BENCHMARK ELECTRONICS INC, S-3/A, 1999-05-07

BENCHMARK ELECTRONICS INC
S-3/A, 1999-05-07
PRINTED CIRCUIT BOARDS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1999.
REGISTRATION NO. 333-77567

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 1

FORM S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

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

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

3000 TECHNOLOGY DRIVE, ANGLETON, TEXAS 77515
TELEPHONE NO. (409) 849-6550
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

CARY T. FU
BENCHMARK ELECTRONICS, INC.
3000 TECHNOLOGY DRIVE
ANGLETON, TEXAS 77515
(409) 849-6550
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

COPIES TO:

JOHN R. BRANTLEY PHILIP J. BOECKMAN
BRACEWELL & PATTERSON, L.L.P. CRAVATH, SWAINE & MOORE
SOUTH TOWER PENNZOIL PLACE 825 EIGHTH AVENUE
711 LOUISIANA STREET, SUITE 2900 NEW YORK, NEW YORK 10019-7475
HOUSTON, TEXAS 77002-2781 (212) 474-1000
(713) 221-1301 FAX: (212) 474-3700
FAX: (713) 221-1212

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. [ ]

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

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

SUBJECT TO COMPLETION, DATED MAY 7, 1999

PROSPECTUS

[COMPANY LOGO]

4,000,656 SHARES

BENCHMARK ELECTRONICS, INC.

COMMON STOCK
$ PER SHARE

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

We are selling 3,000,000 shares of our common stock and the selling
shareholder named in this prospectus is selling 1,000,656 shares. We will not
receive any proceeds from the sale of the shares by the selling shareholder. The
underwriters named in this prospectus may purchase up to 600,098 additional
shares of common stock from us under certain circumstances.

Our common stock is listed on the New York Stock Exchange under the symbol
"BHE." The last reported sale price of our common stock on the New York Stock
Exchange on May 6, 1999, was $30 3/4 per share.

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

INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.

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

PER SHARE TOTAL
--------- -----------
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to Benchmark (before
expenses) $ $
Proceeds to Selling Shareholder
(before expenses) $ $

The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about
, 1999.

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

SALOMON SMITH BARNEY
BANCBOSTON ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
SG COWEN

, 1999
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES WHERE THE
OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY
THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF
THIS PROSPECTUS.
------------------

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C>
Where You Can Find More Management's Discussion and Analysis
Information........................ 2 of Financial Condition and Results
Summary.............................. 3 of Operations...................... 12
Cautionary Statements Regarding Business............................. 20
Forward-looking Statements......... 5 Management........................... 25
Risk Factors......................... 6 Selling Shareholder.................. 27
Price Range of Common Stock and Description of Capital Stock......... 27
Dividend Policy.................... 9 Underwriting......................... 29
Use of Proceeds...................... 9 Legal Matters........................ 30
Capitalization....................... 10 Experts.............................. 30
Selected Financial Information....... 11 Index to Financial Statements........ F-1
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference facilities in Washington,
D.C., New York, New York and Chicago, Illinois at the following addresses:

o 450 Fifth Street, N.W., Washington, D.C. 20549;

o Seven World Trade Center, 13th Floor, New York, New York 10048;
and

o Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.

Please call the SEC at 1-800-SEC-0330 for further information on the public
reference facilities.

Reports, proxy statements and other information concerning Benchmark can
also be inspected and copied at the offices of the New York Stock Exchange at 20
Broad Street, New York, New York 10005.

The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supercede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until we and the selling shareholder sell all of the common stock.

o Annual Report on Form 10-K for the fiscal year ended December 31,
1998;

o Current Report on Form 8-K dated March 1, 1999;

o Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
and

o The description of Benchmark's capital stock set forth in our
Registration Statement on Form 8-A/A filed on June 25, 1990.

You may request a copy of these filings, in most cases without exhibits, at
no cost by writing or telephoning us at the following address:

Corporate Secretary
Benchmark Electronics, Inc.
3000 Technology Drive
Angleton, Texas 77515
(409) 849-6550

2
<PAGE>
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
IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES HEREIN TO
"WE," "US," OR "OUR 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.
OUR COMPANY

We are one of the leading independent providers of electronics
manufacturing services to the enterprise computer, telecommunications, medical
device, industrial control, and testing and instrumentation markets. We offer a
complete range of integrated electronics manufacturing services, from initial
product design to volume production and order fulfillment. We believe that we
have developed particular strengths in the manufacturing process for large,
complex, high-density assemblies. In addition, we offer advanced engineering
services including product design, PCB layout, quickturn prototyping and test
development. Throughout the production process, we offer logistics services,
such as materials procurement, inventory management, packaging and distribution.

We provide electronics manufacturing services to approximately 62
electronics OEMs, including industry leaders such as EMC Corporation, General
Instrument, Hewlett-Packard, Lucent Technologies, Stratus Computer and Texas
Instruments. These companies represented, in the aggregate, 60% of our 1998
sales. These customers rely on us to manufacture technologically complex
products including telecommunications equipment, high-capacity computer storage
devices and fault-tolerant computer servers. We believe one of our primary
strengths is the fact that we have worked with several of our largest customers
for many years. We have established these long-term relationships by exceeding
customer expectations and providing flexibility while responding to their needs.

We have experienced significant growth over the last three years,
increasing our sales by a compounded annual growth rate of 75.3% since 1995. Our
sales growth during the last three years was twice the sales growth of each of
our four largest competitors. Our growth is driven by three factors. First, we
focus on high-end products in growing technology sectors. As a result, our
growth is influenced by several trends including the build-out of the
communications and Internet infrastructure and the evolution of computer
technology. Second, the accelerating pace at which OEMs are adopting outsourcing
as a core business strategy also contributes to our growth. We were selected for
nine new programs in the first quarter of 1999, four of which represented new
outsourcing initiatives of existing customers. These nine programs are expected
to begin generating sales in the fourth quarter of 1999. Third, our growth is
driven by the successful completion and integration of strategic acquisitions.

Since the beginning of 1996, we have completed three acquisitions that have
broadened our service offerings, diversified our customer base with leading OEMs
and expanded our geographic presence. Specifically, we acquired EMD
Technologies, Inc., Lockheed Commercial Electronics Company, and, most recently,
certain assets from Stratus Computer Ireland.

Our objective is to enhance our position as an electronics manufacturing
services provider of choice to leading high technology OEMs in the area of
complex products and assemblies. Our strategy to achieve this objective includes
the following key elements:

o Focus on high-end products in growing sectors;

o Deliver complete manufacturing solutions;

o Leverage advanced technological capabilities;

o Establish and maintain close relationships with customers;

o Expand geographic presence; and

o Selectively pursue strategic acquisitions.

Our principal executive offices are located at 3000 Technology Drive,
Angleton, Texas 77515, and our telephone number is (409) 849-6550.

3
<PAGE>
THE OFFERING

Common stock we are selling............... 3,000,000 shares

Common stock the selling shareholder is
selling................................. 1,000,656 shares

Common stock to be outstanding after the
offering................................ 14,669,783 shares (1)

Use of Proceeds........................... The net proceeds will be used to
repay indebtedness under our bank
credit facility, and for working
capital and other general corporate
purposes, including acquisitions. See
"Use of Proceeds." We will not
receive any proceeds from shares of
common stock sold by the selling
shareholder.

New York Stock Exchange symbol............ BHE
- ------------
(1) Does not include 2,291,245 shares subject to stock options, of which options
to purchase 656,805 shares are presently exercisable.

SUMMARY FINANCIAL INFORMATION

The summary financial information should be read in conjunction with our
financial statements and the related notes thereto included and incorporated by
reference in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENTS OF INCOME INFORMATION:
Sales................................ $ 146,546 $ 108,046 $ 524,065 $ 325,229 $ 201,296
Cost of sales........................ 131,856 97,141 472,354 285,630 177,981
--------- --------- --------- --------- ---------
Gross profit..................... 14,690 10,905 51,711 39,599 23,315
Selling, general and administrative
expenses........................... 4,950 3,526 17,680 12,817 7,228
Amortization of goodwill............. 910 585 3,311 1,670 696
--------- --------- --------- --------- ---------
Income from operations........... 8,830 6,794 30,720 25,112 15,391
Interest expense..................... 1,125 902 4,394 2,472 1,442
Interest income...................... 138 168 479 1,163 442
Other income......................... 78 47 85 149 92
--------- --------- --------- --------- ---------
Income before income taxes....... 7,921 6,107 26,890 23,952 14,483
Income tax expense................... 2,884 2,365 10,518 8,862 5,619
--------- --------- --------- --------- ---------
Net income....................... $ 5,037 $ 3,742 $ 16,372 $ 15,090 $ 8,864
========= ========= ========= ========= =========
Earnings per common share:
Basic............................ $ 0.43 $ 0.32 $ 1.41 $ 1.31 $ 0.99
========= ========= ========= ========= =========
Diluted.......................... $ 0.40 $ 0.31 $ 1.35 $ 1.26 $ 0.96
========= ========= ========= ========= =========
Weighted average number of shares
outstanding:
Basic............................ 11,655 11,575 11,594 11,508 8,976
========= ========= ========= ========= =========
Diluted.......................... 12,703 12,243 12,098 12,004 9,218
========= ========= ========= ========= =========

AS OF AS OF
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
BALANCE SHEET INFORMATION:
Working capital...................... $ 83,346 $ 86,265
Total assets......................... 304,261 241,896
Total debt........................... 77,275 54,311
Shareholders' equity................. 143,687 138,001
</TABLE>
4
<PAGE>
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

We make "forward-looking statements" within the "safe harbor" provision
of the Private Securities Litigation Reform Act of 1995 throughout this
prospectus and in the documents we incorporate by reference in this prospectus.
You can identify these statements by forward-looking words such as "may,"
"intend," "will," "expect," "anticipate," "believe," "estimate,"
"should," "strategy," "position," "plan" and "continue" or the
negatives of those words or other variations on them or by comparable
terminology. We have based these statements on our current expectations about
future events. Although we believe that our expectations reflected in or
suggested by our forward-looking statements are reasonable, we cannot assure you
that these expectations will be achieved. Our actual results may differ
materially from what we currently expect. Important factors which could cause
our actual results to differ materially from the forward-looking statements in
this prospectus or in the documents that we incorporate by reference in this
prospectus include, without limitation, the integration of the operations of
Lockheed Commercial Electronics Company and the assets in Ireland purchased from
Stratus Computer Ireland (Stratus Computer); changes in customer concentration;
the absence of long term sales contracts; dependence on the growth of the
enterprise computer, telecommunications, medical device, industrial control, and
testing and instrumentation industries; availability of customer specified
components; dependence on certain key executives; variety of environmental laws;
Year 2000 problems; fluctuations in quarterly results; stock price volatility;
and competition from other providers of electronics manufacturing services, each
as set forth in the "Risk Factors" section of this prospectus, elsewhere in
this prospectus and in the documents that we incorporate by reference in this
prospectus.

You should read this prospectus and the documents that we incorporate by
reference in this prospectus completely and with the understanding that our
actual future results may be materially different from what we expect. We may
not update these forward-looking statements, even though our situation will
change in the future. All forward-looking statements attributable to us are
expressly qualified by these cautionary statements.

5
<PAGE>
RISK FACTORS

BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW AND THE OTHER INFORMATION INCLUDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS.

THE INTEGRATION OF ACQUIRED OPERATIONS MAY POSE DIFFICULTIES FOR US.

We have made two significant acquisitions in the last fifteen months, and a
total of three significant acquisitions since 1996. In addition, we may acquire
the stock or assets of other companies in the future. The integration of
acquired operations requires substantial management, financial and other
resources and involves a number of risks and challenges, including:

o Potential loss of key employees or customers of the acquired
companies;

o Diversion of management's attention;

o Increased expenses and working capital requirements; and

o Increased exposure to Year 2000 or other risks.

The difficulties of integrating acquired businesses may be further complicated
by geographic distances. Our most recent acquisition was in Dublin, Ireland, and
we may make an acquisition in the Far East. During the integration process,
other parts of our business could be disrupted and the financial performance of
our business could be adversely affected. Our success is also dependent upon our
ability to integrate any future acquisitions. Additional expansion or
acquisitions would require investment of financial resources and may require
debt or equity financing which could dilute our shareholders' interest in us. No
assurance can be given that we will consummate any acquisitions in the future,
or that any debt or equity financing required for future acquisitions will be
available on terms acceptable to us.

THE LOSS OF A MAJOR CUSTOMER WOULD ADVERSELY AFFECT US.

A substantial percentage of our sales have been to a relatively small
number of customers, and the loss of a major customer would adversely affect us.
In 1998, our three largest customers each represented in excess of 10% of our
sales and together represented 53% of our sales. We expect to continue to depend
on the sales from our largest customers and any material delay, cancellation or
reduction of orders from these or other significant customers would have a
material adverse effect on our results of operations. For example, our operating
results were adversely affected in 1998 when a major customer reduced its orders
significantly during a period of organizational change within that company. In
addition, we generate significant accounts receivable in connection with
providing manufacturing services to our customers. If one or more of our
customers were to become insolvent or otherwise unable to pay for the
manufacturing services provided by us, our operating results and financial
condition would be adversely affected.

OUR BUSINESS MAY SUFFER IF INDUSTRIES WE SERVE SUFFER.

We are dependent on the continued growth, viability and financial stability
of our customers. Our customers operate in the following industries:

o Enterprise computer;

o Telecommunications;

o Medical device;

o Industrial control; and

o Testing and instrumentation.

These industries are, to a varying extent, subject to rapid technological
change, vigorous competition and short product life cycles. When our customers
are adversely affected by these factors, we may be similarly affected.

6
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OUR BUSINESS IS NOT TYPIFIED BY LONG-TERM CONTRACTS, AND CANCELLATIONS,
REDUCTIONS OR DELAYS IN CUSTOMER ORDERS WOULD AFFECT OUR PROFITABILITY.

We do not typically obtain firm long-term purchase orders or commitments
from our customers. Instead, we work closely with our customers to develop
forecasts for future orders, which are not binding. Customers may cancel their
orders, change production quantities from forecast volumes or delay production
for a number of reasons beyond our control. Cancellations, reductions or delays
by a significant customer or by a group of customers would have an adverse
effect on us. In addition, as many of our costs and operating expenses are
relatively fixed, a reduction in customer demand can adversely affect our gross
margins and operating income.

WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY.

