased 42.4% to $3.2 million during the six months ended June 30, 1996 from
$5.6 million in the six months ended June 30, 1995. Income from operations as a
percentage of sales decreased to 4.0% during the 1996 period from 6.4% during
the corresponding 1995 period.

Interest and Other Income and Interest Expense. Interest expense for the
first six months of 1996 was approximately $2.3 million on a pro forma basis.
The increased interest expense on a pro forma basis as compared to the combined
actual interest expense for the first six months of 1996 for the Company and EMD
reflects the additional interest expense, at an interest rate of 8.0% per annum,
on the debt incurred in connection with the Acquisition.

Interest expense for the Company for the first six months of 1996 was
$86,000, which was incurred by the Company for borrowings under its short-term
revolving line of credit with a commercial bank (the "Line of Credit").

Interest and other income for EMD increased to $693,000 for the first six
months of 1996 from $348,000 for the same period in 1995. The increase was due
to the gain recognized on the sale of a swap agreement and increased material
handling fees for maintaining levels of inventory, partially offset by a
decrease in gains on sales of fixed assets. Interest expense for EMD increased
21.3% to $712,000 for the six months ended June 30, 1996 from $587,000 in the
same period of 1995. The increase was due to higher average debt outstanding
partially offset by lower interest rates.

Income Tax Expense. Income tax expense on a pro forma basis for the first
six months of 1996 was $3.0 million. The pro forma tax rate of 41.1% reflects
the estimated combined effective tax rate after the Acquisition. The primary
difference between the historical rates and the combined effective rates is the
impact of nondeductible goodwill charges incurred in connection with the
Acquisition.

Income tax expense for the Company increased 34.5% to $2.4 million in the
first six months of 1996 from $1.8 million in the same period of 1995. The
increase was due to higher pre-tax income. The Company's effective tax rate
approximated the blended federal and state statutory rates because all of the
Company's operations were then located within the United States.

Income tax expense for EMD decreased 55.2% to $978,000 for the first six
months of 1996 from $2.2 million for the first six months of 1995. The decrease
was due to decreased pre-tax income in the first six months of 1996 compared to
the comparable period of 1995 and to a reduction in the overall effective tax
rate for the period. The effective tax rate decreased from 40.4% for the first
six months of 1995 to 30.3% for the first six months of 1996. The lower tax rate
resulted, in part, from the beneficial tax impact of the establishment on
January 2, 1996 of EMD-Foreign Sales Corporation, a Barbados foreign sales
corporation, to act as a sales agent for EMD's foreign sales. A substantial
portion of EMD's current and forecasted sales are delivered for use outside the
United States.

Net Income. On a pro forma basis, net income was $4.4 million (or $0.90 per
share) during the six months ended June 30, 1996. Pro forma net income as a
percentage of sales was 3.0% during the period.

As a result of factors described above, net income for the Company
increased 22.4% to $3.9 million (or $0.93 per share) during the six months ended
June 30, 1996 from $3.2 million (or $0.77 per share) during the six months ended
June 30, 1995. Net income as a percentage of sales declined to 6.1% during the
1996 period from 6.7% during the corresponding 1995 period.

As a result of factors described above, net income from continuing
operations for EMD decreased 30.0% to $2.2 million during the six months ended
June 30, 1996 from $3.2 million during the six months ended June 30, 1995. Net
income from continuing operations as a percentage of sales decreased to 2.8%
during the 1996 period from 3.7% during the corresponding 1995 period.

14
<PAGE> 16

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its growth and operations through funds generated
from operations, proceeds from the sale of Common Stock and, during the second
quarter of 1996, funds borrowed under the Line of Credit. Prior to the second
quarter of 1996, the Company had never borrowed any amounts under the Line of
Credit.

Cash flows used by the Company in operating activities were $2.5 million
for the six months ended June 30, 1996. Cash used in operations primarily funded
the increase in inventories related to the Company's increased backlog. See
"Business -- Backlog." Additionally, inventories were higher during the first
six months of 1996 as compared to the same period in 1995 as a result of higher
inventory requirements associated with new programs for existing customers and
the effects of customer-imposed program delays. The Company is attempting to
mitigate the impact of such delays by obtaining customer deposits for
inventories carried by the Company in these situations.

Cash flows used by the Company in investing activities were $5.2 million
for the six months ended June 30, 1996. The Company completed the planned
expansion of its production capacity at the Angleton plant during the second
quarter of 1996, after which the Company had 12 surface mount assembly lines in
operation. Capital expenditures of $5.0 million for the six months ended June
30, 1996 were primarily concentrated in the expansion of the facility and
surface mount assembly equipment associated with this expansion.

Cash flows provided by financing activities totaled $5.0 million for the
six months ended June 30, 1996, reflecting borrowings under the Line of Credit,
which was available primarily to finance accounts receivable and inventory
requirements. At June 30, 1996, the Company had $5.0 million outstanding under
the Line of Credit. The Company was entitled to borrow under the Line of Credit
up to the lesser of $10.0 million or the sum of 80% of its eligible accounts
receivable and 25% of its eligible inventories. The Line of Credit was
collateralized by substantially all of the Company's current assets, imposed
certain financial covenants on the Company and restricted the ability of the
Company to incur additional debt without the consent of the bank. See Note 3 of
Notes to Condensed Financial Statements of the Company.

On July 30, 1996 the Company obtained the Credit Facility, a four-year
$35.0 million revolving line of credit which replaced the prior revolving Line
of Credit, financed a portion of the cash consideration for the Acquisition,
refinanced the revolving line of credit at EMD and provided for future working
capital needs. The Credit Facility is unsecured and is guaranteed by each of the
Company's United States subsidiaries. The credit agreement relating to the
Credit Facility contains certain financial covenants and restricts the ability
of the Company to incur additional debt without the consent of the bank and to
pay dividends. The Company is entitled to borrow under the Credit Facility up to
the lesser of $35.0 million or the sum of 80% of its eligible accounts
receivable and 25% of its eligible inventories. The Company may prepay the
Credit Facility without penalty at any time upon proper notice to the bank.

Interest on the Credit Facility is payable quarterly and accrues, at the
Company's option, at either the bank's prime rate or its Fixed Eurodollar Rate
plus 0.625% to 1.75% per annum. A commitment fee of 0.25% per annum on the
unused portion of the Credit Facility is payable quarterly in arrears. As of
September 26, 1996, the Company had $14.5 million outstanding under the Credit
Facility, bearing interest at a rate of approximately 6.5% per annum.

In order to finance a portion of the cash consideration for the
Acquisition, the Company issued a $30.0 million, 8.02% Senior Note due 2006 (the
"Senior Note") to Northwestern Mutual Life Insurance Company. The Senior Note is
unsecured and guaranteed by each of the Company's United States subsidiaries.
Principal on the Senior Note is payable in annual installments of $5.0 million
beginning July 31, 2001 with a final installment of the unpaid principal amount
due July 31, 2006.

The purchase agreement relating to the Senior Note (the "Purchase
Agreement") includes customary affirmative and negative covenants and requires
that the Company maintain (i) a tangible net worth of not less than the sum of
(a) $39.0 million, (b) 50% of the Company's consolidated net income after June
30, 1996 and (c) the aggregate amount of net cash proceeds from the sale of
Common Stock after June 30, 1996;

15
<PAGE> 17

(ii) minimum fixed charge and interest coverage ratios; and (iii) a ratio of
consolidated indebtedness to earnings before interest, taxes, depreciation and
amortization of not greater than 3.25 to 1.00 at any time prior to March 31,
1997 and not greater than 3.00 to 1.00 at any time on or after March 31, 1997.
Upon any prepayment of all or a portion of the Senior Note, the Company is
obligated to pay the holder a premium on the amount prepaid. The Purchase
Agreement contains a provision that in the event of a change of control (defined
generally to mean the acquisition by a person or group (as defined in the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder) of beneficial ownership or more than 50% of the total voting power
of the outstanding voting stock of the Company), the Company must offer to
repurchase the Senior Note at par plus any prepayment penalty. The Purchase
Agreement also limits the ability of the Company to pay dividends.

The Company may require additional capital to finance further enhancements
to or acquisitions or expansions of its manufacturing capacity. Management
believes that the level of working capital will continue to grow at a rate
generally consistent with the growth of the Company's operations. Although no
assurance can be given that future financing will be available on terms
acceptable to the Company, the Company may seek additional funds from time to
time through public or private debt or equity offerings or through bank
borrowings to the extent permitted by its existing debt agreements. Management
believes that the proceeds from the Offering, existing cash balances, funds
generated from operations, and borrowings under the Company's Senior Note will
be sufficient to permit the Company to meet its liquidity requirements in 1996
and the foreseeable future.

The Company does not hold or issue derivative financial instruments in the
normal course of business.

16
<PAGE> 18

BUSINESS

GENERAL

The Company provides contract electronics manufacturing and design services
to OEMs in select industries, including medical devices, communications
equipment, industrial and business computers, testing instrumentation and
industrial controls. The Company specializes in manufacturing high quality,
technologically complex printed circuit board assemblies with computer-automated
equipment using surface mount and pin-through-hole interconnection technologies
for customers requiring low to medium volume production runs. The Company
frequently works with customers from product design and prototype stages through
ongoing production and, in some cases, final assembly of the customers' products
and provides manufacturing services for successive product generations. As a
result, the Company believes that it is often an integral part of its customers'
operations.

Substantially all of the Company's manufacturing services are provided on a
turnkey basis, whereby the Company purchases customer-specified components from
its extensive network of suppliers, assembles the components on finished printed
circuit boards, performs post-production testing and provides the customer with
production process and testing documentation. The Company offers its customers
flexible, "just-in-time" delivery programs allowing product shipments to be
closely coordinated with the customers' inventory requirements. In certain
instances, the Company completes the assembly of its customers' products at the
Company's facilities by integrating printed circuit board assemblies into other
elements of the customers' products. The Company also provides manufacturing
services on a consignment basis, whereby the Company, utilizing components
provided by the customer, provides only assembly and post-production testing
services. The Company operates a total of 29 surface mount production lines at
its facilities in Angleton, Texas, Beaverton, Oregon and Winona, Minnesota.

ACQUISITION OF EMD

On July 30, 1996, the Company completed the Acquisition of EMD, an
independent provider of contract manufacturing and product design services for
OEMs in industries comparable to those targeted by the Company. EMD's
manufacturing services focus on manufacturing complex printed circuit board
assemblies, operating 15 surface mount production lines at its Winona, Minnesota
facilities. EMD's product design services include the complete design and
development of electronic products and mechanical packages, from conceptual
design of circuit boards to configuring subsystems and enclosures. EMD has
sought to integrate its design services with its assembly services and the
related materials management and post-assembly testing services to provide a
broad range of services to its customers.