We compete against many providers of electronics manufacturing services.
Certain of our competitors have substantially greater resources and more
geographically diversified international operations than we do. We also face
competition from the manufacturing operations of our current and future
customers. To compete effectively, we 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 at competitive prices. Our inability to do so could
have an adverse effect on us.

SHORTAGES OF COMPONENTS SPECIFIED BY OUR CUSTOMERS WOULD DELAY SHIPMENTS AND
ADVERSELY AFFECT OUR PROFITABILITY.

Substantially all of our sales are derived from electronics manufacturing
services in which we purchase components specified by our customers. In the
past, supply shortages have substantially curtailed production of all assemblies
using a particular component. In addition, industry-wide shortages of electronic
components, particularly of memory and logic devices, have occurred. If
shortages of these components occur, we may be forced to delay shipments, which
could have an adverse effect on our profit margins. Because of the continued
increase in demand for surface mount components, we anticipate component
shortages and longer lead times for certain components to occur from time to
time. Also, we typically bear the risk of component price increases that occur
between periodic repricings during the term of a customer contract. Accordingly,
certain component price increases could adversely affect our gross profit
margins.

OUR SUCCESS WILL CONTINUE TO DEPEND TO A SIGNIFICANT EXTENT ON OUR EXECUTIVES.

We depend significantly on our 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 would have an adverse effect on us. We do not have
employment agreements or non-competition agreements with these executive
officers, and we do not maintain key-man insurance on our executive officers.

WE MUST MAINTAIN OUR TECHNOLOGICAL AND MANUFACTURING PROCESS EXPERTISE.

The market for our manufacturing services is characterized by rapidly
changing technology and continuing process development. We are continually
evaluating the advantages and feasibility of new manufacturing processes. We
believe that our future success will depend upon our ability to develop and
provide manufacturing services which meet our customers' changing needs. This
requires that we maintain technological leadership and successfully anticipate
or respond to technological changes in manufacturing processes on a
cost-effective and timely basis. We cannot assure you that our process
development efforts will be successful.

WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL LAWS.

We are subject to a variety of federal, state, local and foreign
environmental regulations relating to the use, storage, discharge and disposal
of hazardous chemicals used during our manufacturing process. If we fail to
comply with any present and future regulations, we could be subject to future

7
<PAGE>
liabilities or the suspension of production. In addition, such regulations could
restrict our ability to expand our facilities or could require us to acquire
costly equipment, or to incur other significant expenses to comply with
environmental regulations.

WE MAY EXPERIENCE YEAR 2000 PROBLEMS.

Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in century. If not corrected, many computer
applications could fail or create erroneous results by or at the Year 2000. We
are actively taking steps to ensure that our information technology
infrastructure and business system applications, manufacturing equipment and
systems will be Year 2000 compliant, and we are seeking assurances of Year 2000
compliance from our suppliers, customers and other third parties with whom we
conduct business. However, we cannot be certain that our efforts will be
appropriate, adequate or complete.

PROVISIONS IN OUR CHARTER DOCUMENTS AND STATE LAW MAY MAKE IT HARDER FOR OTHERS
TO OBTAIN CONTROL OF BENCHMARK EVEN THOUGH SOME SHAREHOLDERS MIGHT CONSIDER SUCH
A DEVELOPMENT TO BE FAVORABLE.

Our shareholder rights plan, provisions of our amended and restated
articles of incorporation and the Texas Business Corporation Act may delay,
inhibit or prevent someone from gaining control of Benchmark through a tender
offer, business combination, proxy contest or some other method. See
"Description of Capital Stock." These provisions include:

o A "poison pill" shareholder rights plan;

o A statutory restriction on the ability of shareholders to take action
by written consent; and

o A statutory restriction on business combinations with some types of
interested shareholders.

WE MAY EXPERIENCE FLUCTUATIONS IN QUARTERLY RESULTS.

Our quarterly results may vary significantly depending on various factors,
many of which are beyond our control. These factors include:

o The volume of customer orders relative to our capacity;

o Customer introduction and market acceptance of new products;

o Changes in demand for customer products;

o The timing of our expenditures in anticipation of future orders;

o Our effectiveness in managing manufacturing processes;

o Changes in cost and availability of labor and components;

o Changes in our product mix;

o Changes in economic conditions;

o Local factors and events that may affect our production volume (such
as local holidays); and

o Seasonality in customer product requirements.

Additionally, as is the case with many high technology companies, a significant
portion of our shipments typically occurs in the last few weeks of a quarter. As
a result, our sales may shift from one quarter to the next, having a significant
effect on reported results.

OUR STOCK PRICE IS VOLATILE.

Our common stock has experienced significant price volatility, and such
volatility may continue in the future. The price of our common stock could
fluctuate widely in response to a range of factors, including variations in our
reported financial results and changing conditions in the economy in general or
in our industry in particular. In addition, stock markets generally experience
significant

8
<PAGE>
price and volume volatility from time to time which may affect the market price
of our common stock for reasons unrelated to our performance.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock is listed on the New York Stock Exchange under the symbol
"BHE." The following table sets forth the high and low sale prices for the
common stock as reported by the New York Stock Exchange for the periods
indicated.

HIGH LOW
---- ----
1997
First quarter...................... $16 3/8 $14 1/4
Second quarter..................... 20 1/2 12 3/4
Third quarter...................... 28 1/2 20
Fourth quarter..................... 30 1/2 21 5/16
1998
First quarter...................... 28 1/4 21 1/8
Second quarter..................... 24 15/16 18 3/8
Third quarter...................... 25 1/2 17 5/8
Fourth quarter..................... 37 1/2 17 7/8
1999
First quarter...................... 38 7/8 26 7/8
Second quarter (through
May 6, 1999)..................... 35 15/16 30 1/8

On May 6, 1999, the last reported sale price of our common stock on the New
York Stock Exchange was $30 3/4 per share.

We have not paid any cash dividends on the common stock in the past and
anticipate that, for the foreseeable future, we will retain any earnings
available for dividends for use in our business. Our bank credit facility and
our senior note purchase agreement currently limit the amount of dividends that
may be declared on our common stock. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

USE OF PROCEEDS

The net proceeds from our sale of 3,000,000 shares of common stock will be
approximately $88.4 million after deducting underwriting discounts and
commissions and estimated expenses ($106.2 million if the over-allotment option
is exercised in full). Such proceeds will be used to repay $47 million of
indebtedness under our bank credit facility, and for working capital and other
general corporate purposes, including acquisitions. Our management continually
evaluates potential strategic acquisitions or investments, but at the present
time we have no understandings, commitments or agreements with respect to any
such acquisition or investment. As of May 6, 1999, the weighted average interest
rate on the debt to be repaid was 6.35%, and the maturity dates of this debt
range from May 1999 to March 2004. Of the debt to be repaid, $25 million was
used to purchase assets from Stratus Computer. We will not receive any proceeds
from the sale of shares of common stock sold by the selling shareholder.

9
<PAGE>
CAPITALIZATION

The following table sets forth our summary capitalization as of March 31,
1999 and as adjusted to give effect to our sale of 3,000,000 shares of common
stock and the application of the net proceeds therefrom as described in "Use of
Proceeds." This table should be read in conjunction with our financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included and incorporated by
reference in this prospectus.

AS OF MARCH 31, 1999
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
Cash and cash equivalents............ $ 12,084 $ 53,475
========== ===========
Debt:
Line of credit.................. $ 25,000 $ --
Term loan....................... 22,000 --
Senior note..................... 30,000 30,000
Capital lease obligations....... 275 275
---------- -----------
Total debt................. $ 77,275 $ 30,275
---------- -----------
Shareholders' equity:
Preferred shares, par value
$0.10 per share; 5,000,000
shares authorized, none....... -- --
Common shares, par value $0.10
per share; 30,000,000 shares
authorized;
issued - 11,715,567 and
14,715,567, respectively;
outstanding - 11,666,083 and
14,666,083, respectively...... 1,167 1,467
Additional paid-in capital...... 70,803 158,894
Retained earnings............... 71,837 71,837
Less treasury shares, at cost,
49,484 shares................. (120) (120)
---------- -----------
Total shareholders'
equity.................. 143,687 232,078
---------- -----------
Total capitalization................. $ 220,962 $ 262,353
========== ===========

10
<PAGE>
SELECTED FINANCIAL INFORMATION

The selected financial information should be read in conjunction with our
financial statements and the related notes thereto included and incorporated by
reference in this prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENTS OF INCOME INFORMATION:
Sales................................ $ 146,546 $ 108,046 $ 524,065 $ 325,229 $ 201,296 $ 97,353 $ 98,168
Cost of sales........................ 131,856 97,141 472,354 285,630 177,981 85,113 86,236
--------- --------- --------- --------- --------- --------- ---------
Gross profit..................... 14,690 10,905 51,711 39,599 23,315 12,240 11,932
Selling, general and administrative
expenses............................. 4,950 3,526 17,680 12,817 7,228 2,990 3,154
Amortization of goodwill............. 910 585 3,311 1,670 696 -- --
--------- --------- --------- --------- --------- --------- ---------
Income from operations........... 8,830 6,794 30,720 25,112 15,391 9,250 8,778
Interest expense..................... 1,125 902 4,394 2,472 1,442 -- --
Interest income...................... 138 168 479 1,163 442 268 252
Other income......................... 78 47 85 149 92 13 11
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes....... 7,921 6,107 26,890 23,952 14,483 9,531 9,041
Income tax expense................... 2,884 2,365 10,518 8,862 5,619 3,383 3,272
--------- --------- --------- --------- --------- --------- ---------
Net income....................... $ 5,037 $ 3,742 $ 16,372 $ 15,090 $ 8,864 $ 6,148 $ 5,769
========= ========= ========= ========= ========= ========= =========
Earnings per common share:
Basic............................ $ 0.43 $ 0.32 $ 1.41 $ 1.31 $ 0.99 $ 0.77 $ 0.72
========= ========= ========= ========= ========= ========= =========
Diluted.......................... $ 0.40 $ 0.31 $ 1.35 $ 1.26 $ 0.96 $ 0.75 $ 0.71
========= ========= ========= ========= ========= ========= =========
Weighted average number of shares
outstanding:
Basic............................ 11,655 11,575 11,594 11,508 8,976 8,031 7,998
========= ========= ========= ========= ========= ========= =========
Diluted.......................... 12,703 12,243 12,098 12,004 9,218 8,213 8,176
========= ========= ========= ========= ========= ========= =========

AS OF DECEMBER 31,
AS OF -----------------------------------------------------
MARCH 31, 1999 1998 1997 1996 1995 1994
--------------- --------- --------- --------- --------- ---------
BALANCE SHEET INFORMATION:
Working capital...................... $ 83,346 $ 86,265 $ 87,879 $ 72,586 $ 37,285 $ 30,890
Total assets......................... 304,261 241,896 190,322 168,174 57,037 48,333
Total debt........................... 77,275 54,311 30,485 30,724 -- --
Shareholders' equity................. 143,687 138,001 120,872 104,999 46,624 40,131
</TABLE>
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the "Selected
Financial Information" and the Consolidated Financial Statements of the Company
and the notes thereto appearing elsewhere herein.

RECENT ACQUISITIONS

On March 1, 1999, the Company acquired certain equipment and inventories
from Stratus Computer, a wholly-owned subsidiary of Ascend Communications, Inc.
(Ascend) for approximately $48 million in cash, subject to adjustment. Based on
March 31, 1999 estimates, the acquisition price was allocated $6.6 million to
equipment, $34.8 million to inventories, with an estimated $6.6 million to other
current assets (the Company expects this amount to be remitted back to the
Company as a final adjustment to the transaction). Stratus Computer provided
systems integration services for large and sophisticated fault-tolerant
mainframe computers. In connection with the transaction, the Company entered
into a three-year supply agreement to provide these system integration services
to Ascend and Stratus Holding Limited (Stratus Holding), and the Company hired
approximately 260 employees. In conjunction with the purchase of the Stratus
Computer assets, the Company increased its revolving line of credit to $65
million and borrowed $25 million.

On February 23, 1998, the Company acquired Lockheed Commercial Electronics
Company (LCEC) for $70 million in cash. LCEC, situated in Hudson, New Hampshire,
is one of New England's largest electronics manufacturing services companies,
providing a broad range of services including printed circuit board assembly and
test, system assembly and test, prototyping, depot repair, materials
procurement, and engineering support services. The transaction was accounted for
under the purchase method of accounting, and, accordingly, the results of
operations of LCEC since February 23, 1998, have been included in the Company's
financial statements. The acquisition resulted in goodwill of approximately
$29.5 million that is being amortized on a straight-line basis over 15 years. In
connection with the acquisition of LCEC, the Company obtained $40 million
through borrowings under a five-year Term Loan with a commercial bank.

Completion of the acquisitions of LCEC and the assets in Ireland from
Stratus Computer and the inclusion of LCEC's operations and the operations of
the system integration facility in Ireland in the Company's accounts subsequent
to February 23, 1998 and March 1, 1999, respectively, are responsible for a
substantial portion of the variations in the results of the Company's operations
(including components thereof) for the most recent reported periods, as compared
to corresponding prior periods. The effects of the acquisitions of the Stratus
Computer assets and LCEC on the Company's financial condition and its reported
results of operations should be considered when reviewing the financial
information contained herein.

12
<PAGE>
RESULTS OF OPERATIONS

The following table presents the percentage relationship that certain items
in the Company's Consolidated Statements of Income bear to sales for the periods
indicated.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................ 90.0 89.9 90.1 87.8 88.4
--------- --------- --------- --------- ---------
Gross profit.................... 10.0 10.1 9.9 12.2 11.6
Selling, general and administrative
expenses........................... 3.4 3.3 3.4 3.9 3.6
Amortization of goodwill............. .6 .5 .6 .5 .3
--------- --------- --------- --------- ---------
Income from operations.......... 6.0 6.3 5.9 7.8 7.7
--------- --------- --------- --------- ---------
Other income (expense)............... (.6) (.6) (.7) (.4) (.5)
--------- --------- --------- --------- ---------
Income before income taxes...... 5.4 5.7 5.2 7.4 7.2
Income tax expense................... 2.0 2.2 2.0 2.7 2.8
--------- --------- --------- --------- ---------
Net income...................... 3.4% 3.5% 3.2% 4.6% 4.4%
========= ========= ========= ========= =========
</TABLE>

THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS
ENDED MARCH 31, 1998

Sales for the first quarter of 1999 were approximately $146.5 million, a
35.6% increase from sales of approximately $108.0 million for the same quarter
in 1998. The net increase in sales resulted primarily from the acquisition of
LCEC, the operation of the system integration facility in Ireland, existing
customers, and the addition of new customers. The Company's results of
operations are dependent upon the success of its customers, and a prolonged
period of reduced demand for its customers' products would have an adverse
effect on the Company's business.

Gross profit increased 34.7% to approximately $14.7 million in the first
quarter of 1999 from approximately $10.9 million in the same quarter in 1998.
The increase in gross profit was due primarily to the higher sales volumes
attributable to the LCEC acquisition and the operation of the new system
integration facility in Ireland, along with changes in product and customer mix
occurring in the ordinary course of business. Gross profit as a percentage of
sales decreased from 10.1% for the first quarter of 1998 to 10.0% for the first
quarter of 1999. The Company's gross margin reflects a number of factors,
including product mix, the level of start up costs and efficiencies associated
with new programs, capacity utilization of surface mount and other equipment,
and pricing within the electronics industry. All of these factors are
continually changing and are interrelated, making it impracticable to determine
separately the effect of each factor. The decrease in gross profit as a
percentage of sales during the quarter ended March 31, 1999, as compared to the
same period in 1998 was due to lower margins on LCEC programs and the system
integration facility in Ireland, changes in the product mix and the initiation
of new programs.

Selling, general and administrative expenses were $5.0 million in the first
quarter of 1999, an increase of 40.4% from $3.5 million for the same quarter in
1998. Selling, general and administrative expenses as a percentage of sales
increased from 3.3% for the first quarter of 1998 to 3.4% for the first quarter
of 1999. 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 continued to add personnel. The
increase in selling, general and administrative expenses during the three-month
period of 1999 reflects these additional personnel and related departmental
expense, as well as the additional administrative expenses resulting from the
inclusion of LCEC for a full three-month period in 1999 and the inclusion of the
system integration facility. The Company anticipates selling, general and
administrative expenses will continue to increase in nominal

13
<PAGE>
terms as the Company continues to build the internal management and support
systems necessary to support higher sales levels.

The amortization of goodwill for the three-month periods ended March 31,
1999 and 1998 was $0.9 million and $0.6 million, respectively. The increase was
due to the acquisition of LCEC on February 23, 1998.

Interest expense for the three-month periods ended March 31, 1999 and 1998
was $1.1 million and $0.9 million, respectively. The increase was due to the
additional debt incurred in connection with the purchase of the assets in
Ireland from Stratus Computer on March 1, 1999, and the acquisition of LCEC on
February 23, 1998.

Interest income was approximately $0.1 million and $0.2 million,
respectively, for the three-month periods ended March 31, 1999 and 1998. The
decrease was due to the use of a portion of the Company's cash and cash
equivalents to fund the purchase of the assets in Ireland from Stratus Computer
on March 1, 1999.

Income tax expense for the three-month periods ended March 31, 1999 and
1998 was $2.9 million and $2.4 million, respectively. The increase was due to
higher pretax income and nondeductible amortization of goodwill, partially
offset by lower foreign tax rates applicable to a portion of pretax income in
1999.

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

Sales in 1998 increased $198.8 million, or 61.1% over 1997 sales. The net
increase in sales resulted primarily from increased sales volume from the
acquisition of LCEC on February 23, 1998, existing customers, and the addition
of new customers, which was offset by reduced sales to a major customer during a
period of organizational change.

A substantial percentage of the Company's sales have been to a small number
of customers, and the loss of a major customer, if not replaced, would adversely
affect the Company. During 1998, the Company's three largest customers accounted
for approximately 53% of the Company's sales, and the Company's largest customer
accounted for approximately 28% of sales. 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, or the
failure of a major customer to pay for components or services, could have an
adverse effect on the Company.

The Company had a record year-end backlog of $317 million at December 31,
1998, as compared to the 1997 year-end backlog of $302 million. Although the
Company expects to fill substantially all of this backlog in 1999, at December
31, 1998, the Company had no long-term agreements with its customers and
customer orders can be canceled, changed or delayed by customers. The timely
replacement of canceled, changed or delayed orders with orders from new
customers cannot be assured, nor can there be any assurance that any of the
Company's current customers will continue to utilize the Company's services.

Gross profit increased $12.1 million, or 30.6% over 1997. Gross profit as a
percentage of sales decreased from 12.2% for 1997 to 9.9% for 1998. The increase
in gross profit was due primarily to higher sales volumes and normal changes in
product mix and customer mix. The Company's gross profit reflects a number of
factors, including product mix, the level of start-up costs and efficiencies
associated with new programs, capacity utilization of surface mount and other
equipment, and pricing within the electronics industry. All of these factors are
continually changing and are interrelated, making it impracticable to determine
separately the effect of each factor. The decrease in gross profit as a
percentage of sales during 1998 was due primarily to a less profitable customer
mix, and a reduced capacity utilization, at the LCEC facility.

Selling, general and administrative expenses increased $4.9 million, or
37.9%, from 1997 to $17.7 million in 1998. The increase in selling, general and
administrative expenses reflects additional

14
<PAGE>
personnel and related departmental expense, as well as the additional
administrative expenses resulting from the inclusion of LCEC for ten months of
1998.

The amortization of goodwill for the years ended December 31, 1998 and 1997
was $3.3 million and $1.7 million, respectively. Interest expense incurred by
the Company on the debt incurred in connection with the acquisitions of LCEC in
1998 and EMD Technologies, Inc. (EMD) in 1996 was approximately $4.4 million and
$2.5 million, respectively, in 1998 and 1997. The increased amortization and
interest expense in 1998 resulted from the additional goodwill and debt incurred
in connection with the acquisition of LCEC during 1998.

Interest income was approximately $0.5 million in 1998 compared to $1.2
million in 1997. The decrease was due to the use of a portion of the Company's
cash and interest bearing marketable securities to fund the acquisition of LCEC.

Income tax expense of $10.5 million represented an effective tax rate of
39.1% for the year ended December 31, 1998, compared with an effective tax rate
of 37% for the year ended December 31, 1997. The increase is due primarily to
the increase in nondeductible amortization of goodwill.

The Company reported net income of approximately $16.4 million, or diluted
earnings of $1.35 per share, for 1998 compared with net income of approximately
$15.1 million, or diluted earnings of $1.26 per share for 1997. The
approximately $1.3 million increase in net income during 1998 was a result of
the combined effects of the acquisition of LCEC and the overall increase in
revenues resulting from the factors discussed above.

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996

Sales in 1997 increased $123.9 million, or 61.6% over 1996 sales. The
increase in sales resulted primarily from increased sales volume from existing
customers, the addition of new customers and the acquisition of EMD on July 30,
1996.

The Company had a then record year-end backlog of $302 million at December
31, 1997, as compared to the 1996 year-end backlog of $230 million.

Gross profit increased $16.3 million, or 69.8% over 1996. Gross profit as a
percentage of sales increased from 11.6% for 1996 to 12.2% for 1997. The
increase in gross profit was due primarily to higher sales volumes and normal
changes in product mix and customer mix. The Company's gross profit reflects a
number of factors, including product mix, the level of start-up costs and
efficiencies associated with new programs, capacity utilization of surface mount
and other equipment, and pricing within the electronics industry. All of these
factors are continually changing and are interrelated, making it impracticable
to determine separately the effect of each factor. The increase in gross profit
as a percentage of sales during 1997 was due primarily to the product mix and
the initiation of new programs during 1996.

Selling, general and administrative expenses increased $5.6 million, or
77.3%, from 1996 to $12.8 million. The increase in selling, general and
administrative expenses reflects these additional personnel and related
departmental expense, as well as the additional administrative expenses
resulting from the inclusion of EMD in the full year of 1997.

The amortization of goodwill associated with the acquisition of EMD for the
year ended December 31, 1997 and 1996 was $1.7 million and $0.7 million,
respectively. Interest expense incurred by the Company on the debt incurred in
connection with the acquisition of EMD was approximately $2.5 million and $1.4
million, respectively, in 1997 and 1996. The increased amortization and interest
expense in 1997 reflected the effect of including EMD's operations for a full
year.

15
<PAGE>
Interest income was approximately $1.2 million in 1997 compared to $0.4
million in 1996. The increase was due to the investment by the Company of
available cash in interest bearing marketable securities and cash equivalents.

Income tax expense of $8.9 million represented an effective tax rate of 37%
for the year ended December 31, 1997, compared with an effective tax rate of
38.8% for the year ended December 31, 1996. The decrease was due to the benefit
from the use of a foreign sales corporation and non-taxable interest earned on
municipal investments partially offset by nondeductible amortization of
goodwill.

The Company reported net income of approximately $15.1 million, or diluted
earnings of $1.26 per share, for 1997 compared with net income of approximately
$8.9 million, or diluted earnings of $0.96 per share for 1996. The approximately
$6.2 million increase in net income during 1997 was a result of the combined
effects of the acquisition of EMD and the overall increase in income from
operations resulting from the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its growth and operations through funds generated
from operations, proceeds from the sale of its common stock and funds borrowed
under its credit facilities.

Cash provided by operating activities was $18.4 million and $6.8 million
for the three months ended March 31, 1999 and 1998, respectively. The increase
in cash provided by operations was primarily the result of increases in net
income, depreciation and amortization, and increases in accounts payable
partially offset by increases in accounts receivable and inventories. The
Company's accounts payable, accounts receivables, and inventories have increased
$30.6 million, $23.4 million, and $2.7 million (net of effects from purchase of
assets from Stratus Computer), respectively, during the first three months of
1999, reflecting the Company's increased sales and backlog as compared to the
corresponding period in the prior year. The Company is continuing the practice
of purchasing components only after customer orders are received, which
mitigates, but does not eliminate, the risk of loss on inventories. Supplies of
electronic components and other materials used in operations are subject to
industry-wide shortages. In certain instances, suppliers may allocate available
quantities to the Company that may not meet Company requirements. The Company
has not experienced significant supply constraints in the recent past.

Cash provided by operating activities was $56.9 million, $19.3 million and
$12.3 million in 1998, 1997 and 1996, respectively. In 1998, substantial
decreases in inventory and accounts receivable, net of effects from the
acquisition of LCEC, and increases in net income, depreciation and amortization
were partially offset by decreases in accounts payable. The Company's
inventories have decreased from $61.1 million at December 31, 1997 to $53.7
million at December 31, 1998, reflecting improved customer forecasting and the
Company's emphasis on supply chain management. In 1997, substantial increases in
inventory were partially offset by net income, depreciation and amortization,
and increases in accounts payable. The Company's inventories increased from
$48.1 million at December 31, 1996 to $61.1 million at December 31, 1997,
reflecting the Company's increased sales and backlog during this period. In
1996, substantial increases in accounts receivable were offset by net income,
depreciation and amortization, and increases in accounts payable and accrued
liabilities and decreases in inventory, net of effects from the acquisition of
EMD. The Company's accounts receivable and inventories increased from $20.2
million and $23.0 million, respectively, at December 31, 1995 to $39.2 million
and $48.1 million, respectively at December 31, 1996, reflecting the Company's
increased sales during this period. The Company expects increases in inventories
to support the anticipated growth in sales.

Cash used in investing activities was $52.7 million and $61.7 million for
the three months ended March 31, 1999 and 1998, respectively. On March 1, 1999,
the Company completed the purchase of inventories and equipment from Stratus
Computer for $48 million in cash. Capital expenditures of $4.0 million for the
three months ended March 31, 1999, were primarily concentrated in test
equipment.

16
<PAGE>
Capitalized software costs of $0.7 million for the three months ended March 31,
1999, were for the purchase and implementation of the Company's Enterprise
Resource Planning System.

Cash used in investing activities was $78.7 million, $12.4 million and
$49.0 million, respectively, for the years ended December 31, 1998, 1997 and
1996. On February 23, 1998, the Company completed its acquisition of LCEC for
approximately $70.7 million in cash. Capital expenditures of $12.2 million
during 1998 consisted primarily of test and manufacturing production equipment
and computer equipment to support the Company's implementation of the new ERP
system. During 1998, the Company invested $7.4 million on the new ERP software
system. Capital expenditures of $10.4 million during 1997 were primarily
concentrated in surface mount assembly, test and manufacturing production
equipment. The Company completed the planned expansion of its production
capacity at the Angleton plant during 1996, after which the Company had 12
surface mount assembly lines in operation at the Angleton plant. Capital
expenditures of $8.7 million during 1996 were primarily concentrated in the
expansion of the Angleton facility and surface mount assembly equipment
associated with this expansion. On July 30, 1996, the Company completed its
acquisition of EMD for approximately $30.8 million in cash. The Company used
$11.4 million of proceeds from the sale of interest bearing marketable
securities during 1998 for the purpose of paying a portion of the purchase price
of LCEC. During 1997 and 1996, the Company invested $2.3 million and $9.5
million, respectively, of available cash in interest bearing marketable
securities.

Cash provided by financing activities was $23.3 million and $39.6 million
for the three months ended March 31, 1999 and 1998, respectively. In connection
with the purchase of the assets from Stratus Computer on March 1, 1999, the
Company increased its revolving line of credit to $65 million and borrowed $25
million. The Company made principal payments on long-term debt totaling $2.0
million during the three months ended March 31, 1999.

Cash provided by financing activities was $23.9 million, $0.4 million and
$47.7 million, respectively, for the years ended December 31, 1998, 1997 and
1996. During 1998, cash provided by financing activities consisted primarily of
$40.0 million of proceeds from the issuance of long-term debt offset by $16.2
million of principal payments on long-term debt. During 1997, cash provided by
financing activities consisted primarily of $0.7 million of proceeds from stock
options exercised, offset by $0.2 million of principal payments on long-term
debt. During 1996, cash provided by financing activities consisted primarily of
$30 million of proceeds from the issuance of long-term debt, $28.5 million of
net proceeds from the public offering of common shares, offset by $10.9 million
of principal payments on long-term debt.

The Company has a $65 million revolving line of credit with a commercial
bank. The Company is entitled to borrow under the line of credit up to the
lesser of $65 million or the sum of 75% of its eligible accounts receivable and
25% of its eligible inventories. Interest on the line of credit is payable
quarterly, at the Company's option, at either the bank's Eurodollar rate plus
.88% to 1.63% or its prime rate. A commitment fee of 0.20% to 0.30% per annum on
the unused portion of the line of credit is payable quarterly in arrears. 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
and to pay dividends. The line of credit matures on March 31, 2004. As of March
31, 1999, the Company had $25 million outstanding under this line of credit with
$40 million available for future borrowings. The Company intends to repay this
line of credit, as well as its Term Loan, in full with a portion of the proceeds
from the offering contemplated by this prospectus.