On a pro forma basis for the Acquisition, the Company's sales for the first
six months of 1996 were $144.3 million compared to the Company's reported sales
for the same period of $63.9 million. The addition of EMD's manufacturing
facility in Minnesota provides the Company with access to markets in the Midwest
and the Northeast, without any overlap of customers. For this reason, the
Acquisition substantially broadens the Company's customer base. The Company
believes that the Acquisition will allow it to pursue larger contracts with its
customers because it provides the Company with additional production capacity
and a broader base of technical resources. As a result, the Company expects to
be able to undertake larger product programs without becoming dependent upon one
industry or customer. The Company also intends to offer EMD's product design
services to a wide range of the Company's customers, combining the design
engineering strength of EMD with the component procurement and customer service
strengths of the Company and the manufacturing expertise of both entities.

The Acquisition was accomplished by means of the merger of EMD with and
into a wholly owned subsidiary of the Company, with the former shareholders of
EMD receiving from the Company approximately $30.4 million in cash and 674,964
shares of Common Stock. The Company is operating the business of EMD as a wholly
owned subsidiary of the Company and has not made major modifications to the
manner in which EMD was operated prior to the Acquisition. The Company believes
that opportunities exist to consolidate certain overhead functions, reduce
duplicative expenditures and implement, on a combined basis, certain other cost
saving measures. The Company is in the process of developing a combined
procurement plan pursuant to

17
<PAGE> 19

which component and other purchases would be negotiated on a Company-wide basis
with a view to realizing cost savings associated with the increased purchasing
power of the combined entities. The Company also plans to reduce EMD's reliance
on distributors as sources of components in favor of the Company's more cost-
effective practice of purchasing materials directly from component
manufacturers. In addition, the Company has expanded the EMD sales force to more
aggressively market the combined entities' services and products in EMD's
historical markets. The Company will also link its three locations with a
wide-area computer network to enhance management reporting and operational
control. See "Risk Factors -- Integration of EMD."

THE CONTRACT ELECTRONICS MANUFACTURING INDUSTRY

The basis for the development of the contract manufacturing industry in
recent years has been the increasing reliance of OEMs on contract manufacturing
specialists such as the Company for the manufacture of printed circuit board
assemblies. As a result of outsourcing manufacturing services, the contract
manufacturing industry in the United States grew at a compound annual rate of
21% from 1990 through 1995, according to the Institute for Interconnecting and
Packaging Electronic Circuits ("IPC"). The IPC estimates the size of the United
States contract manufacturing industry for 1996 in terms of sales to be $13.5
billion. The Company expects the trend toward outsourcing to result in continued
growth in the contract manufacturing industry. A 1995 IPC study forecasts that
the contract manufacturing industry will grow at an approximate compound annual
rate of 20% through 2000 as OEMs continue to outsource their manufacturing
requirements and look to contract manufacturers to provide additional services.
Some of the advantages OEMs receive as a result of outsourcing are:

Acceleration of Time to Market. Rapid technological advances in the
Company's targeted industries require OEMs to make their products available
to their customers quickly to remain competitive. Delays in bringing a new
product to market can result in obsolescence of the product before it
becomes available. Contract manufacturers who specialize in printed circuit
board assembly are often able to provide manufacturing services in a more
timely manner than OEMs, thus allowing OEMs to reduce the time to market
for their products.

Reduction of Production Costs. Contract manufacturers generally are
able to manufacture printed circuit board assemblies at a lower cost than
OEMs because of the efficiencies associated with specialization and greater
production volumes. Additionally, the purchasing power of contract
manufacturers allows OEMs to save on costs of procurement of components.
OEMs also benefit from the inventory management services provided by
contract manufacturers in connection with turnkey manufacturing services.

Access to Advanced Technology. Using contract manufacturers affords
OEMs access to advanced technology in printed circuit board assembly
equipment and techniques that OEMs may consider too costly for in-house
investment. The increasing use of surface mount interconnection technology,
which requires significant investments in computer-automated equipment and
the expertise to operate such equipment, is an example. Many OEMs have been
unwilling to make such investments, relying instead on contract
manufacturers for surface mount assembly. More recent technological
advancements that contract manufacturers are now able to offer to OEMs
include ball grid array and chip on board assembly processes.

Improved Manufacturing Quality. Because it is the focus of their
operations, contract manufacturers are consistently able to provide
contract manufacturing services of a higher quality than OEMs can provide
in-house. Printed circuit board assembly and other services provided by
contract manufacturers are typically a small part of the broader operations
of the OEMs.

Opportunity to Focus Resources. By outsourcing printed circuit board
assembly and other manufacturing services, OEMs are able to focus their
resources on their primary activities, such as research and development of
new products and marketing.

Other factors in the contract manufacturing industry may have a positive
impact on established contract manufacturers such as the Company. The increasing
cost of automated equipment used in the industry, the

18
<PAGE> 20

working capital requirements relating to inventory and the additional services
that contract manufacturers are providing make it more difficult for smaller
manufacturers and start-up companies to compete with the services that are
provided by larger, well-capitalized companies. Furthermore, the Company
believes that these factors are driving consolidation in the industry and may
provide opportunities for growth through acquisition.

BUSINESS STRATEGY

Establish and Maintain Long-Term Relationships. The Company pursues
opportunities to provide turnkey manufacturing services whereby the Company
becomes an integral part of its customers' manufacturing operations. The
Company seeks to work closely with its customers in all phases of design
and production. By aggressively marketing its services to its targeted
customers and involving design, marketing and senior management personnel
in the pursuit and maintenance of customer relationships, the Company
attempts to establish itself as the sole or primary source for its
customers' manufacturing requirements. The Company believes that working to
develop close, long-term relationships builds customer loyalty that is
difficult for competitors to overcome.

Target and Maintain Balance Among Select OEM Industries and
Customers. The Company targets industries and customers that have strict
quality control standards for their products and that have
service-intensive manufacturing requirements. The Company focuses on
complex assemblies in low to medium volumes for commercial and industrial
customers. The Company has not been, and does not intend to become, a
manufacturer of high volume printed circuit board assemblies for personal
computers or consumer-oriented products, which typically have relatively
low margins. The Company targets customers in the medical devices,
communications equipment, industrial and business computers, testing
instrumentation and industrial controls industries and seeks to maintain a
balance of customers among these industries and within each industry. By
balancing its operations among industries and customers, the Company seeks
to avoid becoming dependent on any one industry or customer. In addition,
the Company believes that the industries and customers that it targets
produce products that generally have longer life cycles, more stable demand
and less price pressure as compared to consumer-oriented products.

Provide Comprehensive Design and Manufacturing Services. The Company
believes that OEMs increasingly expect a broad range of services from
contract manufacturers and that attracting and retaining customers depends
on the Company's ability to provide such services. The Company provides its
customers with services ranging from initial product design and development
and prototype production to the manufacture of printed circuit board
assemblies, post-production testing and final assembly of customers'
products. In support of this strategy, the Company made significant capital
investments in the first six months of 1996 to expand its production
capacity, adding two surface mount production lines at its Angleton, Texas
facility. In addition, the Acquisition adds significant design engineering
capabilities and 15 surface mount production lines.

Successfully Integrate EMD. The Company believes that the Acquisition
provides opportunities to enhance the Company's operations and pursue
additional operating efficiencies. These opportunities include taking
advantage of the benefits of a combined component procurement program,
broader customer base, geographic expansion, the ability to pursue larger
contracts and the capability to provide high quality design engineering
services to current and potential customers.

Pursue Opportunities for Growth. The Company is committed to pursuing
opportunities to grow its operations through acquiring additional
facilities or businesses or achieving operating efficiencies in the
Company's existing operations.

19
<PAGE> 21

Maintain Flexibility. The Company believes that many of its customers
are leaders in their respective industries, and, as a result, routinely
re-engineer their products to incorporate new and more competitive product
features. Accordingly, the Company has organized its manufacturing
operations into flexible work centers, as opposed to dedicated production
lines, which allow the Company to incorporate complex design specifications
and to respond rapidly to design changes.

SERVICES PROVIDED BY THE COMPANY

The Company provides turnkey manufacturing services, including the purchase
of customer-specified components from its extensive network of component
suppliers, assembly of the components onto printed circuit boards and
performance of post-production testing. In certain instances, the Company
completes the assembly of its customers' products at the Company's facilities by
integrating printed circuit boards into other elements of the customers'
products.

The Company provides design-for-manufacturability engineering services for
products it manufactures, and the Acquisition significantly expands the
Company's capabilities in this area. With respect to product design, the Company
provides the complete design and development of new electronic products and
mechanical packages, as well as the redesign, surface mount conversion and
printed circuit board layout of existing products. The Company also provides
test process design capabilities that include the design and development of test
fixtures and procedures and software for both in-circuit tests and functional
tests of circuit boards, components and products.

The Company's component procurement services for turnkey projects consist
of planning, purchasing, expediting, inspecting, warehousing and financing the
components required to manufacture printed circuit board assemblies. OEMs
increasingly have required manufacturers to purchase all or some components
directly from component manufacturers or distributors and to warehouse and
finance the components. See "-- Suppliers."

In its manufacturing services, the Company offers both surface mount and
pin-through-hole interconnection technologies. Surface mount technology is a
computer-automated process which allows the placement of a higher density of
components directly on both sides of a printed circuit board. The surface mount
process is a more recent advancement over the mature pin-through-hole
technology, which normally permits electronic components to be attached to only
one side of a printed circuit board by inserting the components into holes
drilled through the board. The surface mount process allows OEMs to use advanced
circuitry, while at the same time permitting the placement of a greater number
of components on a printed circuit board without having to increase the size of
the board. By allowing increasingly complex circuits to be packaged with the
components placed in closer proximity to each other, surface mount technology
greatly enhances circuit processing speed and thus board and system performance.
The surface mount process allows a reduction in the number of printed circuit
boards required per system and allows the use of more fully automated production
processes. The Company performs pin-through-hole assembly both manually and with
computer-automated component insertion and soldering equipment. Although surface
mount technology is the leading interconnection technology, the Company intends
to continue providing pin-through-hole assembly services for its customers.
Pin-through-hole technology is of continuing viability because most printed
circuit boards assembled using surface mount technology require some
pin-through-hole assembly. In addition, the Company believes that by continuing
to provide pin-through-hole assembly services, the Company appeals to current
and prospective customers that have not shifted, or do not wish to change, their
manufacturing process to utilize surface mount technology.

Because the Company may be the sole source or a major source of printed
circuit board assemblies for a customer, frequent communication between the
Company and the customer is necessary to ensure that the Company's manufacturing
services meet the customer's specifications. Accordingly, the Company maintains
a customer service department whose personnel work closely with the customer
throughout the manufacturing process. The Company's engineering and
manufacturing personnel coordinate the implementation of new and reengineered
products with the customer, thereby providing the customer with feedback on such
issues as the overall ease of manufacture of the printed circuit board assembly
and anticipated production lead times.