The Company's operations are subject to certain federal, state and local
regulatory requirements relating to environmental, waste management, health and
safety matters. Some risk of costs and liabilities related to these matters is
inherent in the Company's business as with many similar businesses. Management
believes that the Company's business is operated in substantial compliance with
applicable environmental, waste management, health and safety regulations.

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

17
<PAGE>

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 existing cash balances, proceeds from this
offering, funds generated from operations, and borrowings under the Company's
credit facility will be sufficient to permit the Company to meet its liquidity
requirements for the foreseeable future.

The Company does not hold or issue derivative financial instruments in the
normal course of business. Inflation and changing prices have not significantly
affected the Company's operating results or the markets in which the Company
performs services during recent years.

YEAR 2000 ISSUES

The Company recognizes that it must ensure that its products and operations
will not be adversely impacted by Year 2000 software failures which can arise in
date-sensitive software applications which utilize a field of two digits rather
than four to define a specific year. Absent corrective actions, date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions to various activities and operations.

STATE OF READINESS

Many of the Company's business and operating systems are currently Year
2000 compliant, and the Company initiated a review of its systems during 1997 to
address those systems that are not currently Year 2000 compliant. Areas
addressed included major third-party suppliers of components of the Company's
products as well as full reviews of the Company's manufacturing equipment,
telephone and voice mail systems, security systems and other office support
systems. The Company has also initiated formal communications with significant
suppliers and customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
issues. Based on its inquiries to date, the Company believes satisfactory
progress is being made by its significant suppliers and customers on Year 2000
issues. No significant information technology initiatives have been deferred by
the Company as a result of its Year 2000 project.

In addition, the Company has selected Baan U.S.A., Inc. to provide an ERP
System, which will be Year 2000 compliant, to improve processes and
efficiencies. All necessary Year 2000 upgrades of major systems, including those
supplied by vendors, have been identified and conversion strategies have been
developed and are under deployment.

COSTS TO ADDRESS THE YEAR 2000 ISSUE

The estimated total cost to address the Company's Year 2000 issues,
including the cost associated with the new ERP System, is approximately $13.5
million. Costs incurred and expected to be incurred consist primarily of the
cost of Company personnel involved in updating applications and operating
systems and the costs of software updates and patches (many of which are
provided free of charge from the vendors). The estimated total cost associated
with the purchase and implementation of the new ERP System is approximately $13
million. The costs of this software will be capitalized and amortized over the
estimated useful life of the software, and costs associated with the preliminary
project stage and post-implementation stage has been and will be expensed as
incurred. The Year 2000 component of this system can not be readily segregated
from the total cost of the company-wide ERP System implementation. The total
amount expended on Year 2000 issues and the new ERP System through March 31,
1999, is approximately $10 million, of which $9.7 million related to the new ERP
System implementation and approximately $300,000 related to the cost of
identifying and communicating with third parties and installing software
patches. The costs of the Year 2000 process and the timetable on which the
Company believes it will complete any Year 2000 modifications are based on
management's best estimates, which are derived utilizing a number of assumptions
of future

18
<PAGE>
events, including the availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties. In addition,
there can be no assurance that the systems of other companies on which the
Company's systems rely will be converted on a timely basis or that such failure
by another company to convert would not have an adverse effect on the Company's
systems.

RISKS PRESENTED BY THE YEAR 2000 ISSUE

There is considerable uncertainty inherent in assessing the Company's
vulnerability to Year 2000 problems, arising in part from the uncertainty of the
Year 2000 readiness of the Company's suppliers and customers. It is possible
that the failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business operations, and that
such failures could materially and adversely affect the Company's results of
operations, liquidity and financial condition. Based on the information
available to it, and subject to the effect of the general uncertainty on the
Company's ability to make a definitive determination, the Company does not
believe it has any material exposure to significant business interruption as a
result of the Year 2000 problem, or that the cost of remedial actions will have
a material adverse effect on its business, financial condition or results of
operations.

CONTINGENCY PLANS

The steps taken by the Company to address the Year 2000 issues are expected
to reduce significantly the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of its
material third party suppliers and customers. The Company believes that, with
the completion of identifying and communicating with third parties as scheduled,
the possibility of significant interruptions of normal operations should be
reduced.

Accordingly, and as the program is on schedule to be completed during the
fall of 1999, the Company has not formulated a worse case scenario in the event
its Year 2000 project is not completed in a timely manner. The Company has a
contingency plan in place in the event all scheduled implementations are not
completed by the end of 1999. All necessary Year 2000 upgrades of major systems
and software patches, including those supplied by vendors, have been identified
and conversion strategies are under deployment.

19
<PAGE>
BUSINESS
GENERAL

We are one of the leading independent providers of electronics
manufacturing services to the enterprise computer, telecommunications, medical
device, industrial control, and testing and instrumentation markets. We offer a
complete range of integrated electronics manufacturing services, from initial
product design to volume production and order fulfillment. We believe that we
have developed particular strengths in the manufacturing process for large,
complex, high-density assemblies. In addition, we offer advanced engineering
services including product design, PCB layout, quickturn prototyping and test
development. Throughout the production process, we offer logistics services such
as materials procurement, inventory management, packaging and distribution.

We have experienced significant growth over the last three years,
increasing our sales by a compounded annual growth rate of 75.3% since 1995. Our
sales growth during the last three years was twice the sales growth of each of
our four largest competitors. Our growth is driven by three factors. First, we
focus on high-end products in growing technology sectors. As a result, our
growth is influenced by several trends including the build-out of the
communications and Internet infrastructure and the evolution of computer
technology. Second, the accelerating pace at which OEMs are adopting outsourcing
as a core business strategy also contributes to our growth. We were selected for
nine new customer programs in the first quarter of 1999, four of which
represented new outsourcing initiatives of existing customers. These nine
programs are expected to begin generating sales in the fourth quarter of 1999.
Third, our growth is driven by the successful completion and integration of
strategic acquisitions.

o STRATUS COMPUTER IRELAND. On March 1, 1999, we acquired certain
assets from Stratus Computer Ireland, and in connection with the
transaction we entered into a three-year supply agreement with Ascend
and Stratus Holding Limited. The acquired assets augment our ability
to provide a broad range of services to the European market and
enhance our systems integration and box build engineering
capabilities.

o LOCKHEED COMMERCIAL ELECTRONICS COMPANY. In February 1998, we
acquired Lockheed Commercial Electronics Company. This acquisition
provided us with manufacturing capacity in the northeastern United
States and 18 additional customers. Now operated as our Hudson, New
Hampshire division, the facility provides a broad range of services
including printed circuit board assembly and test, system assembly and
test, prototyping, depot repair, materials procurement, and
engineering and design support services.

o EMD TECHNOLOGIES, INC. In July 1996, we acquired EMD Technologies,
Inc., an independent provider of electronics manufacturing and product
design services. Now operated as our Winona, Minnesota division, this
facility provides a complete range of enhanced product design and
development capabilities, including circuit board conceptual design
and subsystem and enclosure configuration. In addition to design
services, this acquisition provided us with manufacturing capabilities
in the midwestern United States and 19 additional customers.

20
<PAGE>
We believe our primary competitive advantages are our design,
manufacturing, testing and supply chain management capabilities. We offer our
customers complete and flexible manufacturing solutions that provide accelerated
time-to-market, time-to-volume production, and reduced production costs. As a
result of working closely with our customers and responding promptly to their
needs, we have become an integral part of their operations. In addition, our
workforce is led by a management team that founded the Company and has an
average of 18 years of industry experience.

BUSINESS STRATEGY

FOCUS ON HIGH-END PRODUCTS IN GROWING SECTORS. Electronics manufacturing
service providers produce products for a wide range of OEMs in different
industries. The product scope ranges from easy to assemble, low-cost high-volume
products targeted for the consumer market to complicated state-of-the-art,
mission critical electronic hardware. Similarly, OEM customers range from
consumer-oriented companies that compete primarily on price and redesign their
products every year to high-end telecommunications and enterprise computer
manufacturers that compete on technology and quality. We currently focus on
state-of-the-art products for industry leaders who require advanced engineering
design and production services. Our ability to offer these services enables us
to expand our business relationships.

DELIVER COMPLETE MANUFACTURING SOLUTIONS. We believe OEMs increasingly
require a wide range of advanced engineering and manufacturing services in order
to reduce their costs and accelerate their time-to-market. Building on our
integrated engineering and manufacturing capabilities, we offer services from
initial product design and test to final product assembly and distribution to
the OEMs' customers. In addition, we offer customers the flexibility to move
more rapidly from design and initial introduction to production and
distribution.

LEVERAGE ADVANCED TECHNOLOGICAL CAPABILITIES. Our strengths in the
manufacturing processes for large, complex high-density assemblies enable us to
offer customers advanced design, technology and manufacturing solutions for
their primary products. Our design capabilities in each of our facilities,
together with our corporate design center located in Winona, Minnesota, offer
engineering expertise to our customers. These capabilities help our customers
improve product performance and reduce costs.

ESTABLISH AND MAINTAIN CLOSE RELATIONSHIPS WITH CUSTOMERS. We believe we
can become an integral part of our customers' operations by working closely with
them throughout the design, manufacturing and distribution process, and by
offering flexible and responsive services. We believe we develop stronger
customer relationships through local management teams that respond to frequently
changing customer design specifications and production requirements.

EXPAND GEOGRAPHIC PRESENCE. A strategically positioned facilities network
can simplify and shorten an OEM's supply chain and reduce the time it takes to
bring product to market. We believe we can deliver additional value to our
customers by increasing our presence in low-cost locations close to component
suppliers or OEM customers.

SELECTIVELY PURSUE STRATEGIC ACQUISITIONS. We have completed three
acquisitions since July 1996 and will continue to selectively seek acquisition
opportunities. Our acquisitions have enhanced our business in the following
ways:

o Expanded geographic presence in high technology regions;

o Addition of experienced management teams;

o Enhanced customer growth opportunities;

o Development of strategic relationships;

o Broadened service offerings; and

o Diversification into new market sectors.

21
<PAGE>
We believe that growth by selective acquisitions is critical for achieving
the scale, flexibility and breadth of customer services required to remain
competitive in the electronics manufacturing services industry.

ELECTRONICS MANUFACTURING SERVICES INDUSTRY

Many OEMs in the electronics industry are increasingly using electronics
manufacturing service providers in their business and manufacturing strategies
and are seeking to outsource a broad range of manufacturing and related
engineering services. Outsourcing allows OEMs to take advantage of the
manufacturing expertise and capital investments of electronics manufacturing
service providers, thereby enabling OEMs to concentrate on what they believe to
be their core strengths, such as product development, marketing and sales. OEMs
utilize electronics manufacturing service providers to enhance their competitive
position by:

o Reducing capital investment requirements and fixed overhead costs;

o Accessing advanced manufacturing and design capabilities;

o Reducing production costs;

o Accelerating time-to-market and time-to-volume production;

o Improving inventory management and purchasing power; and

o Accessing worldwide manufacturing capabilities.

We believe that OEMs, recognizing benefits such as these, are increasingly
outsourcing their electronics manufacturing operations. Industry sources
estimate that the overall market for electronics manufacturing services will
have grown at an average annual rate of 25% from 1996 to 2002. In addition,
according to industry sources the electronics manufacturing services industry's
revenue accounted for approximately 12% of the cost of goods sold in the
electronics industry in 1996. By 2001, industry sources estimate that this
percentage will increase to 26%.

SERVICES PROVIDED BY BENCHMARK

ENGINEERING SERVICES. Our approach is to coordinate and integrate our
design, prototype and other engineering capabilities. Through this approach, we
provide a broad range of engineering services and, in some cases, dedicated
production lines for prototypes. These services strengthen our relationships
with manufacturing customers and attract new customers requiring advanced
engineering services.

To assist customers with initial design, we offer CAE and CAD-based design,
engineering for manufacturability, circuit board layout and test development. We
also coordinate industrial design and tooling for product manufacturing. After
product design, we offer quickturn prototyping. During this process, we assist
with the transition to volume production. By participating in product design and
prototype development, we can reduce manufacturing costs and accelerate the time
to volume production.

MATERIALS PROCUREMENT AND MANAGEMENT. Materials procurement and management
consists of the planning, purchasing, expediting and warehousing of components
and materials. Our inventory management and volume procurement capabilities
contribute to cost reductions and reduce total cycle time. Our materials
strategy is focused on leveraging our procurement volume corporate wide while
providing local execution for maximum flexibility at the division level. In
addition, our Ireland facility has developed material processes required to
support high-end computer system integration operations.

ASSEMBLY AND MANUFACTURING. Our assembly and manufacturing operations
include PCB and subsystem assembly and box build. A substantial portion of our
sales are derived from the manufacture and assembly of complete products. We
employ various inventory management techniques such as just-in-time,
ship-to-stock and autoreplenish programs. As OEMs seek to provide greater
functionality in smaller products, they increasingly require more sophisticated
manufacturing technologies and processes. Our investment in advanced
manufacturing equipment and our experience in innovative packaging and
interconnect technologies (such as chip scale packaging and ball grid array)
enable us to offer a variety of advanced manufacturing solutions.

22
<PAGE>
TEST. We offer computer-aided testing of assembled PCBs, subsystems and
systems, which contributes significantly to our ability to deliver high-quality
products on a consistent basis. We work with our customers to develop
product-specific test strategies. Our test capabilities include manufacturing
defect analysis, in-circuit tests and functional tests. We either custom design
test equipment and software ourselves or use test equipment and software
provided by our customers. In addition, we also provide environmental stress
tests of board or system assemblies.

DISTRIBUTION. We offer our customers flexible, just-in-time delivery
programs allowing product shipments to be closely coordinated with customers'
inventory requirements. Increasingly, we ship products directly into customers'
distribution channels or directly to the end-user. We believe that this service
can provide our customers with a more comprehensive solution and enable them to
be more responsive to market demands.

MARKETING AND CUSTOMERS

We market our services through a direct sales force and independent
marketing representatives. In addition, our divisional and executive management
teams are an integral part of our sales and marketing teams. During 1998, our
three largest customers, EMC, Lucent and Stratus Computer, each represented in
excess of 10% of total sales and, in the aggregate, represented 53% of total
sales.

We target customers in five industries and seek to maintain a balance in
our sales to those industries. The following table sets forth the percentages of
our sales to each of the five industries for 1998, 1997 and 1996.

1998 1997 1996
---- ---- ----
Enterprise Computer.................. 44% 39% 25%
Telecommunications................... 31 21 26
Medical Device....................... 11 17 18
Industrial Control................... 9 12 16
Testing and Instrumentation.......... 5 11 15

SUPPLIERS

We maintain a network of suppliers of components and other materials used
in assembling printed circuit boards. We procure components when a purchase
order or forecast is received from a customer and occasionally utilize
components or other materials for which a supplier is the single source of
supply. Although we experience component shortages and longer lead times of
various components from time to time, we have generally been able to reduce the
impact of the component shortages. We reduce 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, but do not eliminate, our inventory
risk. In addition, by developing long-term relationships with suppliers, we have
been better able to minimize the effects of component shortages than
manufacturers without such relationships. Because of the continued increase in
demand for surface mount components, we anticipate shortages and longer lead
times for certain components to occur from time to time.

COMPETITION

The electronics manufacturing services we provide is available from many
independent sources as well as in-house manufacturing capabilities of current
and potential customers. Our competitors include Celestica, Inc., Flextronics
International Ltd., Jabil Circuit, Inc., SCI Systems, Inc. and Solectron
Corporation, who may be more established in the industry and may have
substantially greater financial, manufacturing or marketing resources than we
do. We believe that the principal competitive factors in our 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.

23
<PAGE>
GOVERNMENTAL REGULATION

Our operations, and the operations of businesses that we acquire, are
subject to certain federal, state and local regulatory requirements relating to
environmental, waste management, and health and safety matters. 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 our business, as with many similar businesses,
we believe that our 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 us.

We periodically generate and temporarily handle limited amounts of
materials that are considered hazardous waste under applicable law. We contract
for the off-site disposal of these materials and have implemented a waste
management program to address related regulatory issues.

EMPLOYEES

As of March 31, 1999, we had 2,552 employees, of whom 1,902 were engaged in
manufacturing and operations, 374 in materials control and procurement, 82 in
design and development, 43 in marketing and sales, and 151 in administration.
None of our employees is subject to a collective bargaining agreement.
Management believes that our relationship with our employees is satisfactory.

EXPORT SALES

In 1998, we had export sales of approximately $87 million to Europe, $2
million to Canada, $92,000 to Asia, and $8,000 to Australia from our United
States operations. In 1997 and 1996, we had export sales of approximately $86
million and $29 million, respectively, to Europe from our United States
operations.

PROPERTIES

Our executive offices and one of our manufacturing facilities are located
in an approximately 109,000 square foot facility on 18.9 acres of land we own in
Angleton, Texas, where we have six surface mount manufacturing lines. We lease
an approximately 52,000 square foot facility in Beaverton, Oregon, where we have
four surface mount production lines. This lease expires in June 2002. Our
facilities in Winona, Minnesota consist of five leased buildings with total
square footage of approximately 137,000 and a 64,000 square foot building that
we own. For the primary leased facilities in Winona, we have leases through July
2006, each with purchase options that expire in June 1999. We are currently
evaluating whether we will exercise these purchase options. The Winona
facilities include manufacturing facilities with 15 surface mount production
lines and warehouse facilities. We lease our approximately 200,000 square foot
facility in Hudson, New Hampshire, which contains 14 surface mount production
lines. The Hudson lease expires in June 2000, with an option to extend the lease
for an additional four years. Our Dublin, Ireland facilities with a total of
approximately 74,000 square feet, where we will consolidate the assets purchased
in March 1999 from Stratus Computer, are leased for various periods through
September 2003. Our Angleton, Beaverton and Hudson facilities are certified
under ISO-9002, and the Winona facilities are certified under ISO-9001. We
believe that our properties are and will be sufficient to conduct our operations
for the foreseeable future.

<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to our
current directors and executive officers.

NAME AGE POSITION
---- --- --------
John C. Custer........ 68 Director and Chairman of the Board
Donald E. Nigbor...... 51 President of Benchmark; Director
Steven A. Barton...... 50 Executive Vice President of Benchmark; Director
Cary T. Fu............ 50 Executive Vice President of Benchmark; Director
Peter G. Dorflinger... 48 Director
Gerald W. Bodzy....... 47 Director
David H. Arnold....... 61 Director

JOHN C. CUSTER has been Chairman of the Board of Directors of Benchmark
since 1988 and a member of the Compensation Committee of the Board of Directors
since 1990. Mr. Custer was employed by Mason & Hanger, a technical services
contracting and engineering firm, from 1951 until his retirement in February
1996. Mr. Custer became a member of the board of directors of Mason & Hanger in
1983, serving as Chairman of the Board of Mason & Hanger from 1994 until his
retirement, and served in various other management and operations positions
prior to 1994. Mason & Hanger is the selling shareholder in this offering.

DONALD E. NIGBOR has been a director and President of Benchmark since 1986
and was our General Manager from 1984 to 1990. Before joining us, he was
employed by Intermedics, Inc., a medical implant manufacturer, serving as a
Manufacturing Analyst for its Pacemaker division from 1980 to 1984. 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.

STEVEN A. BARTON has been a director and Executive Vice President of
Benchmark since 1990. He served as Executive Vice President -- Marketing and
Sales of Benchmark from 1990 to April 1992. Since June 1, 1993 he has worked
part-time for us for personal reasons. He also has served Benchmark as Executive
Vice President from 1988 to 1990, a director and Vice President from 1986 to
1988, and President from 1979 to 1983. From 1977 to 1986, Mr. Barton was
employed by Intermedics in various management positions. 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.

CARY T. FU has been a director and Executive Vice President of Benchmark
since 1990. He served as Executive Vice President -- Financial Administration of
Benchmark from 1990 to April 1992. He also has served Benchmark as Treasurer
from 1986 to January 1996, Secretary from 1990 to January 1996, a director and
Secretary from 1986 to 1988 and Assistant Secretary from 1988 to 1990. From 1983
to 1986, Mr. Fu was employed by Intermedics as Controller of Benchmark and
another subsidiary. Mr. Fu holds an M.S. degree in accounting from the
University of Houston and is a certified public accountant.

PETER G. DORFLINGER has been a director of Benchmark and a member of the
Audit Committee and Compensation Committee of the Board of Directors since 1990.
He is currently President and Chief Operating Officer of GlasTech, Inc., a
dental products manufacturer, a position he has held since November 1998. From
January 1998 through October 1998, he served as President and Chief Operating
Officer of Physicians Resource Group, Inc., a physicians practice management
company. From January 1997 through January 1998, he served as Vice President and
General Counsel of Advanced Medical Instruments, Inc., a manufacturer of medical
monitoring equipment. From March 1987 through October 1996, he served as Vice
President, General Counsel and Secretary of Intermedics. From June 1990 through
October 1996, he served as Group Vice President and General Counsel of
SULZERmedica, a division of Sulzer Limited of Switzerland, composed of eight
operating

25
<PAGE>
medical device companies in Europe and the United States. 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.

GERALD W. BODZY has been a director of Benchmark 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. From 1979 to 1990, Mr. Bodzy was employed by Smith Barney Inc., as an
investment banker, serving as Managing Director from 1986 to 1990.

DAVID H. ARNOLD became a director of Benchmark in 1996 pursuant to the
terms of the agreement relating to our acquisition of EMD in July 1996. Mr.
Arnold has been a member of the Audit Committee since 1997. Mr. Arnold was a
co-founder of EMD and served as a director and officer of EMD from 1974 until we
acquired it. Mr. Arnold is currently President and Chairman of the Board of DCM
Tech, Inc., a privately-held manufacturer of machine tools. 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.

The agreement relating to our acquisition of EMD requires us to include
either Mr. Arnold or Mr. Daniel M. Rukavina (the other EMD co-founder), or an
acceptable person designated by them, on our recommended slate of nominees for
election to our Board of Directors for so long as Mr. Arnold and Mr. Rukavina
own beneficially in the aggregate at least 10% of the outstanding shares of our
common stock.

COMMON STOCK OWNERSHIP OF MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership, as defined in Rule 13d-3 of the Securities Exchange Act of
1934, as amended, of our common stock as of April 30, 1999, by each of our
executive officers.

PERCENTAGE OF
OUTSTANDING
SHARES OF
COMMON
COMMON STOCK STOCK
BENEFICIALLY AFTER
BENEFICIAL OWNERS OWNED(1) OFFERING
- ------------------------------------- ------------- -------------
Donald E. Nigbor..................... 321,632(2) 2.2%
Steven A. Barton..................... 31,170(3) (4)
Cary T. Fu........................... 342,010(5) 2.3%
- ------------
(1) Unless otherwise noted, each person identified possesses sole voting and
dispositive power with respect to the shares of common stock listed,
subject to community property laws.

(2) Includes (i) 3,200 shares of common stock held by Mr. Nigbor's children as
to which shares of common stock Mr. Nigbor expressly disclaims beneficial
ownership, and (ii) 160,000 shares of common stock that may be acquired
upon the exercise of options that are currently exercisable.

(3) Includes 28,400 shares of common stock that may be acquired upon the
exercise of options that are currently exercisable.

(4) Less than 1%.

(5) Includes (i) 2,640 shares of common stock held by certain family members of
Mr. Fu as custodian for his children under the Uniform Gifts to Minors Act,
as to which shares of common stock Mr. Fu expressly disclaims beneficial
ownership, (ii) 1,320 shares of common stock held by a certain family
member of Mr. Fu, as to which shares of common stock Mr. Fu expressly
disclaims beneficial ownership, and (iii) 160,000 shares of common stock
that may be acquired upon the exercise of options that are currently
exercisable.

26
<PAGE>
SELLING SHAREHOLDER

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE STOCK OFFERING AFTER STOCK OFFERING
---------------------- SHARES TO ---------------------
SELLING SHAREHOLDER SHARES PERCENTAGE BE SOLD SHARES PERCENTAGE
- ------------------------------------- --------- ---------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Mason & Hanger....................... 1,000,656 8.6% 1,000,656 -0- -0-
</TABLE>

DESCRIPTION OF CAPITAL STOCK

The following description of the material features of our capital stock is
intended as a summary only and is qualified in its entirety by reference to our
amended and restated articles of incorporation, a copy of which has been filed
as an exhibit to our report on Form 10-K for the year ended December 31, 1998,
which is incorporated herein by reference. See "Risk Factors -- Provisions in
our charter documents and state law may make it harder for others to obtain
control of Benchmark even though some shareholders might consider such a
development to be favorable."

COMMON STOCK

Our amended and restated articles of incorporation authorize us to issue
30,000,000 shares of common stock. There are currently outstanding 11,669,783
shares of common stock. Upon the issuance and sale of 3,000,000 shares of common
stock in this offering, we will have outstanding 14,669,783 shares of common
stock. In addition, we have issued options to purchase 2,291,245 shares of
common stock, of which options to purchase 656,805 shares are currently
exercisable.

Each share of common stock has an equal and ratable right to receive
dividends to be paid from our assets legally available therefor when, as and if
declared by the Board of Directors. We have never paid, and do not anticipate
that we will pay in the foreseeable future, cash dividends on the common stock.
In addition, the agreement relating to our credit facility and the purchase
agreement relating to our Senior Note currently restricts the amount of cash
dividends that we may pay on 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 Benchmark. 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 our shareholders. The holders of common stock have no
right to cumulate their votes in the election of directors. In the event of our
dissolution or liquidation, the holders of common stock will be entitled to
share equally and ratably in our assets available for distribution after
payments are made to our 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 New York Stock Exchange under the symbol
"BHE." The transfer agent and registrar for the common stock is Harris Trust
and Savings Bank, 88 Pine Street, New York, New York 10005.

PREFERRED STOCK

Our amended and restated articles of incorporation authorize us to issue
5,000,000 shares of preferred stock, par value $0.10 per share. We have
established and designated a series of our preferred stock known as Series A
Cumulative Junior Participating Preferred Stock, par value $0.10 per share,
consisting of an aggregate of 30,000 shares. None of this preferred series has
been issued.

In addition, the Board of Directors has the authority, without shareholder
approval, to cause the issuance of other preferred stock in one or more series,
with such designations, preferences, limitations and rights as the Board of
Directors may determine. We have not issued, and have no plans to issue, any
shares of preferred stock. If we were to do so, however, the provisions of the
preferred stock may include, among others, extraordinary voting, dividend,
redemption, conversion or exchange rights.

27
<PAGE>
SHAREHOLDER RIGHTS PLAN

On December 11, 1998, the Board of Directors adopted a shareholder rights
plan. Under this plan, a dividend of one preferred share purchase right (Right)
was declared for each outstanding share of common stock, payable December 21,
1998 to shareholders of record on that date. Each Right entitles shareholders to
buy one one-thousandth of a share of newly created Series A Cumulative Junior
Participating Preferred Stock at an exercise price of $155, subject to
adjustment in the event a person acquires, or makes a tender or exchange offer
for, 15% or more of the outstanding common stock. In such event, each Right
entitles the holder (other than the person acquiring 15% or more of the
outstanding common stock) to purchase shares of common stock with a market value
of twice the Right's exercise price. In addition, if a company acquires us in a
merger or other business combination, or if we sell more than 50% of our
consolidated assets or earning power, these rights will entitle our shareholders
(other than the acquiror) to purchase, for the exercise price, shares of the
common stock of the acquiring company or its parent having a market value of two
times the exercise price. At any time prior to such event, the Board of
Directors may redeem the Rights at one cent per Right. The Rights can be
transferred only with common stock and expire in ten years. The existence of the
Rights may, under certain circumstances, render more difficult or discourage
attempts to acquire us.

STATUTORY BUSINESS COMBINATION PROVISIONS

Our company is subject to Article 13 of the Texas Business Corporation Act
(Article 13) which, with certain exceptions, prohibits a Texas corporation from
engaging in a "business combination" (as defined in Article 13) with any
shareholder who is a beneficial owner of 20% or more of the corporation's
outstanding stock for a period of three years after such shareholder acquires
the 20% ownership position, unless: (1) the board of directors of the
corporation approves the transaction or the shareholder's acquisition of shares
prior to the acquisition or (2) two-thirds of the unaffiliated shareholders of
the corporation approve the transaction at a shareholders' meeting. Shares that
are issuable, but have not yet been issued, pursuant to options, conversion or
exchange rights or other agreements are not considered outstanding for purposes
of Article 13.

28
<PAGE>
UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we and the selling shareholder have agreed to sell to such
underwriter, the number of shares set forth opposite the name of such
underwriter.