20
<PAGE> 22

Component procurement begins after component specifications are verified and
approved sources are confirmed with the customer. Concurrently, the Company's
technical personnel establish complete documentation files on components and the
appropriate set-up, assembly and testing procedures. The Company's personnel
monitor all stages of the manufacturing process in order to provide flexible and
rapid responses to the customer's requirements, including changes in design,
order size and delivery schedules. In addition, the Company utilizes an
automated materials planning system which allows the customer to monitor the
status of an order on a real-time basis.

The Company also provides testing services for completed printed circuit
board assemblies in connection with the manufacturing process. In-circuit tests
verify that the components have been inserted properly and meet certain
functional standards and that the electrical circuits have been completed
properly. These tests are performed on industry standard testing equipment using
proprietary software developed either by the customer or test consultants on a
contractual basis. In-circuit tests normally are performed on all printed
circuit board assemblies for turnkey projects. In addition, using specialized
testing equipment designed and provided by the customer, the Company performs
customized functional tests designed to ensure that the printed circuit board
assembly will perform its intended functions. Because defective components
normally fail after a relatively short period of use, customers occasionally
request that certain printed circuit board assemblies be subjected by the
Company to controlled environmental stresses, typically thermal or electrical
stresses. These procedures accelerate the effects of operational use without
affecting the useful life of the component.

The Company also offers its customers flexible, just-in-time delivery
programs allowing product shipments to be closely coordinated with the
customers' inventory requirements. Several of the Company's larger customers
utilize a just-in-time inventory management system. Management believes that the
attractiveness of just-in-time inventory management will lead other customers to
implement such systems and, accordingly, anticipates that a greater percentage
of the Company's business will be performed on this basis in the future.

In establishing a turnkey relationship with a manufacturer, OEMs must incur
expense in qualifying the contract manufacturer and in some cases its sources of
component supply, refining product design and manufacturing processes, and
developing mutually compatible information and reporting systems. The Company
believes that once this relationship is established, OEMs typically experience
significant difficulty in expeditiously reassigning turnkey projects to another
manufacturer and, as a result, seek sources of turnkey manufacturing services
that they perceive will be able to meet their production requirements over a
long period of time and successive product generations. Accordingly, the Company
believes that its increasing turnkey business has resulted in greater stability
in its customer base.

MARKETING AND CUSTOMERS

To better implement its service-intensive business strategy, the Company
markets its services to existing and potential customers through its direct
sales force, independent marketing representatives and its executive officers.
The Company's combined sales force consists of eight in-house salesmen and two
independent marketing representatives, through which the Company is aggressively
marketing the combined services of the Company and EMD. Four of the eight
in-house salesmen are based at the Winona, Minnesota facility, with two based at
each of the Angleton, Texas and Beaverton, Oregon facilities.

The Company seeks to serve a sufficiently large number of customers to
minimize dependence on any one customer or industry. This strategy was enhanced
by the Acquisition, as there is no customer overlap between the Company and EMD.
Nevertheless, historically a substantial percentage of the Company's sales have
been to a small number of customers. However, by successfully undertaking the
transition to serving a much larger and more diversified customer base, the
Company has been able to reduce its dependence on certain significant customers
and lessen the impact of a substantial reduction in business from one such
customer. Similarly, EMD's largest customer in recent years, IBM, has begun
using an offshore source for some of its products. Although EMD has been making
the transition to serving a more diversified customer base and the Acquisition
will lessen the effect of the loss of such customer, aggressive sales efforts by
the Company will be required to replace sales to this customer. See "Risk
Factors -- Customer Concentration" and "Manage-

21
<PAGE> 23

ment's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Six Months Ended June 30, 1996 Compared
to Six Months Ended June 30, 1995."

The Company targets customers in five industries and seeks to maintain a
balance in its sales to those industries. The following table sets forth the
percentages of the Company's sales to each of the five industries for 1993,
1994, 1995 and the first six months of 1996 and the percentages of sales to
these industries on a pro forma combined basis for the Company and EMD for the
first six months of 1996.

<TABLE>
<CAPTION>
PRO FORMA
SIX MONTHS SIX MONTHS
ENDED ENDED
1993 1994 1995 JUNE 30, 1996 JUNE 30, 1996
---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C>
Medical Devices.............................. 10% 18% 14% 16% 12%
Communications Equipment..................... 8 8 18 25 17
Industrial and Business Computers............ 54 51 29 7 42
Testing Instrumentation...................... 6 7 22 27 12
Industrial Controls.......................... 14 13 17 25 15
Other........................................ 8 3 -- -- 2
</TABLE>

SUPPLIERS

The Company maintains an extensive network of suppliers of components and
other materials used in assembling printed circuit boards. The Company procures
components only when a purchase order or forecast is received from a customer
and occasionally utilizes components or other materials for which a supplier is
the single source of supply. Although the Company experiences component
shortages and longer lead times of various components from time to time, the
Company has generally been able to reduce the impact of the component shortages
by working with customers to reschedule deliveries, by working with suppliers to
provide the needed components using just-in-time inventory programs, or by
purchasing components at somewhat higher prices from distributors, rather than
directly from manufacturers. These procedures reduce the Company's inventory
risk. In addition, by developing long-term relationships with suppliers, the
Company has been better able to avoid the effects of component shortages than
manufacturers without such relationships. Because of the continued increase in
demand for surface mount components, the Company anticipates continued component
shortages with respect to certain components and longer lead times for various
components from time to time. See "Risk Factors -- Availability of Resources."

As part of the integration of EMD, the Company is in the process of
developing a combined procurement plan pursuant to which component and other
purchases would be negotiated on a Company-wide basis with a view to realizing
savings associated with the increased purchasing power of the combined entities.
The Company also plans to reduce EMD's reliance on distributors as sources of
components in favor of the Company's more cost-effective practice of purchasing
materials directly from component manufacturers.

BACKLOG

The Company's backlog was approximately $117 million at December 31, 1995,
compared to $60 million at December 31, 1994 and $57 million at December 31,
1993. The combined backlog of the Company and EMD at August 31, 1996 was
approximately $230 million. Backlog consists of customer orders that are
expected to be filled within twelve months. Because orders generally may be
rescheduled or cancelled by the payment of cancellation charges and because the
Company's customers update their orders at different intervals and provide
orders to be filled over different periods, the Company's backlog does not
provide an accurate measure of the timing or amount of future sales. See "Risk
Factors -- Absence of Long-Term Sales Contracts."

COMPETITION

The contract manufacturing services provided by the Company are available
from many independent sources as well as in-house manufacturing capabilities of
current and potential customers. Some of the

22
<PAGE> 24

Company's competitors include Solectron Corporation, SCI Systems, Inc., The DII
Group, Inc., Avex Electronics, Inc., Jabil Circuit, Inc. and Plexus Corp., some
of which are more established in the industry and have substantially greater
financial, manufacturing or marketing resources than the Company. The Company
believes that the principal competitive factors in its targeted markets are
product quality, flexibility and timeliness in responding to design and schedule
changes, reliability in meeting product delivery schedules, pricing,
technological sophistication and geographic location. The Company believes that
it competes favorably with respect to these factors.

GOVERNMENTAL REGULATION

The Company's operations are subject to certain federal, state and local
regulatory requirements relating to environmental, waste management, health and
safety matters, and there can be no assurance that material costs and
liabilities will not be incurred or that past or future operations will not
result in exposure to injury or claims of injury by employees or the public.
Although some risk of costs and liabilities related to these matters is inherent
in the Company's business, as with many similar businesses, the Company believes
that its business is operated in substantial compliance with applicable
regulations. However, new, modified or more stringent requirements or
enforcement policies could be adopted, which could adversely affect the Company.

The Company periodically generates and temporarily handles limited amounts
of materials that are considered hazardous waste under applicable law. The
Company contracts for the off-site disposal of these materials and has
implemented a waste management program to address related regulatory issues.

EMPLOYEES

As of August 31, 1996, the Company had 1,543 employees, of whom 1,213 were
engaged in manufacturing and operations, 134 in materials control and
procurement, 63 in design and development, 12 in marketing and sales, and 121 in
administration. None of the Company's employees is subject to a collective
bargaining agreement. Management believes that the Company's relationship with
its employees is satisfactory.

PROPERTIES

The Company's executive offices and one of its manufacturing facilities are
located in an approximately 109,000 square foot facility on 18.9 acres of land
owned by the Company in Angleton, Texas, where the Company has 12 surface mount
manufacturing lines. The Company also leases an approximately 38,000 square foot
facility in Beaverton, Oregon, where the Company has two surface mount
production lines. The Beaverton lease expires on June 30, 1997, and the Company
intends to extend this lease. With the Acquisition, the Company added facilities
in Winona, Minnesota comprising four leased buildings with total square footage
of approximately 142,000 and an additional 64,000 square foot building that the
Company now owns. For the primary leased facilities in Winona, the Company has
long-term leases with three-year purchase options. The Winona facilities include
manufacturing facilities with 15 surface mount production lines and warehouse
facilities. The Company's Angleton and Beaverton facilities are certified under
ISO-9002, and the Winona facilities are certified under ISO-9001. The Company
believes that its properties are and will be sufficient to conduct the Company's
operations for the foreseeable future.

LEGAL PROCEEDINGS

The Company is not currently a party to any litigation.

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<PAGE> 25

MANAGEMENT

The directors and principal officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- ---- -----------------------------------------
<S> <C> <C>
John C. Custer 66 Chairman of the Board of Directors
Donald E. Nigbor 48 Director and President
Steven A. Barton 48 Director and Executive Vice President
Cary T. Fu 48 Director and Executive Vice President
Peter G. Dorflinger 45 Director
Gerald W. Bodzy 44 Director
David H. Arnold 58 Director
Christopher Nawrocki 46 Vice President -- Sales and Marketing
Gayla J. Delly 36 Treasurer
</TABLE>

Mr. Custer has been Chairman of the Board of Directors of the Company since
1988 and a member of the Compensation Committee of the Board of Directors since
1990. Mr. Custer was employed by Mason & Hanger Corporation ("Mason & Hanger"),
a technical services contracting and engineering firm, from 1951 until his
retirement in February 1996. Mr. Custer served Mason & Hanger as Chairman of the
Board from 1994 until his retirement, as a director since 1983, and in various
other management and operations positions before becoming Chairman of the Board.

Mr. Nigbor has been a director and President of the Company since 1986 and
was its General Manager from 1984 to 1990. Mr. Nigbor holds B.S. and M.S.
degrees in engineering from Rensselaer Polytechnic Institute and received an
M.B.A. from the Amos Tuck School of Business at Dartmouth College.

Mr. Barton has been a director and Executive Vice President of the Company
since 1990. He served as Executive Vice President -- Marketing and Sales of the
Company from 1990 to April 1992. Since June 1, 1993 he has worked part-time for
the Company for personal reasons. He also has served the Company as Executive
Vice President from 1988 to 1990, a director and Vice President from 1986 to
1988, and President from 1979 to 1983. Mr. Barton holds B.S. and M.S. degrees in
electrical engineering from the University of South Florida and received an
M.B.A. from the Harvard Business School.