NAME NUMBER OF SHARES
- ---------------------------------------- ----------------
Salomon Smith Barney Inc................
BancBoston Robertson Stephens Inc.......
Donaldson, Lufkin & Jenrette Securities
Corporation......................
SG Cowen Securities Corporation.........

----------------
Total.................... 4,000,656
----------------

The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.

The underwriters, for whom Salomon Smith Barney Inc., BancBoston Robertson
Stephens Inc., Donaldson, Lufkin & Jenrette Securities Corporation and SG Cowen
Securities Corporation are acting as representatives, propose to offer some of
the shares directly to the public at the public offering price set forth on the
cover page of this prospectus and some of the shares to certain dealers at the
public offering price less a concession not in excess of $ per share. The
underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share on sales to certain other dealers. If all of the shares are
not sold at the initial offering price, the representatives may change the
public offering price and the other selling terms.

Benchmark granted to the underwriters an option, exercisable for 30 days
from the date of this prospectus, to purchase up to 600,098 additional shares of
common stock at the public offering price less the underwriting discount. The
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent such
option is exercised, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares approximately
proportionate to such underwriter's initial purchase commitment.

We, our officers and our directors have agreed that, for a period of 90
days from the date of this prospectus, we will not, without the prior written
consent of Salomon Smith Barney Inc., dispose of or hedge any shares of our
common stock or any securities convertible into or exchangeable for our common
stock. Salomon Smith Barney Inc. in its sole discretion may release any of the
securities subject to these lock-up agreements at any time without notice.

The common stock is listed on the New York Stock Exchange under the symbol
"BHE."

29
<PAGE>
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by Benchmark and the selling shareholder in connection
with this offering. These amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase additional shares of common
stock.

<TABLE>
<CAPTION>
PAID BY BENCHMARK PAID BY SELLING SHAREHOLDER
---------------------------- ----------------------------
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Per share............................... $ $ $ $
Total................................... $ $ $ $
</TABLE>

In connection with the offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may purchase and sell shares of common stock in the open
market. These transactions may include over-allotment, syndicate covering
transactions and stabilizing transactions. Over-allotment involves syndicate
sales of common stock in excess of the number of shares to be purchased by the
underwriters in the offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of common stock made for the purpose of preventing or retarding a
decline in the market price of the common stock while the offering is in
progress.

The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.

Any of these activities may cause the price of the common stock to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on the New York
Stock Exchange on in the over-the-counter market, or otherwise and, if
commenced, may be discontinued at any time.

The underwriters or their affiliates have performed certain investment
banking and advisory services for Benchmark from time to time for which they
have received customary fees and expenses. The underwriters or their affiliates
may, from time to time, engage in transactions with and perform services for
Benchmark in the ordinary course of their business. Some of the underwriters may
be lenders under our credit facility that is being repaid with certain of the
proceeds of the offering.

We and the selling shareholder estimate that our respective portions of the
total expenses of this offering (excluding underwriting discounts and
commissions) will be $400,000 and $7,500.

We and the selling shareholder have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments the underwriters may be required to make in
respect of any of those liabilities.

LEGAL MATTERS

Certain legal matters including the validity of the shares of common stock
offered hereby are being passed upon for us by Bracewell & Patterson, L.L.P.,
Houston, Texas. Certain legal matters in connection with the offering are being
passed upon for the underwriters by Cravath, Swaine & Moore, New York, New York.
Certain legal matters in connection with the offering are being passed upon for
the selling shareholder by Wyatt Tarrant & Combs, Louisville, Kentucky.

EXPERTS

The consolidated financial statements of Benchmark Electronics, Inc. and
subsidiaries as of December 31, 1998 and 1997 and for each of the years in the
three-year period ended December 31, 1998, have been included and incorporated
by reference herein in reliance on the report of KPMG LLP, independent certified
public accountants, appearing elsewhere herein and incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.

<PAGE>
INDEX TO FINANCIAL STATEMENTS

PAGE
-----
Audited Annual Financial Statements:
Independent Auditors' Report.... F-2
Consolidated Balance Sheets as
of December 31, 1998 and
1997........................... F-3
Consolidated Statements of
Income for the Years Ended
December 31, 1998, 1997 and
1996........................... F-4
Consolidated Statements of
Shareholders' Equity for the
Years Ended
December 31, 1998, 1997 and
1996........................... F-5
Consolidated Statements of Cash
Flows for the Years Ended
December 31, 1998, 1997 and
1996........................... F-6
Notes to Consolidated Financial
Statements..................... F-7
Unaudited Interim Financial
Statements:
Condensed Consolidated Balance
Sheet as of March 31, 1999..... F-18
Condensed Consolidated
Statements of Income for the
Three Months Ended
March 31, 1999 and 1998....... F-19
Condensed Consolidated
Statements of Cash Flows for
the Three Months Ended
March 31, 1999 and 1998....... F-20
Notes to Condensed Consolidated
Financial Statements........... F-21

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Benchmark Electronics, Inc.:

We have audited the accompanying consolidated balance sheets of Benchmark
Electronics, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Benchmark
Electronics, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.

KPMG LLP

Houston, Texas
January 22, 1999

F-2
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
--------------------------------
1998 L997
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents....... $ 23,076,582 $ 21,029,347
Accounts receivable, net........ 57,178,757 39,772,435
Income taxes receivable......... 1,120,343 313,594
Inventories..................... 53,718,247 61,133,963
Prepaid expenses and other
assets........................ 1,896,888 1,545,110
Deferred tax asset.............. 2,488,328 1,359,205
--------------- ---------------
Total current assets....... 139,479,145 125,153,654
Property, plant and equipment........ 80,826,164 54,061,241
Accumulated depreciation............. (35,264,179) (23,245,264)
--------------- ---------------
Net property, plant and
equipment............... 45,561,985 30,815,977
Goodwill, net........................ 48,906,481 22,680,551
Marketable securities................ -- 11,430,757
Other................................ 7,948,086 240,859
--------------- ---------------
$ 241,895,697 $ 190,321,798
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt................ $ 8,199,910 $ 155,505
Accounts payable................ 37,046,161 31,694,123
Accrued liabilities............. 7,968,412 5,424,939
--------------- ---------------
Total current
liabilities............. 53,214,483 37,274,567
--------------- ---------------
Long-term debt, excluding current
installments....................... 46,110,646 30,329,828
Deferred tax liability............... 4,569,654 1,845,846
Shareholders' equity:
Preferred shares, $.10 par
value; 5,000,000 shares
authorized,
none issued................... -- --
Common shares, $.10 par value;
30,000,000 shares authorized:
issued 11,676,967 and
11,623,252, respectively;
outstanding 11,627,483 and
11,573,768, respectively...... 1,162,748 1,157,376
Additional paid-in capital...... 70,159,115 69,407,600
Retained earnings............... 66,800,001 50,427,531
Less treasury shares, at cost,
49,484 shares................. (120,950) (120,950)
--------------- ---------------
Total shareholders'
equity.................. 138,000,914 120,871,557
Commitments and contingencies...
--------------- ---------------
$ 241,895,697 $ 190,321,798
=============== ===============

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Sales................................ $ 524,065,077 $ 325,229,015 $ 201,296,320
Cost of sales........................ 472,354,251 285,630,163 177,981,328
--------------- --------------- ---------------
Gross profit............... 51,710,826 39,598,852 23,314,992
Selling, general and administrative
expenses........................... 17,680,338 12,817,317 7,227,833
Amortization of goodwill............. 3,310,661 1,669,740 695,722
--------------- --------------- ---------------
Income from operations..... 30,719,827 25,111,795 15,391,437
Interest expense..................... (4,393,528) (2,472,183) (1,441,834)
Interest income...................... 479,075 1,162,958 442,384
Other income......................... 84,663 149,276 90,880
--------------- --------------- ---------------
Income before income
taxes................... 26,890,037 23,951,846 14,482,867
Income tax expense................... 10,517,567 8,862,183 5,619,352
--------------- --------------- ---------------
Net income................. $ 16,372,470 $ 15,089,663 $ 8,863,515
=============== =============== ===============
Earnings per share:
Basic........................... $ 1.41 $ 1.31 $ 0.99
Diluted......................... $ 1.35 $ 1.26 $ 0.96
=============== =============== ===============
Weighted average number of shares
outstanding:
Basic........................... 11,594,271 11,508,407 8,976,192
Diluted......................... 12,098,349 12,003,741 9,217,801
=============== =============== ===============
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES SHARES CAPITAL EARNINGS SHARES EQUITY
----------- ----------- ------------ ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995.......... 8,042,800 $ 804,280 $ 19,466,385 $ 26,474,353 $ (120,950) $ 46,624,068
Common shares issued in public
offering, net of expenses.......... 2,033,000 203,300 28,287,841 -- -- 28,491,141
Stock options exercised.............. 51,340 5,134 402,310 -- -- 407,444
Federal tax benefit of stock options
exercised.......................... -- -- 88,536 -- -- 88,536
Acquisition of EMD Technologies,
Inc................................ 1,349,928 134,992 20,375,814 -- -- 20,510,806
Net income........................... -- -- -- 8,863,515 -- 8,863,515
Effect of difference between fair
value and cost of shares released
from collateral.................... -- -- 13,904 -- -- 13,904
----------- ----------- ------------ ------------ ---------- --------------
Balances, December 31, 1996.......... 11,477,068 1,147,706 68,634,790 35,337,868 (120,950) 104,999,414
Stock options exercised.............. 96,700 9,670 669,927 -- -- 679,597
Federal tax benefit of stock options
exercised.......................... -- -- 154,820 -- -- 154,820
Net income........................... -- -- -- 15,089,663 -- 15,089,663
Other................................ -- -- (51,937) -- -- (51,937)
----------- ----------- ------------ ------------ ---------- --------------
Balances, December 31, 1997.......... 11,573,768 1,157,376 69,407,600 50,427,531 (120,950) 120,871,557
Stock options exercised.............. 53,715 5,372 487,870 -- -- 493,242
Federal tax benefit of stock options
exercised.......................... -- -- 263,645 -- -- 263,645
Net income........................... -- -- -- 16,372,470 -- 16,372,470
----------- ----------- ------------ ------------ ---------- --------------
Balances, December 31, 1998.......... 11,627,483 $ 1,162,748 $ 70,159,115 $ 66,800,001 $ (120,950) $138,000,914
=========== =========== ============ ============ ========== ==============
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................... $ 16,372,470 $ 15,089,663 $ 8,863,515
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization............... 13,306,975 10,150,586 5,723,922
Amortization of premiums on
marketable securities...... 46,026 342,193 25,940
Deferred income taxes......... 2,305,482 (314,801) 408,346
Federal tax benefit of stock
options exercised.......... 263,645 154,820 88,536
Amortization of goodwill...... 3,310,661 1,669,740 695,722
Gain on the sale of property,
plant and equipment........ (3,696) (86,973) (42,878)
ESOP shares contribution...... -- -- 13,904
Changes in operating assets
and liabilities, net of
effects from acquisitions
of businesses:
Accounts receivable........ 7,403,982 (589,806) (10,119,586)
Income taxes receivable.... (806,749) 74,270 994,179
Inventories................ 30,930,316 (13,033,625) 3,131,340
Prepaid expenses and other
assets.................. (353,729) (729,367) (124,259)
Accounts payable........... (15,369,675) 7,341,651 1,782,239
Accrued liabilities........ (552,417) (779,596) 895,208
---------------- ---------------- ----------------
Net cash provided by
operations............ 56,853,291 19,288,755 12,336,128
Cash flows from investing activities:
Additions to property, plant and
equipment..................... (12,204,071) (10,352,112) (8,684,400)
Additions to capitalized
software...................... (7,383,410) -- --
Proceeds from the sale of
property, plant and
equipment..................... 182,810 168,912 75,281
Acquisitions, net of cash
acquired...................... (70,679,312) -- (30,833,300)
Proceeds from the sale of
marketable securities......... 11,384,731 -- --
Purchase of marketable
securities.................... -- (2,264,716) (9,534,174)
---------------- ---------------- ----------------
Net cash used in
investing
activities............ (78,699,252) (12,447,916) (48,976,593)
Cash flows from financing activities:
Net proceeds from public
offering of common shares..... -- (51,937) 28,491,141
Proceeds from issuance of
long-term debt................ 40,000,000 -- 30,000,000
Principal payments on long-term
debt.......................... (16,174,777) (239,165) (10,928,329)
Debt issuance costs............. (425,269) -- (315,114)
Proceeds from stock options
exercised..................... 493,242 679,597 407,444
---------------- ---------------- ----------------
Net cash provided by
financing activities.. 23,893,196 388,495 47,655,142
---------------- ---------------- ----------------
Net increase in cash and cash
equivalents........................ 2,047,235 7,229,334 11,014,677
---------------- ---------------- ----------------
Cash and cash equivalents at
beginning of year.................. 21,029,347 13,800,013 2,785,336
---------------- ---------------- ----------------
Cash and cash equivalents at end of
year............................... $ 23,076,582 $ 21,029,347 $ 13,800,013
================ ================ ================
Supplemental disclosures of cash flow
information:
Income taxes paid............... $ 8,755,264 $ 8,491,894 $ 4,171,224
================ ================ ================
Interest paid................... $ 4,264,706 $ 2,537,089 $ 369,021
================ ================ ================
</TABLE>

See accompanying notes to consolidated financial statements.

F-6

<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) BUSINESS

Benchmark Electronics, Inc. (the Company) is a Texas corporation which
provides contract manufacturing and design services to original equipment
manufacturers (OEMs) in select industries, including enterprise computer,
telecommunications, medical device, industrial control, and testing and
instrumentation.

(B) PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of
Benchmark Electronics, Inc. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.

(D) MARKETABLE SECURITIES

Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determination at each balance sheet date. Debt securities for which the Company
does not have the intent or ability to hold to maturity are classified as
available for sale. Securities available for sale are carried at fair value,
with the unrealized gains and losses, net of tax, reported in shareholders'
equity as other comprehensive income. Held-to-maturity securities are recorded
at amortized cost, adjusted for the amortization or accretion of premiums or
discounts to maturity.

Such amortization and interest are included in interest income. Realized
gains and losses from the sale of available for sale securities are included in
other income or expense and are determined on a specific identification method.