Mr. Fu has been a director and Executive Vice President of the Company
since 1990. He served as Executive Vice President -- Financial Administration of
the Company from 1990 to April 1992. He also served the Company as Treasurer
from 1986 to January 1996 and Secretary from 1990 to January 1996. Mr. Fu holds
an M.S. degree in accounting from the University of Houston and is a certified
public accountant.

Mr. Dorflinger has been a director of the Company and a member of the Audit
Committee and Compensation Committee of the Board of Directors since 1990. He
has been employed since 1983 by Intermedics, Inc. ("Intermedics"), a medical
implant manufacturer, serving as Vice President and General Counsel since 1987,
Secretary since 1986, and in various other legal positions before then. Since
1990, he has been serving concurrently as Group Vice President and General
Counsel of SULZERmedica, a division of Sulzer Limited of Switzerland, composed
of eight operating medical device companies in Europe and the United States. Mr.
Dorflinger continues to serve as Group Vice President and General Counsel of
SULZERmedica and in the same capacity and as Secretary of various affiliates of
SULZERmedica, including Intermedics. Mr. Dorflinger received a J.D. degree from
the University of Houston and also is a director of Maxxim Medical, Inc., a
medical products manufacturer and supplier.

Mr. Bodzy has been a director of the Company since September 1994 and has
been a member of the Audit Committee since March 1995. He has been employed
since 1990 by Stephens Inc., serving as Senior Vice President and Managing
Director. Mr. Bodzy received a B.A. degree in economics from the University of
Texas and a J.D. degree from the University of Texas School of Law.

24
<PAGE> 26

Mr. Arnold became a director of the Company in 1996 pursuant to the terms
of the Acquisition, which provide that, for so long as Mr. Arnold and Daniel M.
Rukavina (including, in the first year after the Acquisition, their spouses and
descendants) own beneficially in the aggregate at least 10% of the outstanding
shares of Common Stock, the Company will include one of Mr. Arnold or Mr.
Rukavina or an acceptable person designated by them on its recommended slate of
nominees for election to the Company's Board of Directors. Mr. Arnold was a
co-founder of EMD and served as a director and officer of EMD from 1974 until
the consummation of the Acquisition. Mr. Arnold earned a B.S. degree in
mechanical engineering from Iowa State University and an M.S. degree in
mechanical engineering from the University of Michigan. He also serves as a
director of Town and Country State Bank in Winona, Minnesota.

Mr. Nawrocki has been Vice President -- Sales and Marketing of the Company
since July, 1993, having previously served as plant manager of the Beaverton,
Oregon facility for one year. From 1979 to 1992 Mr. Nawrocki served in various
positions, most recently as Vice President of Operations, for Electro-Scientific
Industries, Portland, Oregon. Mr. Nawrocki earned a B.S. degree in engineering
science (nuclear engineering) from Rensselaer Polytechnic Institute and received
an M.S. degree in electrical engineering from Oregon State University.

Ms. Delly joined the Company as Treasurer in January 1996. From 1984 until
joining the Company, Ms. Delly, a certified public accountant, was employed by
KPMG Peat Marwick LLP, serving most recently as a Senior Manager. Ms. Delly
received a B.S. degree in business administration from Samford University.

25
<PAGE> 27

PRINCIPAL AND SELLING SHAREHOLDERS

The Selling Shareholders are Mason & Hanger, Donald E. Nigbor and Cary T.
Fu. Mason & Hanger is selling 200,000 shares; Mr. Nigbor, a director and the
President of the Company, is selling 25,000 shares; and Mr. Fu, a director and
Executive Vice President of the Company, is selling 25,000 shares. The Selling
Shareholders will bear the underwriting discount applicable to the shares sold
by them and will pay their pro rata shares of the Securities and Exchange
Commission registration fee, the National Association of Securities Dealers,
Inc. filing fee and any Blue Sky filing fees and any other expenses of the
Offering incurred solely as a result of their inclusion of shares in the
Offering, and will indemnify the Underwriters and each other from certain
liabilities, including liabilities under the Securities Act of 1933, as amended
("Securities Act").

The following table sets forth certain information as of September 26, 1996
concerning the beneficial ownership of shares of Common Stock by the Selling
Shareholders, the members of the Board of Directors of the Company, the
executive officers of the Company and all directors and executive officers of
the Company as a group. Except as otherwise noted, each shareholder has sole
voting and investment power with respect to the shares beneficially owned, and
no other person is known by the Company to be the beneficial owner of five
percent or more of the outstanding shares of Common Stock.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------------------------------------------------------
NUMBER OF SHARES PERCENT
---------------------------------- -------------------------------------
NAME OF BENEFICIAL OWNER BEFORE OFFERING AFTER OFFERING BEFORE OFFERING AFTER OFFERING
- --------------------------------- --------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C>
Mason & Hanger Corporation(1).... 800,328 600,328 17.0% 10.5%
John C. Custer(1)................ 18,000(2) 18,000 * *
Donald E. Nigbor(3).............. 156,916(4) 131,916 3.3 2.3
Steven A. Barton(3).............. 20,680(5) 20,680 * *
Cary T. Fu(3).................... 162,005(6) 137,005 3.4 2.4
Peter G. Dorflinger(7)........... 19,000(8) 19,000 * *
Gerald W. Bodzy(9)............... 12,600(10) 12,600 * *
David H. Arnold(11).............. 244,996(12) 244,996 5.2 4.3
All executive officers and
directors as a group (seven
persons)....................... 634,197 584,197 13.0 9.9
</TABLE>

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

* Less than one percent

(1) The address of Mason & Hanger and Mr. Custer is 2355 Harrodsburg Road,
Lexington, Kentucky 40504.

(2) Includes 200 shares held of record by Mr. Custer's wife and 17,800 shares
that are issuable upon the exercise of options that are currently
exercisable.

(3) The address of Messrs. Nigbor, Barton and Fu is 3000 Technology Drive,
Angleton, Texas 77515.

(4) Includes 46,000 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable.

(5) Includes 20,000 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable.

(6) Includes 46,000 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable.

(7) The address of Mr. Dorflinger is 4000 Technology Drive, Angleton, Texas
77515.

(8) Includes 18,000 shares of Common Stock that may be acquired upon the
exercise of options that are currently exercisable.

(9) The address of Mr. Bodzy is 333 Clay Street, Suite 3030, Houston, Texas
77002.

(10) Includes (i) 600 shares of Common Stock held by Mr. Bodzy as custodian for
his children under the Uniform Gifts to Minors Act, as to which shares of
Common Stock Mr. Bodzy expressly disclaims

26
<PAGE> 28

beneficial ownership, and (ii) 9,000 shares of Common Stock that may be
acquired upon the exercise of options that are currently exercisable.

(11) The address of Mr. Arnold is 1853 Edgewood Road, Winona, Minnesota 55987.

(12) Includes 5,644 shares of Common Stock held of record by Mr. Arnold's wife,
1,363 shares held for Mr. Arnold's benefit in the Employee Stock Ownership
Plan previously maintained by EMD and 3,000 shares that may be acquired
upon the exercise of options that are currently exercisable.

DESCRIPTION OF CAPITAL STOCK

PREFERRED STOCK

The Company's Restated Articles of Incorporation authorize the Company to
issue 5,000,000 shares of Preferred Stock, par value $0.10 per share ("Preferred
Stock"). The Board of Directors has the authority, without shareholder approval,
to cause the Company to issue the Preferred Stock in one or more series, with
such designations, preferences, limitations and rights as the Board of Directors
may determine. The Company has not issued, and has no plans to issue, any shares
of Preferred Stock. If the Company decides to do so, however, the provisions of
the Preferred Stock may include, among others, extraordinary voting, dividend,
redemption, conversion or exchange rights which could discourage unsolicited
takeovers of the Company and limit the opportunity of the holders of Common
Stock to receive a premium over the prevailing market price for the Common
Stock. See "Risk Factors -- Authorized Preferred Stock."

COMMON STOCK

The Company's Restated Articles of Incorporation authorize the Company to
issue 10,000,000 shares of Common Stock. There are currently 4,719,114
outstanding shares of Common Stock. Upon the issuance and sale of 1,000,000
shares of Common Stock by the Company in the Offering, the Company will have
5,719,114 outstanding shares of Common Stock. In addition, the Company has
issued options to purchase 558,100 shares of Common Stock, of which options to
purchase 154,830 are currently exercisable.

Each share of Common Stock has an equal and ratable right to receive
dividends to be paid from the Company's assets legally available therefor when,
as and if declared by the Board of Directors. The Company never has paid, and
does not anticipate that it will pay in the foreseeable future, cash dividends
on the Common Stock. In addition, the agreement relating to the Credit Facility
and the Purchase Agreement relating to the Senior Note restrict the amount of
cash dividends that the Company may pay on the Common Stock. The holders of
Common Stock have no preemptive or other rights to subscribe for additional
shares of Common Stock or any other securities of the Company. Each share of
Common Stock entitles the holder thereof to one vote in the election of
directors and on all other matters submitted to a vote of the shareholders of
the Company. The holders of Common Stock have no right to cumulate their votes
in the election of directors. In the event of the dissolution or liquidation of
the Company, the holders of Common Stock will be entitled to share equally and
ratably in the assets of the Company available for distribution after payments
are made to the Company's creditors and the holders of any outstanding shares of
Preferred Stock. The outstanding shares of Common Stock are, and the shares of
Common Stock offered hereby, when issued, will be, fully paid and
non-assessable.

The Common Stock is traded on the AMEX under the symbol "BHE." The transfer
agent and registrar for the Common Stock is Society National Bank, c/o KeyCorp
Shareholder Services, Inc., 700 Louisiana Street, Suite 2620, Houston, Texas
77002-2729.

The Company and Mason & Hanger entered into a Registration Rights Agreement
on March 30, 1992, pursuant to which Mason & Hanger has, subject to certain
limitations, the right to require the Company one time, after June 1, 1995, but
before June 1, 2005, to register Mason & Hanger's shares of Common Stock under
the Securities Act of 1933, as amended (the "Securities Act") and the right to
include its shares of Common Stock in other registrations initiated by the
Company until such time as Mason & Hanger holds less than 5% of the outstanding
shares of Common Stock. Mason & Hanger will bear all expenses of any
registration that includes its shares of Common Stock exclusively. With respect
to registrations in which

27
<PAGE> 29

shares of Common Stock are to be sold for the Company's account, the Company
will bear all expenses except those expenses incurred solely as a result of
Mason & Hanger's participation, which will be paid by Mason & Hanger. Pursuant
to the Registration Rights Agreement, Mason & Hanger has agreed to certain
restrictions with respect to its shares of Common Stock or any other securities
of the Company held by Mason & Hanger entitled generally to vote in the election
of directors of the Company (the "Voting Securities"). Mason & Hanger is
required to be present or represented by proxy at all meetings of the Company's
shareholders and is generally prohibited from depositing any Voting Securities
in any voting trust or subjecting them to a voting agreement or other similar
arrangement, acquiring any additional Voting Securities, joining any partnership
or other group for the purpose of holding or disposing of Voting Securities
within the meaning of Section 13(d) of the Exchange Act, or taking any action by
a written consent in lieu of a meeting.