At December 31, 1997, the Company's investments in marketable securities
consisted of Texas state guaranteed obligation bonds with an amortized cost of
$4,831,833, fair value of $4,851,000 and unrealized gain of $19,167; Lynnwood,
Washington guaranteed obligation bonds with an amortized cost of $4,359,096,
fair value of $4,362,000 and unrealized gain of $2,904; Austin, Texas guaranteed
obligation bonds with an amortized cost of $1,213,257, fair value of $1,212,000,
and unrealized loss of $1,257; and Maryland state guaranteed obligation bonds
with an amortized cost of $1,026,571, fair value of $1,032,000, and unrealized
gain of $5,429. These investments were sold during 1998 in connection with the
purchase of Lockheed Commercial Electronics Company (LCEC).

(E) INVENTORIES

Inventories include material, labor and overhead and are stated at the
lower of cost (first-in, first-out) or market.

(F) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation is
calculated on the straight-line method over the useful lives of the assets,
which range from three to thirty years. Leasehold improvements are amortized on
the straight-line method over the shorter of the useful life of the improvement
or the remainder of the lease term.

F-7
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In assessing and measuring impairment of long-lived assets, the Company
applies the provisions of Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.

(G) GOODWILL AND OTHER ASSETS

Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the period of
expected benefit of 15 years. The accumulated amortization of goodwill at
December 31, 1998 and 1997 was $5,676,123 and $2,365,462, respectively. The
carrying value of goodwill will be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the acquired
assets may not be recoverable. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted future operating
cash flows of the acquired operation. The amount of goodwill impairment, if any,
is measured based on projected discounted future operating cash flows compared
to the carrying value of goodwill. Other assets consists of capitalized software
costs, which are amortized over the estimated useful life of the related
software and deferred financing costs, which are amortized over the life of the
related debt. During 1998, $7,383,410 of software costs was capitalized in
connection with the new ERP system implementation. The accumulated amortization
of deferred financing costs at December 31, 1998 and 1997 was $207,311 and
$85,521, respectively.

(H) EARNINGS PER SHARE

Basic earnings per share is computed using the weighted average number of
shares outstanding. Diluted earnings per share is computed using the weighted
average number of shares outstanding adjusted for the incremental shares
attributed to outstanding stock options to purchase common stock. Incremental
shares of 504,078, 495,334, and 241,609 in 1998, 1997 and 1996, respectively,
were used in the calculation of diluted earnings per share. Options to purchase
3,000 and 124,000 shares of common stock in 1998 and 1997, respectively, were
not included in the computation of diluted earnings per share because the option
exercise price was greater than the average market price of the common stock.

(I) REVENUE RECOGNITION

Revenues are recognized at the time the circuit boards are shipped to the
customer, for both turnkey and consignment method sales. Under the consignment
method, OEMs provide the Company with the electronic components to be assembled,
and the Company recognizes revenue only on the labor used to assemble the
product.

(J) INCOME TAXES

Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred taxes of a change in tax rates
is recognized in income in the period that includes the enactment date.

F-8
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(K) STOCK OPTION PLANS

On January 1, 1996, the Company adopted the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation", which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant. Alternately, SFAS No. 123 also allows entities to continue to
apply the provisions of Accounting Principles Board (APB) Opinion No. 25
"Accounting for Stock Issued to Employees", and provide pro forma net income
and pro forma earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123. Under APB Opinion No. 25, compensation expense is recorded on
the date of grant only if the current market price of the underlying stock
exceeds the exercise price.

(L) USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
accordance with generally accepted accounting principles. Actual results could
differ from those estimates.

(M) FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair values of the Company's cash equivalents, accounts receivable,
accrued liabilities, and accounts payable approximated their carrying values due
to the short-term maturities of these instruments. The estimated fair value of
long-term debt approximates its carrying value based on the Company's current
incremental borrowing rates for similar types of borrowing agreements.

(N) COMPREHENSIVE INCOME

On January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for reporting and
presentation of comprehensive income and its components in a full set of
financial statements. The Company currently does not have any items that require
additional presentation of other comprehensive income. Accordingly, adoption of
SFAS No. 130 did not affect the Company's consolidated financial statements.

(O) BUSINESS SEGMENTS

On January 1, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company currently
operates in a single business segment. Accordingly, adoption of SFAS No. 131 did
not affect the Company's consolidated financial statements.

(P) CAPITALIZED SOFTWARE COSTS

On January 1, 1998, the Company adopted the American Institute of Certified
Public Accountants (AICPA) Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" on a
prospective basis. SOP 98-1 establishes criteria for capitalizing certain costs
related to internal-use software. The adoption of SOP 98-1 did not have a
material impact on the Company's financial position, results of operations or
liquidity.

(Q) RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other

F-9
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

hedging activities. The Company expects that the adoption of SFAS No. 133 will
have no material impact on its financial position, results of operations or
liquidity.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 requires that all start-up costs related to new
operations must be expensed as incurred. In addition, all start-up costs that
were capitalized in the past must be expensed when SOP 98-5 is adopted. The
Company expects that the adoption of SOP 98-5 will have no material impact on
its financial position, results of operations or cash flows. The Company will be
required to implement SOP 98-5 in 1999.

NOTE 2 -- ACQUISITIONS

On February 23, 1998, the Company completed the acquisition of LCEC for
$70,679,312 in cash. LCEC, situated in Hudson, New Hampshire, provides a broad
range of services including printed circuit board assembly and test, system
assembly and test, prototyping, depot repair, materials procurement, and
engineering support services. The transaction was accounted for under the
purchase method of accounting, and accordingly, the results of operations of
LCEC since February 23, 1998 have been included in the consolidated statements
of income. The acquisition resulted in goodwill of $29,536,591 that is being
amortized on a straight-line basis over 15 years.

The net purchase price was allocated as follows:

Working capital, other than cash..... $ 30,574,621
Property, plant and equipment........ 15,904,987
Goodwill............................. 29,536,591
Other liabilities.................... (3,095,890)
Deferred income taxes................ (2,240,997)
--------------
Purchase price, net of cash
received................... $ 70,679,312
==============

The following unaudited summary pro forma condensed financial information
reflects the acquisition of LCEC as if the acquisition had occurred on January
1, 1997 for purposes of the consolidated statements of income. The summary pro
forma information is not necessarily representative of what the Company's
results of operations would have been had the acquisition in fact occurred on
January 1, 1997 and is not intended to project the Company's results of
operations for any future period or date.

1998 1997
---------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Net sales............................ $ 548,335 607,439
Gross Profit......................... 50,091 52,069
Income from operations............... 27,004 25,615
Net income........................... 13,796 12,453
Earnings per share:
Basic........................... $1.19 1.08
Diluted......................... $1.14 1.04
Weighted average number of shares
outstanding:
Basic........................... 11,594 11,508
Diluted......................... 12,098 12,003

On July 30, 1996, the Company completed its acquisition of EMD
Technologies, Inc. (EMD). This business, headquartered in Winona, Minnesota, was
acquired for 1,349,928 shares of common

F-10
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stock, $30,447,033 in cash, and the Company paid $2,208,136 in acquisition
costs. The transaction was accounted for under the purchase method of
accounting, and accordingly, the results of operations of EMD since July 30,
1996 have been included in the consolidated statements of income. The
acquisition resulted in goodwill of $25,046,013, which is being amortized on a
straight line basis over 15 years.

The net purchase price was allocated as follows:

Working capital, other than cash..... $ 10,638,671
Property, plant and equipment........ 17,598,785
Other assets......................... 12,379
Goodwill............................. 25,046,013
Other liabilities.................... (1,951,742)
--------------
Purchase price, net of cash
received...................... $ 51,344,106
==============
Net cash portion of purchase price... $ 30,833,300
Common stock issued.................. 20,510,806
--------------
Purchase price, net of cash
received........................... $ 51,344,106
==============

NOTE 3 -- INVENTORIES

Inventory costs are summarized as follows:

DECEMBER 31,
----------------------------
1998 1997
-------------- ------------
Raw materials........................ $ 39,230,450 41,837,205
Work in process...................... 14,487,797 19,296,758
-------------- ------------
$ 53,718,247 61,133,963
============== ============

NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

DECEMBER 31,
----------------------------
1998 1997
-------------- ------------
Land................................. $ 391,969 391,969
Buildings............................ 8,441,221 8,417,497
Machinery and equipment.............. 64,189,215 38,025,436
Furniture and fixtures............... 6,856,395 6,480,183
Vehicles............................. 14,383 14,383
Leasehold improvements............... 750,111 731,773
Construction in progress............. 182,870 --
-------------- ------------
$ 80,826,164 54,061,241
============== ============

F-11
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5 -- BORROWING FACILITIES

Long-term debt consists of the following:

DECEMBER 31,
----------------------------
1998 1997
-------------- ------------
Senior note.......................... $ 30,000,000 30,000,000
Term loan............................ 24,000,000 --
Other................................ 310,556 485,333
-------------- ------------
Total long-term debt............ 54,310,556 30,485,333
Less current installments............ 8,199,910 155,505
-------------- ------------
Long-term debt....................... $ 46,110,646 30,329,828
============== ============

In order to finance a portion of the cash consideration for the acquisition
of EMD, the Company issued a $30 million, 8.02% Senior Note due 2006 ("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 on the unpaid principal amount
due July 31, 2006. Interest on the Senior Note is payable semi-annually on
January 31st and July 31st.

The purchase agreement relating to the Senior Note (the "Purchase
Agreement") includes customary affirmative and negative covenants and restricts
the ability of the Company to incur additional debt and to pay dividends. 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 of 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.

In connection with the acquisition of LCEC on February 23, 1998, the
Company obtained $40 million through borrowings under a five-year term loan (the
Term Loan) with a commercial bank. Principal on the Term Loan is payable in
quarterly installments of $2.0 million beginning June 30, 1998 with a final
installment of the unpaid principal amount due March 31, 2003. The Term Loan
bears interest, at the Company's option, at either the bank's Eurodollar rate
plus .625% to 1.375% or its prime rate, and interest is payable quarterly. The
margin on the Eurodollar rate fluctuates with the Company's ratio of debt to
earnings before interest, taxes, depreciation and amortization (EBITDA). The
Term Loan includes customary affirmative and negative covenants and restricts
the Company's ability to incur additional indebtedness and to pay dividends. As
of December 31, 1998, the Company had $24 million outstanding under the Term
Loan bearing interest at rates ranging from 5.8125% to 6.0625%.

The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1998 are as follows: 1999, $8,199,910; 2000,
$8,019,693; 2001, $13,020,699; 2002, $5,021,756; 2003, $5,022,867 and thereafter
$15,025,631.

The Company has a $25 million revolving line of credit with a commercial
bank. The Company is entitled to borrow under the line of credit up to the
lesser of $25 million or the sum of 75% of its eligible accounts receivable and
25% of its eligible inventories. Interest on the line of credit is payable
quarterly, at the Company's option, at either the bank's Eurodollar rate plus
.625% to 1.375% or its prime rate. A commitment fee of 0.25% per annum on the
unused portion of the line of credit is payable quarterly in arrears. The line
of credit agreement contains certain financial covenants and

F-12
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

restricts the ability of the Company to incur additional debt without the
consent of the bank and to pay dividends. The line of credit matures on March
31, 2003. As of December 31, 1998 and 1997, the Company had no borrowings
outstanding under this line of credit.

NOTE 6 -- COMMITMENTS

The Company has several noncancelable operating leases for office space,
manufacturing facilities and manufacturing equipment that expire through 2006.
Rental expense for each of the years in the three-year period ended December 31,
1998 was $2,493,146, $1,354,607 and $921,526, respectively.

The Company leases manufacturing and office facilities in Minnesota from a
partnership whose partners include stockholders and a director of the Company.
These operating leases have initial terms of eight to ten years, expiring
through December 2006 with annual renewals thereafter. Total rent expense
associated with these leases for the years ended December 31, 1998, 1997 and
1996 was $828,900, $828,900 and $413,784, respectively.

Aggregate annual rental payments on future lease commitments at December
31, 1998 were as follows:

1999................................. $ 2,043,007
2000................................. 1,651,734
2001................................. 1,613,734
2002................................. 1,463,734
2003................................. 1,152,123
Thereafter........................... 2,150,425
--------------
$ 10,074,757
==============

NOTE 7 -- COMMON STOCK AND STOCK OPTION PLANS

During 1996, the Company issued 2,033,000 shares of common stock in a
public offering for net proceeds of $28,491,141.

The Company's stock option plan authorizes the Company, upon recommendation
of the compensation committee of the Board of Directors, to grant options to
purchase a total of 3,200,000 shares of the Company's common stock to key
employees of the Company.

The stock option plan provides for the discretionary granting by the
Company of "incentive stock options" within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended, as well as nonqualified stock
options. The exercise price of any incentive stock option must not be less than
the fair market value of the common stock on the date of grant. The stock
options will terminate no later than 10 years after the date of grant. Although
options may vest in increments over time, they historically have become 20%
vested two years after the options are granted and 100% vested after 5 years.

In December of 1994, the Board of Directors of the Company adopted the
Benchmark Electronics, Inc., 1994 Stock Option Plan for Non-Employee Directors
(the "Plan") for the benefit of members of the Board of Directors of the
Company or its Affiliates who are not employees of the Company or its Affiliates
(as defined in the Plan). The aggregate number of shares of Common Stock for
which options may be granted under the Plan is 200,000.

Under the terms of the Plan, each member of the Board of Directors of the
Company or its Affiliates who was not an employee of the Company or any of its
Affiliates on the date of the grant (a "Non-Employee Director") will receive a
grant of an option to purchase 3,000 shares of the Company's Common Stock upon
the date of his election or re-election to the Board of Directors.

F-13
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Additionally, any Non-Employee Director who was a director on the date the Board
of Directors adopted the Plan received (a) an option to purchase 6,000 shares of
Common Stock for the fiscal year in which the Plan was adopted by the Board of
Directors and (b) an option to purchase shares of Common Stock in amount equal
to (i) 6,000, multiplied by (ii) the number of consecutive fiscal years
(immediately preceding the fiscal year during which the Plan was adopted) that
the individual served as a director of the Company, provided that the number
under clause (ii) shall not exceed three (3). During 1998, 1997 and 1996,
pursuant to the Plan, 12,000, 24,000 and 30,000 options, respectively, were
granted to Directors to purchase shares of Common Stock at an exercise price of
$21.38, $16.32 and $14.69 per share, respectively.