The Agreement and Plan of Merger relating to the Acquisition (the "Merger
Agreement") contains certain restrictions on the ability of David H. Arnold and
Daniel M. Rukavina, the "Founding Shareholders" of EMD, to vote and transfer
shares of Common Stock received by them in the Acquisition for a period of three
years after the closing date of the Acquisition (the "Closing Date"). Until the
first anniversary of the Closing Date, the Founding Shareholders may not
transfer any shares of Common Stock except by will or the laws of descent and
distribution or otherwise by operation of law. During the second and third years
after the Closing Date, the Founding Shareholders may make certain transfers
that are expressly permitted by the Merger Agreement, but may not make any other
transfers unless they have complied with procedures set forth in the Merger
Agreement providing for a right of first refusal for the Company with respect to
the shares of Common Stock to be transferred by the Founding Shareholders.

Until the third anniversary of the Closing Date, the Merger Agreement
requires the Founding Shareholders to be present, in person or by proxy, at all
meetings of shareholders of the Company and to vote all shares of Common Stock
held by them, however acquired, in the manner recommended to shareholders by the
Company's Board of Directors, except that the Founding Shareholders may vote
their shares in their sole discretion with respect to any proposal involving a
merger, consolidation, statutory share exchange, reorganization,
reclassification or other extraordinary corporate transaction that has been
approved by the Company's Board of Directors. Additionally, until the third
anniversary of the Closing Date, the Founding Shareholders are prohibited from
(i) soliciting proxies in opposition to the recommendation of the Company's
Board of Directors, (ii) depositing any shares of Common Stock in a voting trust
or subjecting them to a voting agreement, (iii) acquiring or offering to acquire
any shares of Common Stock except from other persons receiving such shares in
the Acquisition or as a result of a stock split or dividend or similar
transaction, (iv) joining any group for the purpose of acquiring, holding or
disposing of Common Stock within the meaning of Section 13(d) of the Exchange
Act, (v) initiating, proposing or soliciting shareholders for a shareholder
proposal or tender or exchange offer for Common Stock or any change of control
of the Company or for the purpose of convening a shareholders' meeting, (vi)
acquiring more than 5% of any class of equity security of any entity that has
publicly disclosed that it owns or intends to become the owner of, or that the
Founding Shareholder otherwise knows owns or intends to become the owner of, 5%
of the outstanding shares of Common Stock, and (vii) taking any action by
written consent in lieu of a meeting.

28
<PAGE> 30

UNDERWRITING

Stephens Inc., J.C. Bradford & Co. and Wheat, First Securities, Inc. (the
"Underwriters") have severally agreed, subject to the terms and conditions of
the Underwriting Agreement among the Company, the Selling Shareholders and the
Underwriters, to purchase, and the Company and the Selling Shareholders have
agreed to sell to them, the following respective numbers of shares of Common
Stock at the public offering price less the underwriting discount set forth on
the cover of the Prospectus. The Underwriters are committed to take and pay for
all shares if any are taken.

<TABLE>
<CAPTION>
NUMBER OF
SHARES TO BE
UNDERWRITER PURCHASED
----------------------------------------------------------------- ------------
<S> <C>
Stephens Inc.....................................................
J.C. Bradford & Co...............................................
Wheat, First Securities, Inc.....................................
---------
Total.................................................. 1,250,000
=========
</TABLE>

The Company and the Selling Shareholders have been advised by the
Underwriters that the Underwriters propose to offer the shares to the public
initially at the offering price set forth on the cover page of this Prospectus.
The Underwriters may allow concessions not exceeding $ per share to
selected dealers. The selected dealers may reallow a concession to certain other
dealers not to exceed $ per share. After the initial offering to the
public, the public offering price and concessions may be changed.

The Company has granted an option to the Underwriters, exercisable at any
time during the 30-day period after the date of this Prospectus, to purchase up
to an additional 187,500 shares at the public offering price less the
underwriting discount. The Underwriters may exercise such option only to cover
over-allotments in the sales of shares that the Underwriters have agreed to
purchase. To the extent that the Underwriters exercise such options, each of the
Underwriters will be committed, subject to certain conditions, to purchase the
same proportion of the option shares as the number of shares to be purchased and
offered by such Underwriter in the preceding table bears to 1,250,000.

The Company, the Underwriters and the Selling Shareholders have agreed to
indemnify each other against certain liabilities that may be incurred in
connection with the Offering, including liabilities under the Securities Act.

The Company, each of its directors and executive officers and Mason &
Hanger have agreed not to sell or otherwise dispose of any additional shares of
Common Stock for a period of 120 days after the date of this Prospectus without
the written consent of Stephens Inc.

Gerald W. Bodzy, Senior Vice President and Managing Director of Stephens
Inc., is a director of the Company.

LEGAL MATTERS

Certain legal matters including the validity of the shares of Common Stock
offered hereby are being passed upon for the Company and the individual Selling
Shareholders by Bracewell & Patterson, L.L.P., Houston, Texas. Certain legal
matters in connection with the Offering are being passed upon for the
Underwriters by Vinson & Elkins L.L.P., Houston, Texas. Certain legal matters in
connection with the Offering are being passed upon for Mason & Hanger by Slone &
Garrett PSC, Lexington, Kentucky.

EXPERTS

The consolidated financial statements of EMD Technologies, Inc. and
subsidiaries as of December 31, 1995 and 1994 and for each of the years in the
three-year period ended December 31, 1995 have been incorporated by reference
herein and in the Registration Statement of which this Prospectus is a part in
reliance on the report of KPMG Peat Marwick LLP, independent certified public
accountants, also

29
<PAGE> 31

incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing. The financial statements of Benchmark Electronics,
Inc. as of December 31, 1995 and 1994 and for each of the years in the
three-year period ended December 31, 1995 have been incorporated by reference
herein and in the Registration Statement of which this Prospectus is a part in
reliance on the report of KPMG Peat Marwick LLP, independent certified public
accountants, also incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance therewith,
the Company files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's regional offices at 7 World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal offices in Washington, D.C. As of May 6, 1996, the Company is required
to file its reports, proxy statements and other information with the Commission
electronically. The Commission maintains a site on the World Wide Web that
contains documents filed with the Commission electronically. The address of such
site is http://www.sec.gov, and reports, proxy statements and other information
filed by the Company after May 6, 1996 may be inspected at such site. Reports,
proxy statements and other information filed by the Company may also be
inspected at the offices of the AMEX at 86 Trinity Place, New York, New York
10006-1881.

The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act, with respect to the
shares of Common Stock offered hereby. In accordance with the Securities Act and
the rules and regulations thereunder, this Prospectus, which constitutes part of
the Registration Statement, omits certain of the information contained in the
Registration Statement and the exhibits and schedules thereto. Statements made
in this Prospectus as to the contents of any document are necessarily summaries
of such document and are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement, each such statement being hereby qualified in all
respects by such reference. The Registration Statement, including the exhibits
and schedules thereto, is on file at the offices of the Commission and may be
obtained upon payment of the fee prescribed by the Commission or may be examined
without charge at the public reference facilities of the Commission or at the
Commission's World Wide Web site as described above.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, or portions of documents, previously filed by the
Company with the Commission (File No. 1-10560) are incorporated by reference in
this Prospectus:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.

2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996.

3. The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, as amended on Form 10-Q/A filed with Commission on September 13, 1996.

4. The Company's Current Report on Form 8-K dated July 30, 1996.

5. The description of the Common Stock contained in the Company's Exchange
Act Registration Statement on Form 8-A filed with the Commission on May 15,
1996, as amended on Form 8 dated June 25, 1990.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering shall be deemed to be

30
<PAGE> 32

incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents.

Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to the extent
that a statement contained herein or in any subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus.

The Company will provide, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the information that has been incorporated herein by
reference, other than exhibits to such information (unless such exhibits are
specifically incorporated by reference into such information). Requests should
be directed to Lenora A. Gurton, Benchmark Electronics, Inc., 3000 Technology
Drive, Angleton, Texas 77515, telephone: (409) 849-6550.

31
<PAGE> 33

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Condensed Financial Statements of Benchmark Electronics, Inc. for the Six Months Ended
June 30, 1995 and 1996 (unaudited):
Condensed Balance Sheets............................................................ F-2
Condensed Statements of Income...................................................... F-3
Condensed Statements of Cash Flows.................................................. F-4
Notes to Condensed Financial Statements............................................. F-5
Condensed Consolidated Financial Statements of EMD Technologies, Inc. and subsidiaries
for the Six Months Ended June 30, 1995 and 1996 (unaudited):
Condensed Consolidated Balance Sheets............................................... F-7
Condensed Consolidated Statements of Income......................................... F-8
Condensed Consolidated Statements of Cash Flows..................................... F-9
Notes to Condensed Consolidated Financial Statements................................ F-10
Pro Forma Condensed Combined Financial Information (unaudited):
Pro Forma Condensed Combined Balance Sheet as of June 30, 1996...................... F-13
Pro Forma Condensed Combined Statement of Income for the Six Months Ended June 30,
1996............................................................................. F-14
Pro Forma Condensed Combined Statement of Income for the Year Ended December 31,
1995............................................................................. F-15
Notes to Pro Forma Condensed Combined Financial Information......................... F-16
</TABLE>

F-1
<PAGE> 34

BENCHMARK ELECTRONICS, INC.

CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 2,785 $ 72
Accounts receivable............................................... 20,167 23,529
Inventories....................................................... 22,983 33,772
Prepaid expenses and other assets................................. 648 292
Deferred income tax assets........................................ 372 372
------- -------
Total current assets...................................... 46,955 58,037
------- -------
Property, plant and equipment....................................... 17,956 22,990
Accumulated depreciation.......................................... (7,874) (9,182)
------- -------
Net property, plant and equipment.............................. 10,082 13,808
------- -------
Other assets........................................................ -- 413
------- -------
Total assets.............................................. $57,037 $72,258
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit.................................................... $ -- $ 5,000
Accounts payable.................................................. 9,116 14,745
Accrued liabilities............................................... 554 963
------- -------
Total current liabilities................................. 9,670 20,708
Deferred income taxes............................................... 743 839
Shareholders' equity:
Preferred shares, $0.10 par value; 5,000,000 shares authorized,
none issued.................................................... -- --
Common shares, $0.10 par value; 10,000,000 shares authorized,
issued -- 4,046,142 and 4,060,192, respectively; outstanding --
4,021,400 and 4,035,400, respectively.......................... 402 404
Additional paid-in capital........................................ 19,808 20,028
Retained earnings................................................. 26,474 30,339
Less treasury shares, at cost; 24,742 shares...................... (60) (60)
------- -------
Total shareholders' equity................................ 46,624 50,711
------- -------
Total liabilities and shareholders' equity................ $57,037 $72,258
======= =======
</TABLE>

See accompanying notes to condensed financial statements.

F-2
<PAGE> 35

BENCHMARK ELECTRONICS, INC.

CONDENSED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS -- EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1995 1996
------- -------
<S> <C> <C>
Sales.................................................................... $46,761 $63,883
Cost of sales............................................................ 40,547 55,574
------- -------
Gross profit........................................................... 6,214 8,309
Selling, general and administrative expenses............................. 1,433 1,986
------- -------
Income from operations................................................. 4,781 6,323
Interest and other income................................................ 166 36
Interest expense......................................................... -- (86)
------- -------
Income before income tax expense....................................... 4,947 6,273
Income tax expense....................................................... (1,790) (2,408)
------- -------
Net income............................................................. $ 3,157 $ 3,865
======= =======
Earnings per common share................................................ $ 0.77 $ 0.93
======= =======
Weighted average common and equivalent shares outstanding................ 4,090 4,144
======= =======
</TABLE>

See accompanying notes to condensed financial statements.

F-3
<PAGE> 36

BENCHMARK ELECTRONICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1995 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 3,157 $ 3,865
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation........................................................ 1,013 1,308
Deferred income taxes............................................... 63 96
Changes in:
Accounts receivable............................................... 1,226 (3,362)
Income taxes receivable........................................... -- 305
Inventory......................................................... (4,564) (10,789)
Prepaid expenses and other assets................................. (99) 51
Accounts payable.................................................. 536 5,629
Accrued liabilities............................................... (314) 409
Current income taxes payable...................................... (75) --
------- -------
Total adjustments.............................................. (2,214) (6,353)
------- -------
Net cash used in operations.................................... 943 (2,488)
Cash flows used in investing activities:
Capital expenditures, net.............................................. (1,094) (5,034)
Deferred acquisition costs............................................. -- (413)
Proceeds from exercise of employee stock options....................... 80 222
------- -------
Net cash used in investing activities.......................... (1,014) (5,225)
------- -------
Cash flows provided by financing activities --
borrowings under revolving line of credit.............................. -- 5,000
------- -------
Net decrease in cash........................................... (71) (2,713)
Cash at beginning of period.................................... 8,371 2,785
------- -------
Cash at end of period.......................................... $ 8,300 $ 72
======= =======
Supplemental disclosure of cash flow information:
Income taxes paid.............................................. $ 1,801 $ 1,450
======= =======
</TABLE>

See accompanying notes to condensed financial statements.

F-4
<PAGE> 37

BENCHMARK ELECTRONICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE 1 -- BASIS OF PRESENTATION

Benchmark Electronics, Inc. (the "Company") is a Texas corporation which
provides contract manufacturing services to original equipment manufacturers
(OEMs) in the electronics industry, including manufacturers of medical devices,
communications equipment, industrial and business computers, testing
instrumentation, and industrial instruments.

The accompanying unaudited interim condensed financial statements reflect
all normal and recurring adjustments which in the opinion of management are
necessary for a fair presentation of the results of operations and cash flows
for the interim periods presented. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year. The accompanying unaudited condensed financial statements should be
read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995.

NOTE 2 -- EARNINGS PER COMMON SHARE

Earnings per common share are computed by dividing net income by the
weighted average number of common and common equivalent shares outstanding. For
the purposes of this calculation, outstanding employee stock options are
considered common equivalent shares. Fully diluted earnings per share are
materially equivalent to primary earnings per share for all periods presented.
Weighted common shares outstanding for the six months ended June 30, 1995 and
June 30, 1996 were 4,090,000 and 4,144,000, respectively.

NOTE 3 -- BORROWING FACILITY

At June 30, 1996, the Company had a short-term revolving line of credit
with a commercial bank which was available primarily to finance accounts
receivable and inventory requirements. The Company was entitled to borrow under
the line of credit up to the lesser of $10,000,000 or the sum of 80% of its
eligible accounts receivable and 25% of its eligible inventories. The Company's
borrowings under the line of credit bore interest at the lower of the rate
applicable to Alternate Base Rate Loans or Eurodollar Loans as defined in the
credit agreement. The line of credit was collateralized by substantially all of
the Company's current assets. The line of credit agreement also contained
certain financial covenants and restricted the ability of the Company to incur
additional debt without the consent of the bank. The Company had $5,000,000
outstanding under its line of credit at June 30, 1996 bearing interest at
approximately 6.5%.

In connection with the acquisition of EMD Technologies, Inc. ("EMD") which
was completed on July 30, 1996, the Company replaced the above mentioned credit
facility with a $35,000,000 four-year revolving line of credit with a commercial
bank which is available primarily to finance accounts receivable and inventory
requirements. The Company is entitled to borrow under the line of credit up to
the lesser of $35,000,000 or the sum of 80% of its eligible accounts receivable
and 25% of its eligible inventories. The Company's borrowings under the line of
credit bears interest, at the Company's option, at either the bank's prime rate
or its Fixed Eurodollar Rate plus 0.625% to 1.75% per annum. The line of credit
agreement contains certain financial covenants and restricts the ability of the
Company to incur additional debt without the consent of the bank. The line of
credit matures on July 31, 2000.

F-5
<PAGE> 38

BENCHMARK ELECTRONICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 -- INVENTORIES

Inventory costs are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Raw materials..................................... $16,365,280 $23,425,375
Work in process................................... 6,617,875 10,346,489
----------- -----------
$22,983,155 $33,771,864
=========== ===========
</TABLE>

NOTE 5 -- INCOME TAXES

The provision for income taxes in the statement of income is summarized
below (unaudited):

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1995 1996
---------- ----------
<S> <C> <C>
Federal -- current.................................. $1,497,783 $2,062,000
Federal -- deferred................................. 63,738 96,000
State............................................... 228,859 250,020
---------- ----------
$1,790,380 $2,408,020
========== ==========
</TABLE>

The provision for income taxes did not vary significantly from the amount
computed by applying the U.S. federal statutory rate for the six-month period
ended June 30, 1995 and 1996.

NOTE 6 -- SUBSEQUENT EVENTS

On July 30, 1996 the Company completed its purchase of EMD Technologies,
Inc. This business, headquartered in Winona, Minnesota, was acquired for
approximately 675,000 shares of common stock and approximately $30.4 million in
cash. The transaction will be accounted for under the purchase method of
accounting.

In connection with this acquisition the Company issued a 10 year 8.02%
Senior Note in the amount of $30 million to finance a portion of the cash
consideration for the acquisition. The purchase agreement relating to this note
contains certain financial covenants and restricts the ability of the Company to
incur additional debt without the consent of the noteholder. Additionally, the
Company replaced its existing revolving line of credit with a new revolving line
of credit in the amount of $35 million (see Note 3).

F-6
<PAGE> 39

EMD TECHNOLOGIES, INC.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................................. $ 184 $ 522
Accounts receivable............................................... 14,831 14,961
Inventories....................................................... 25,804 27,186
Prepaid expenses and other assets................................. 664 648
Deferred income tax asset......................................... 564 594
Net assets associated with discontinued operations................ 1,410 --
------- -------
Total current assets...................................... 43,457 43,911
Property, plant and equipment....................................... 45,451 45,894
Accumulated depreciation.......................................... (24,857) (27,666)
------- -------
Net property, plant and equipment.............................. 20,594 18,228
Other assets........................................................ 81 287
Notes receivable.................................................... -- 1,269
------- -------
Total assets.............................................. $64,132 $63,695
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations... $ 717 $ 590
Accounts payable.................................................. 13,707 11,636
Accrued taxes, other than income.................................. 593 300
Other accrued liabilities......................................... 2,167 1,774
------- -------
Total current liabilities................................. 17,184 14,300
Notes payable to bank - long-term................................... 14,733 15,183
Long-term debt and capital lease obligations, less current
portion........................................................... 954 733
Deferred income taxes............................................... 1,679 1,649
------- -------
Total liabilities......................................... 34,550 31,865
Shareholders' equity:
Common stock, no par value. 10,000,000 shares authorized;
5,208,078 issued and outstanding............................... 156 156
Paid in capital................................................... 1,652 1,652
Retained earnings................................................. 27,874 30,122
Unearned ESOP shares.............................................. (100) (100)
------- -------
Total shareholders' equity................................ 29,582 31,830
------- -------
Total liabilities and shareholders' equity................ $64,132 $63,695
======= =======
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-7
<PAGE> 40

EMD TECHNOLOGIES, INC.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS - EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1995 1996
------- -------
<S> <C> <C>
Sales.................................................................... $87,586 $80,383
Cost of sales............................................................ 77,251 73,350
------- -------
Gross profit........................................................ 10,335 7,033
Selling, general and administrative expenses............................. 4,704 3,788
------- -------
Income from operations.............................................. 5,631 3,245
Interest and other income................................................ 348 693
Interest expense......................................................... (587) (712)
------- -------
Income from continuing operations before income tax expense......... 5,392 3,226
Income tax expense....................................................... 2,181 978
------- -------
Income from continuing operations................................... 3,211 2,248
------- -------
Discontinued operations:
Loss from discontinued operations (net of income tax benefit of
$70,443)............................................................ (104) --
------- -------
Net income.......................................................... $ 3,107 $ 2,248
======= =======
Earnings per common share:
Continuing operations.................................................. $ 0.62 $ 0.43
Discontinued operations................................................ (0.02) --
------- -------
Net income.......................................................... $ 0.60 $ 0.43
======= =======
Weighted average common and equivalent shares outstanding................ 5,208 5,208
======= =======
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-8
<PAGE> 41

EMD TECHNOLOGIES, INC.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1995 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 3,107 $ 2,248
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Gain on disposal of property and equipment.......................... (176) (103)
Depreciation and amortization....................................... 3,607 3,603
Deferred income taxes............................................... -- (60)
Changes in:
Accounts receivable............................................... 2,953 (130)
Inventories....................................................... 3,530 (1,381)
Prepaid expense and other current assets.......................... 1,183 15
Net assets associated with discontinued operations................ 77 1,409
Accounts payable.................................................. 11 (2,071)
Accrued liabilities............................................... 1,485 (686)
------- -------
Net cash provided by operating activities...................... 15,777 2,844
Cash flows from investing activities:
Proceeds from disposal of property and equipment....................... 427 153
Capital expenditures................................................... (2,847) (1,286)
(Increase) decrease in other assets.................................... 10 (207)
------- -------
Net cash used in investing activities.......................... (2,410) (1,340)
Cash flows from financing activities:
Net proceeds from (payments on) notes payable to banks................. (12,735) 450
Principal payments on capital lease obligations........................ (531) (347)
Increase in notes receivable........................................... -- (1,269)
------- -------
Net cash used in financing activities.......................... (13,266) (1,166)
------- -------
Net increase in cash..................................................... 101 338
Cash at beginning of period.............................................. 101 184
------- -------
Cash at end of period.................................................... $ 202 $ 522
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................................ $ 589 $ 712
Income taxes........................................................ 37 943
Supplemental schedule of noncash investing and financing activities:
Long-term debt and capital lease obligations in exchange for
property and equipment.............................................. 845 --
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-9
<PAGE> 42

EMD TECHNOLOGIES, INC.
AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements
reflect all normal and recurring adjustments which in the opinion of management
are necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year. The accompanying unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes for the year ended December 31,
1995.

NOTE 2 -- EARNINGS PER COMMON SHARE

Earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding.

NOTE 3 -- INVENTORIES

The major components of inventories are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
Raw materials................................... $ 19,093,815 $18,367,722
Work in process and finished goods.............. 6,710,207 8,817,785
----------- -----------
$ 25,804,022 $27,185,507
=========== ===========
</TABLE>

EMD has arrangements to maintain inventory levels on behalf of certain
customers for which it receives material handling fees. During the six months
ended June 30, 1995 and 1996, EMD received $162,923 (unaudited) and $326,347
(unaudited), respectively, of such material handling fees which are included in
other income.

NOTE 4 -- NOTES PAYABLE TO BANKS -- LONG-TERM

EMD has a credit agreement with participating banks which provides for a
total credit facility of up to $25,000,000. On June 28, 1996, EMD amended this
agreement to extend the termination date from June 30, 1997, to September 30,
1997. The agreement is secured by virtually all assets of EMD and interest is
payable monthly in an amount equal to the bank's prime rate. EMD must pay a
quarterly commitment fee of 3/8 of 1 percent on the average daily unused portion
of the commitment. The agreement requires EMD to comply with certain covenants
including minimum financial ratios, limitations on intercompany loans and
advances, and capital expenditures. Under this agreement, EMD had $14,733,000
and $15,183,000 (unaudited) outstanding at December 31, 1995 and June 30, 1996,
respectively.

In order to mitigate fluctuations in interest rate changes EMD had entered
into an interest rate swap agreement which calls for monthly interest
considerations for the differential between a fixed swap rate of 7.25% and the
average monthly prime rate for the period on approximately $6,667,000 of the
outstanding balance at December 31, 1995. The fair value of the interest rate
swap agreement, based on estimated termination value at December 31, 1995, was
$94,000. On March 11, 1996, EMD terminated the swap agreement and received a
termination payment of $146,000.

The prime rate was 8.25% at June 30, 1996 and 8.50% at December 31, 1995.

F-10
<PAGE> 43

EMD TECHNOLOGIES, INC.
AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 -- INCOME TAXES

Total income taxes were allocated as follows (unaudited):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1995 1996
---------- --------
<S> <C> <C>
Income from continuing operations.................. $2,180,769 $977,548
Discontinued operations............................ (103,629) --
---------- -------
$2,077,140 $977,548
========== =======
</TABLE>

Income tax expense attributable to income from continuing operations
consists of the
following (unaudited):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1995 1996
---------- --------
<S> <C> <C>
Current:
Federal.......................................... $1,833,168 $770,185
State............................................ 347,601 267,363
---------- -------
2,180,769 1,037,548
Deferred........................................... -- (60,000)
---------- -------
Total income tax expense........................... $2,180,769 $977,548
========== =======
</TABLE>

NOTE 6 -- DISCONTINUED OPERATIONS

In September 1995, EMD announced a plan to sell 100% of the stock of two
wholly owned subsidiaries, DCM Tech, Inc. and MAP Leasing Co., to an officer and
major stockholder of EMD. On January 2, 1996 the stock was sold in return for a
promissory note of $1,410,510 resulting in a loss on disposal of $130,720. The
note is payable in 20 equal quarterly installments of principal, plus interest
on the unpaid balance at a variable rate equal to the rate paid by EMD on its
bank borrowing, beginning April 1, 1996 through January 1, 2001. The note is
secured by the shares of DCM Tech, Inc. and MAP Leasing Co. The loss on
disposition of the subsidiaries has been accounted for as discontinued
operations. Revenues related to the discontinued operations were $2,252,210
(unaudited) for the six months ended June 30, 1995.

NOTE 7 -- SUBSEQUENT EVENT

On July 30, 1996, EMD was purchased by Benchmark Electronics, Inc., a
manufacturer headquartered in Angleton, Texas.

F-11
<PAGE> 44

PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(UNAUDITED)

The following unaudited pro forma condensed combined financial information
is based on (i) the historical consolidated financial statements of the Company
which are included elsewhere or incorporated by reference in this Prospectus and
(ii) the historical consolidated financial statements of EMD and subsidiaries
which are included elsewhere or incorporated by reference in this Prospectus and
should be read in conjunction with such financial statements and notes thereto.

The historical condensed balance sheets present the financial position of
the Company and EMD as of June 30, 1996. The unaudited pro forma condensed
combined balance sheet as of June 30, 1996 assumes the Acquisition occurred as
of that date.

The unaudited pro forma condensed combined statements of operations were
prepared assuming that the Acquisition was consummated as of January 1, 1995.
The unaudited pro forma statements of operations give effect to (i) the
Acquisition under the purchase method of accounting and (ii) certain estimated
operational and financial combination benefits that are a direct result of the
Acquisition.

The unaudited pro forma condensed combined financial statements have been
prepared based on assumptions deemed appropriate by the Company and may not be
indicative of actual results of the future operations of the Company.

F-12
<PAGE> 45

PRO FORMA CONDENSED COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)

JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- ---------------------------
THE COMPANY EMD ADJUSTMENTS(a) COMBINED
----------- ------- -------------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 72 $ 522 $ $ 594
Accounts receivable...................... 23,529 14,961 38,490
Inventories.............................. 33,772 27,186 60,958
Prepaid expenses and other assets........ 292 648 940
Deferred income tax assets............... 372 594 1,677 2,643
------- ------- ------- --------
Total current assets............. 58,037 43,911 1,677 103,625
Property, plant and equipment.............. 22,990 45,894 (27,666) 41,218
Accumulated depreciation.............. (9,182) (27,666) 27,666 (9,182)
------- ------- ------- --------
Net property, plant and equipment... 13,808 18,228 -- 32,036
Goodwill, net.............................. 24,683 24,683
Other assets............................... 413 287 (413) 287
Note receivable............................ -- 1,269 (1,269) --
------- ------- ------- --------
Total assets..................... $72,258 $63,695 $ 24,678 $160,631
======= ======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit........................... $ 5,000 $ -- $ (5,000) $ --
Current portion of long-term debt and
capital lease obligations............. -- 590 (590) --
Accounts payable......................... 14,745 11,636 26,381
Accrued liabilities...................... 963 2,074 4,400 7,437
------- ------- ------- --------
Total current liabilities........ 20,708 14,300 (1,190) 33,818
Notes payable to bank -- long-term......... -- 15,183 (15,183) --
Long-term debt and capital leases, less
current portion.......................... -- 733 52,470 53,203
Deferred income taxes...................... 839 1,649 -- 2,488
------- ------- ------- --------
Total liabilities................ 21,547 31,865 36,097 89,509
Shareholders' equity:
Preferred shares......................... -- -- -- --
67
Common shares............................ 404 156 (156) 471
20,444
Additional paid-in capital............... 20,028 1,652 (1,652) 40,472
Retained earnings........................ 30,339 30,122 (30,122) 30,339
Less treasury shares, at cost............ (60) -- (60)
Unearned ESOP shares..................... -- (100) -- (100)
------- ------- ------- --------
Total shareholders' equity....... 50,711 31,830 (11,419) 71,122
------- ------- ------- --------
Total liabilities and
shareholders' equity........... $72,258 $63,695 $ 24,678 $160,631
======= ======= ======= ========
</TABLE>

The accompanying notes are an integral part of the
unaudited pro forma condensed combined financial statements.

F-13
<PAGE> 46

PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 1996
(AMOUNTS IN THOUSANDS -- EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- ------------------------
THE COMPANY EMD ADJUSTMENTS COMBINED
----------- ------- ----------- --------
<S> <C> <C> <C> <C>
Sales......................................... $63,883 $80,383 $ -- $144,266
Cost of sales................................. 55,574 73,350 -- 128,924
------- ------- ------- --------
Gross profit................................ 8,309 7,033 -- 15,342
Selling, general and administrative
expenses.................................... 1,986 3,788 (200)(b) 5,574
Amortization of goodwill...................... -- -- (823)(c) 823
------- ------- ------- --------
Income from operations...................... 6,323 3,245 (623) 8,945
Interest and other income..................... 36 693 729
Interest expense.............................. (86) (712) (1,480)(d) (2,278)
------- ------- ------- --------
Income before income taxes.................. 6,273 3,226 (2,103) 7,396
Income tax expense............................ (2,408) (978) (348)(e) (3,038)
------- ------- ------- --------
Net income.................................. $ 3,865 $ 2,248 $(1,755) $ 4,358
======= ======= ======= ========
Earnings per common share..................... $ 0.93 $ 0.43 $ 0.90
======= ======= ========
Weighted common shares outstanding............ 4,144 5,208 4,819
======= ======= ========
</TABLE>

The accompanying notes are an integral part of the
unaudited pro forma condensed combined financial statements.

F-14
<PAGE> 47

PRO FORMA CONDENSED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS -- EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ------------------------
THE COMPANY EMD ADJUSTMENTS COMBINED
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Sales........................................ $97,353 $160,754 $ -- $258,107
Cost of sales................................ 85,113 143,158 -- 228,271
------- -------- ------- --------
Gross profit............................... 12,240 17,596 -- 29,836
Selling, general and administrative
expenses................................... 2,990 9,663 (400)(b) 12,253
Amortization of goodwill..................... -- -- (1,645)(c) 1,645
------- -------- ------- --------
Income from operations..................... 9,250 7,933 (1,245) 15,938
Interest and other income.................... 281 756 1,037
Interest expense............................. -- (909) (2,960)(d) (3,869)
------- -------- ------- --------
Income from continuing operations before
income taxes............................ 9,531 7,780 (4,205) 13,106
Income tax expense........................... (3,383) (3,024) (980)(e) (5,427)
------- -------- ------- --------
Income from continuing operations.......... $ 6,148 4,756 (3,225) 7,679
Earnings per common share:
Continuing operations...................... $ 1.50 0.91 $ 1.61
======= ======== ========
Weighted average common and equivalent
shares outstanding...................... 4,106 5,208 4,781
======= ======== ========
</TABLE>

The accompanying notes are an integral part of the
unaudited pro forma condensed combined financial statements.

F-15
<PAGE> 48

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(UNAUDITED)

1. BASIS OF PRESENTATION

On March 27, 1996, the Company and EMD entered into a merger agreement
providing for the merger of EMD with and into a wholly owned subsidiary of the
Company (the "Acquisition").

The Acquisition was consummated on July 30, 1996 and was accounted for
using the purchase method of accounting for business combinations. The Company
issued an aggregate of 674,964 shares of Common Stock and paid an aggregate of
approximately $30.4 million in cash in the Acquisition. Closing costs were
approximately $2.6 million.

a. The pro forma entries to goodwill, debt, equity and retained
earnings reflect the purchase accounting entries based on a total purchase
price of approximately $51.3 million, plus approximately $2.6 million of
closing costs, which include professional and financial advisory fees.
Goodwill recorded represents the purchase price in excess of the fair value
of assets acquired of EMD. The pro forma adjustments give effect to the
issuance of 674,964 shares of Common Stock in exchange for all outstanding
shares of EMD.

The adjustment to note receivable reflects the payment of the note
upon consummation of the Acquisition.

The $4.4 million adjustment to accrued liabilities represents the
payments under EMD's Gain Sharing Plan. The $1.7 million deferred tax asset
represents the expected tax benefit to be realized by the Company.

b. The adjustment to selling, general and administrative expenses
reflects the estimated cost savings realized through consolidation of
duplicative executive functions as a direct result of the Acquisition.

c. The adjustment to amortization expense reflects the amortization of
goodwill incurred in connection with the transaction over an estimated
useful life of 15 years.

d. The adjustment to interest expense reflects the additional interest
expense, at an interest rate of 8.0% per annum (which reflects rates
currently available to the Company) on the debt to be incurred in
connection with the Acquisition.

e. The adjustment to income taxes reflects the tax effect (federal and
state) associated with the effects of the identified cost savings and
additional expenses (including nondeductible goodwill) in the above
adjustments.

2. EARNINGS PER SHARE

The pro forma earnings per common share is computed on the basis of the
combined weighted average number of shares of Common Stock based upon a price of
$30 per share of Common Stock for purposes of determining the number of shares
to be issued in connection with the Acquisition. Fully diluted earnings per
share are equal to primary earnings per share for the periods presented.

F-16
<PAGE> 49

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

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY,
THE SELLING SHAREHOLDERS OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary............................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 9
Capitalization........................ 9
Price Range of Common Stock and
Dividend Policy..................... 10
Selected Historical and Pro Forma
Financial Information............... 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
Business.............................. 17
Management............................ 24
Principal and Selling Shareholders.... 26
Description of Capital Stock.......... 27
Underwriting.......................... 29
Legal Matters......................... 29
Experts............................... 29
Available Information................. 30
Incorporation of Certain Documents by
Reference........................... 30
Index to Financial Statements......... F-1
</TABLE>

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

1,250,000 SHARES
[BENCHMARK ELECTRONICS, INC. LOGO]

COMMON STOCK
------------------------

PROSPECTUS
------------------------

STEPHENS INC.
J.C. BRADFORD & CO.
WHEAT FIRST BUTCHER SINGER
, 1996

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 50

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated fees and expenses to be incurred in connection with the
Offering are as follows*:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 15,181
National Association of Securities Dealers, Inc. filing fee...... $ 4,902
Printing and engraving expenses.................................. $ **
Legal fees and expenses of counsel for the Company............... $ **
Accounting fees and expenses..................................... $ **
Blue sky filing fees and expenses (including legal fees and
expenses)...................................................... $ **
Transfer Agent fees.............................................. $ **
Miscellaneous.................................................... $ **
Total.......................................................... $ **
</TABLE>

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

* Such fees and expenses will be paid by the Company except the Selling
Shareholders will pay their pro rata portion of the Securities and Exchange
Commission registration fee, the National Association of Securities Dealers,
Inc. filing fee, and any Blue Sky filing fees and any other fees and expenses
incurred solely as a result of their participation in the Offering.

** To be supplied by Amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Texas Business Corporation Act

Article 2.02-1.B of the Texas Business Corporation Act, as amended (the
"TBCA"), grants to a corporation the power to indemnify a person who was, is or
is threatened to be made a named defendant or respondent in a proceeding because
the person is or was a director of the corporation against judgments, penalties
(including excise and similar taxes), fines, settlements and reasonable expenses
actually incurred in connection therewith, only if it is determined that the
person (1) conducted himself in good faith; (2) reasonably believed that (a) in
the case of conduct in his official capacity as a director of the corporation,
his conduct was in the corporation's best interests, and (b) in all other cases,
his conduct was at least not opposed to the corporation's best interests; and
(3) in the case of any criminal proceeding, he had no reasonable cause to
believe that his conduct was unlawful. Article 2.02-1.C limits the allowable
indemnification by providing that, except to the extent permitted by Article
2.02-1.E, a director may not be indemnified in respect of a proceeding in which
the person was found liable (1) on the basis that he improperly received a
personal benefit, whether or not the benefit resulted from an action taken in
his official capacity, or (2) to the corporation. Article 2.02-1.E provides that
if a director is found liable to the corporation or is found liable on the basis
that he received a personal benefit, the permissible indemnification (1) is
limited to reasonable expenses actually incurred by the person in connection
with the proceeding, and (2) shall not be made in respect of any proceeding in
which the person shall have been found liable for willful or intentional
misconduct in the performance of his duty to the corporation. Finally, Article
2.02-1.H provides that a corporation shall indemnify a director against
reasonable expenses incurred by him in connection with a proceeding in which he
is a named defendant or respondent because he is or was a director if he has
been wholly successful, on the merits or otherwise, in defense of the
proceeding.

With respect to the officers of a corporation, Article 2.02-1.O of the TBCA
provides that a corporation may indemnify and advance expenses to an officer of
the corporation to the same extent that it may indemnify and advance expenses to
directors under Article 2.02-1. Further, Article 2.02-1.O provides that an
officer of a corporation shall be indemnified as, and to the same extent,
provided by Article 2.02-1.H for a director.

II-1
<PAGE> 51

Amended and Restated Bylaws

The Amended and Restated Bylaws of the Company make mandatory the
indemnification of and advancement of expenses to its directors who become
involved in indemnifiable legal proceedings, subject to their compliance with
certain requirements imposed by Texas law.

Indemnity Agreements

The Company has entered into Indemnity Agreements with its directors and
officers pursuant to which the Company generally is obligated to indemnify its
directors and officers to the full extent permitted by Texas law.

Underwriting Agreement

Certain provisions of the Underwriting Agreement by and among the Company,
the Selling Shareholders and the Underwriters, the form of which is filed as
Exhibit 1 hereto, provide for indemnification of the officers and directors of
the Company in certain circumstances.

Registration Rights Agreement

The Registration Rights Agreement by and between the Company and Mason &
Hanger, pursuant to which shares held by Mason & Hanger are included in the
shares covered by this Registration Statement, provides for the indemnification
of the officers and directors of the Company by Mason & Hanger under certain
circumstances.

ITEM 16. EXHIBITS

The exhibits listed below are filed as a part of the Registration
Statement.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------
<S> <C>
1* Form of Underwriting Agreement by and among the Company, the Selling
Shareholders and the Underwriters.
5* Opinion of Bracewell & Patterson, L.L.P., regarding the validity of the
shares covered by this Registration Statement.
23.1* Consent of Bracewell & Patterson, L.L.P. (included in the opinion filed as
Exhibit 5 hereto).
23.2 Consent of KPMG Peat Marwick LLP, relating to the Company's financial
statements incorporated by reference herein.
23.3 Consent of KPMG Peat Marwick LLP, relating to EMD's financial statements
incorporated by reference herein.
24 Powers of Attorney (included on the signature page of this Registration
Statement).
</TABLE>

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

* To be filed with a subsequent amendment to this Registration Statement.

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement 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.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such

II-2
<PAGE> 52

indemnification is against public policy as expressed in the 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 Act and will be governed by the final adjudication of
such issue.

(1) For purposes of determining any liability under the Securities Act
of 1933, 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 of 1933, each posteffective 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-3
<PAGE> 53

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that 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 the City of Angleton, State of Texas, on September 26, 1996.

BENCHMARK ELECTRONICS, INC.

By: /s/ DONALD E. NIGBOR
-------------------------------
Donald E. Nigbor
President

Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Donald E. Nigbor and Cary T. Fu, each with full
power to act without the other, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities (until revoked in writing) to sign
any and all amendments (including post-effective amendments and amendments
thereto) 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 attorney-in-fact and agent full power
and authority to do and perform each and every act and thing he might do or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, 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>
<CAPTION>
NAME POSITION DATE
- ----------------------------------------------- ------------------------- -------------------
<C> <C> <S>
/s/ JOHN C. CUSTER Chairman of the September 26, 1996
------------------------------- Board of Directors
John C. Custer

/s/ DONALD E. NIGBOR Director and President September 26, 1996
------------------------------ (principal executive
Donald E. Nigbor officer)

/s/ STEVEN A. BARTON Director and Executive September 26, 1996
------------------------------- Vice President
Steven A. Barton

/s/ CARY T. FU Director and Executive September 26, 1996
------------------------------- Vice President (principal
Cary T. Fu financial and accounting
officer)

/s/ PETER G. DORFLINGER Director September 26, 1996
-------------------------------
Peter G. Dorflinger

------------------------------- Director
Gerald W. Bodzy

/s/ DAVID H. ARNOLD Director September 24, 1996
-------------------------------
David H. Arnold
</TABLE>

II-4
<PAGE> 54

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ ---------------------------------------------------------------------------
<S> <C>
1* Form of Underwriting Agreement by and among the Company, the Selling
Shareholders and the Underwriters.
5* Opinion of Bracewell & Patterson, L.L.P., regarding the validity of the
shares covered by this Registration Statement.
23.1* Consent of Bracewell & Patterson, L.L.P. (included in the opinion filed as
Exhibit 5 hereto).
23.2 Consent of KPMG Peat Marwick LLP, relating to the Company's financial
statements incorporated by reference herein.
23.3 Consent of KPMG Peat Marwick LLP, relating to EMD's financial statements
incorporated by reference herein.
24 Powers of Attorney (included on the signature page of this Registration
Statement).
</TABLE>

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

* To be filed with a subsequent amendment to this Registration Statement.

<PAGE> 1

EXHIBIT 23.2

The Board of Directors
Benchmark Electronics, Inc.

We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.

KPMG PEAT MARWICK LLP

Houston, Texas
September 27, 1996

<PAGE> 1

EXHIBIT 23.3

The Board of Directors
Benchmark Electronics, Inc.

We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.

KPMG PEAT MARWICK LLP

Minneapolis, Minnesota
September 27, 1996