The following table summarizes the activities relating to the Company's
stock option plans:

WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
Balance at December 31, 1995......... 801,200 $ 9.85
Granted......................... 653,000 $14.43
Exercised....................... (51,340) $ 8.13
Canceled........................ (45,200) $13.80
--------- --------------
Balance at December 31, 1996......... 1,357,660 $12.00
Granted......................... 426,000 $19.27
Exercised....................... (96,700) $ 7.03
Canceled........................ (96,800) $15.95
--------- --------------
Balance at December 31, 1997......... 1,590,160 $14.11
Granted......................... 653,000 $20.99
Exercised....................... (53,715) $ 9.18
Canceled........................ (80,000) $17.94
--------- --------------
Balance at December 31, 1998......... 2,109,445 $16.22
========= ==============

The following table summarizes information concerning currently outstanding
and exercisable options:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF OUTSTANDING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------------------------------- ------------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$4.38-$10............................ 170,200 4.16 $ 7.37 170,200 $ 7.37
$10-$15.............................. 887,245 6.71 $13.18 424,785 $12.49
$15-$20.............................. 532,000 8.41 $17.40 39,200 $15.88
$20-$25.............................. 393,000 8.94 $21.99 12,000 $21.35
$25-$30.............................. 127,000 8.52 $26.50 -- --
------------- -----------
2,109,445 646,185
============= ===========
</TABLE>
At December 31, 1998, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $4.38-$26.88 and 7.74
years, respectively.

F-14
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1998, 1997 and 1996, the number of options exercisable was
646,185, 492,920 and 500,340, respectively, and the weighted average exercise
price of those options was $11.51, $10.30 and $9.20, respectively.

The Company applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income would have been approximately $13,916,901, or
$1.15 per share diluted during 1998, $13,396,245, or $1.11 per share diluted
during 1997, and $7,851,515, or $0.85 per share diluted during 1996. Pro forma
net income reflects only options granted since 1995. The weighted average fair
value of the options granted during 1998, 1997, and 1996 is estimated as $6.41,
$8.55 and $5.23, respectively, on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: no dividend yield for all
years, volatility of 30% for all years, risk-free interest rate of 4.33% to
5.86% in 1998, 5.46% to 6.57% in 1997 and 5.31% to 6.57% in 1996, assumed annual
forfeiture rate of 5% for all years, and an expected life of 4 years in 1998 and
5 years in 1997 and 1996.

NOTE 8 -- INCOME TAXES

Income tax expense (benefit) consists of:

YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
-------------- ----------- -----------
Federal -- current................... $ 7,275,581 8,178,203 4,322,471
State -- current..................... 936,504 998,781 888,535
Federal/State -- deferred............ 2,305,482 (314,801) 408,346
-------------- ----------- -----------
$ 10,517,567 8,862,183 5,619,352
============== =========== ===========

Income tax expense differed from the amounts computed by applying the U.S.
federal statutory income tax rate to pretax income as a result of the following:

YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
-------------- ----------- -----------
Tax at statutory rate................ $ 9,411,513 8,383,146 4,924,175
State taxes, net of federal
benefit............................ 608,728 649,208 586,433
Tax exempt interest.................. (165,288) (386,658) (49,882)
Tax benefit from use of foreign sales
corporation........................ (349,727) (393,839) (139,218)
Effect of foreign operations......... 132,364 -- --
Amortization of goodwill............. 1,122,751 562,413 236,545
Other................................ (242,774) 47,913 61,299
-------------- ----------- -----------
Total income tax expense............. $ 10,517,567 8,862,183 5,619,352
============== =========== ===========

F-15
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1997 are presented below:

1998 1997
-------------- ------------
Deferred tax assets:
Carrying values of
inventories................... $ 1,358,217 710,124
Accrued liabilities deductible
for tax purposes on a cash
basis......................... 1,130,111 649,081
-------------- ------------
2,488,328 1,359,205
Less valuation allowance............. -- --
-------------- ------------
Net deferred tax assets.... $ 2,488,328 1,359,205
============== ============
Deferred tax liabilities:
Plant and equipment, due to
differences in depreciation... $ (4,442,867) (1,797,228)
Other................................ (126,787) (48,618)
-------------- ------------
Gross deferred tax liability......... (4,569,654) (1,845,846)
-------------- ------------
Net deferred tax
liability............... $ (2,081,326) (486,641)
============== ============

NOTE 9 -- MAJOR CUSTOMERS

The Company's customers operate in businesses associated with rapid
technological change and consequent product obsolescence. Developments adverse
to the electronics industry, the Company's customers or their products could
impact the Company's overall credit risk.

The Company extends credit based on evaluation of its customers' financial
condition and generally does not require collateral or other security from its
customers and would incur an accounting loss equal to the carrying value of the
accounts receivable if its customer failed to perform according to the terms of
the credit arrangement.

Sales to major customers were as follows for the indicated periods:

YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
---------- --------- ---------
(IN THOUSANDS)
Customer A........................... $ 148,674 -- --
Customer B........................... 70,908 42,983 28,638
Customer C........................... 58,424 120,500 33,680
Customer D........................... 19,033 13,381 8,938
Customer E........................... 18,919 -- --

In 1998, the Company had export sales of approximately $87 million to
Europe, $2 million to Canada, $92,000 to Asia, and $8,000 to Australia from the
Company's United States operations. In 1997 and 1996, the Company had export
sales of approximately $86 million and $29 million, respectively, to Europe from
the Company's United States operations.

NOTE 10 -- EMPLOYEE BENEFIT PLANS

The Company has a defined contribution plan qualified under Section 401(k)
of the Internal Revenue Code for the benefit of its employees. The Plan covers
all employees with at least one year of service. The Company has agreed to
contribute an amount equal to 50% of each participant's contributions to the
extent such participant's contribution does not exceed 4% of their compensation
for the year and 1% of each participant's compensation. A participant's
contribution may not exceed

F-16
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20% of annual compensation, or the maximum amount allowed as determined by the
Internal Revenue Code. The Company may also make discretionary contributions to
the plan. During 1998, 1997 and 1996 the Company made contributions to the plan
of approximately $1,098,000, $689,000 and $430,000, respectively.

Effective May 6, 1992, the Company adopted an Incentive Bonus Plan ("Bonus
Plan") for the benefit of its employees, including executive officers. The
Bonus Plan replaced the Company's Incentive Bonus Plan which was adopted in
1990. The Bonus Plan is administered by the Compensation Committee. The total
amount of cash bonus awards to be made under the Bonus Plan for any plan year
depends primarily on the Company's sales and net income for such year.

For any plan year, the Company's sales and net income must meet or exceed,
or in combination with other factors satisfy, levels targeted by the Company in
its business plan, as established at the beginning of each fiscal year, for any
bonus awards to be made. Aggregate bonus awards to all participants under the
Bonus Plan may not exceed 7% of the Company's net income. The Compensation
Committee has the authority to determine the total amount of bonus awards, if
any, to be made to the eligible employees for any plan year based on its
evaluation of the Company's financial condition and results of operations, the
Company's business and prospects, and such other criteria as it may determine to
be relevant or appropriate. The Company expensed $1,434,000 in 1998, $738,000 in
1997 and $320,000 in 1996 in conjunction with the bonus plans.

NOTE 11 -- CONCENTRATIONS OF BUSINESS RISK

The Company uses numerous suppliers of electronic components and other
materials for its operations. Some components used by the Company have been
subject to industry-wide shortages, and suppliers have been forced to allocate
available quantities among their customers. The Company's inability to obtain
any needed components during periods of allocation could cause delays in
manufacturing and could adversely affect results of operations.

NOTE 12 -- CONTINGENCIES

The Company is involved in various legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.

NOTE 13 -- EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED)

On March 1, 1999, the Company acquired certain assets from Stratus Computer
Ireland (Stratus), a wholly-owned subsidiary of Ascend Communications, Inc.
(Ascend) for approximately $48 million, subject to adjustment. In connection
with the transaction, the Company entered into a three-year supply agreement to
provide system integration services to Ascend and Stratus Holding Limited and
the Company hired 260 employees. In conjunction with the purchase of the Stratus
assets, the Company increased its revolving line of credit to $65 million and
borrowed $25 million.

F-17

<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS)

MARCH 31,
1999
-----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents....... $ 12,084
Accounts receivable, net........ 80,545
Inventories..................... 91,230
Prepaid expenses and other
assets.......................... 8,819
Deferred tax asset.............. 2,501
-----------
Total current assets....... 195,179
-----------
Property, plant and equipment, at
cost............................... 91,444
Accumulated depreciation............. (39,165)
-----------
Net property, plant and
equipment................ 52,279
-----------
Other assets, net.................... 8,806
Goodwill, net........................ 47,997
-----------
$ 304,261
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term
debt.......................... $ 33,164
Accounts payable................ 67,654
Income taxes payable............ 1,448
Accrued liabilities............. 9,567
-----------
Total current liabilities.. 111,833
Long term debt, less current portion. 44,111
Deferred income taxes................ 4,630
Shareholders' equity:
Preferred shares, $0.10 par
value; 5,000,000 shares
authorized, none issued........ --
Common shares, $0.10 par value;
30,000,000 shares authorized;
issued -- 11,715,567;
outstanding -- 11,666,083...... 1,167
Additional paid-in capital...... 70,803
Retained earnings............... 71,837
Less treasury shares, at cost;
49,484 shares................. (120)
-----------
Total shareholders'
equity................... 143,687
Commitments and contingencies........
-----------
$ 304,261
===========

See accompanying notes to condensed consolidated financial statements.

F-18
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
---------- ----------
(UNAUDITED)
Sales................................... $ 146,546 $ 108,046
Cost of sales........................... 131,856 97,141
---------- ----------
Gross profit....................... 14,690 10,905
Selling, general and administrative
expense............................... 4,950 3,526
Amortization of goodwill................ 910 585
---------- ----------
Income from operations............. 8,830 6,794
Interest expense........................ (1,125) (902)
Interest income......................... 138 168
Other income............................ 78 47
---------- ----------
Income before income taxes......... 7,921 6,107
Income tax expense...................... 2,884 2,365
---------- ----------
Net income......................... $ 5,037 $ 3,742
========== ==========
Earnings per share:
Basic.............................. $ 0.43 $ 0.32
Diluted............................ $ 0.40 $ 0.31
========== ==========
Weighted average number of shares
outstanding:
Basic.............................. 11,655 11,575
Diluted............................ 12,703 12,243
========== ==========

See accompanying notes to condensed consolidated financial statements.

F-19
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
--------- ---------
(UNAUDITED)
Cash flows from operating activities:
Net income...................... $ 5,037 $ 3,742
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization expense.... 4,818 3,435
Deferred income taxes...... 47 320
Gain on sale of property,
plant and equipment..... (34) (7)
Tax benefit of employee
stock options
exercised............... 211 20
Amortization of premiums on
marketable securities... -- 46
Changes in operating assets and
liabilities, net of effects
from acquisitions:
Accounts receivable........ (23,366) (7,890)
Inventories................ (2,718) (3,536)
Prepaid expenses and other
assets.................. (323) 7
Accounts payable........... 30,608 8,919
Accrued liabilities........ 1,599 (304)
Income taxes............... 2,568 2,017
--------- ---------
Net cash provided by
operations......... 18,447 6,769
--------- ---------
Cash flows from investing activities:
Capital expenditures, net....... (3,956) (2,433)
Additions to capitalized
software....................... (734) --
Proceeds from sale of marketable
securities..................... -- 11,385
Acquisitions, net of cash
acquired....................... (48,000) (70,646)
--------- ---------
Net cash used in
investing
activities......... (52,690) (61,694)
--------- ---------
Cash flows from financing activities:
Debt issuance costs............. (152) (390)
Proceeds from issuance of
debt........................... 25,000 40,000
Proceeds from exercise of
employee stock options......... 438 33
Principal payments on long-term
debt........................... (2,036) (52)
--------- ---------
Net cash provided by
financing
activities......... 23,250 39,591
--------- ---------
Net decrease in cash and cash
equivalents........................ (10,993) (15,334)
Cash and cash equivalents at
beginning of year.................. 23,077 21,029
--------- ---------
Cash and cash equivalents at March
31................................. $ 12,084 $ 5,695
========= =========
Supplemental disclosures of cash flow
information:
Income taxes paid............... $ 57 $ 9
========= =========
Interest paid................... $ 1,610 $ 1,217
========= =========

See accompanying notes to condensed consolidated financial statements.

F-20
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- BASIS OF PRESENTATION

Benchmark Electronics, Inc. (the Company) is a Texas corporation which
provides contract
manufacturing and design services to original equipment manufacturers (OEMs) in
select industries, including enterprise computer, telecommunications, medical
device, industrial control, and testing and instrumentation.

The condensed consolidated financial statements included herein have been
prepared by the Company without audit pursuant to the rules and regulations of
the Securities and Exchange Commission. The 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 audited
annual financial statements and notes included elsewhere herein.

NOTE 2 -- EARNINGS PER SHARE

Basic earnings per share is computed using the weighted average number of
shares outstanding. Diluted earnings per share is computed using the weighted
average number of shares outstanding adjusted for the incremental shares
attributed to outstanding stock options to purchase common stock. Incremental
shares of 1,047,686 and 668,494 for the three months ended March 31, 1999 and
1998, respectively, were used in the calculation of diluted earnings per share.
Options to purchase 147,000 shares of common stock for the three-month period
ended March 31, 1998, were not included in the computation of diluted earnings
per share because the option exercise price was greater than the average market
price of the common stock.

NOTE 3 -- BORROWING FACILITIES

In order to finance a portion of the cash consideration for the acquisition
of EMD Technologies, Inc. (EMD) on July 30, 1996, the Company issued a $30
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 on the unpaid principal amount due July 31, 2006. Interest on
the Senior Note is payable semi-annually on January 31 and July 31. The purchase
agreement relating to the Senior Note (the Purchase Agreement) includes
customary affirmative and negative covenants and restricts the ability of the
Company to incur additional debt and to pay dividends. 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 of 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. As of March 31, 1999, the Company had $30
million outstanding under the Senior Note.

In connection with the acquisition of Lockheed Commercial Electronics
Company (LCEC) on February 23, 1998, the Company obtained $40 million through
borrowings under a five-year term loan (the Term Loan) with a commercial bank.
Principal on the Term Loan is payable in quarterly installments of $2.0 million
with a final installment of the unpaid principal amount due March 31, 2003. The
Term Loan bears interest, at the Company's option, at either the bank's
Eurodollar rate plus

F-21
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

.625% to 1.375% or its prime rate, and interest is payable quarterly. The margin
on the Eurodollar rate fluctuates with the Company's ratio of debt to earnings
before interest, taxes, depreciation and amortization (EBITDA). The Term Loan
includes customary affirmative and negative covenants and restricts the
Company's ability to incur additional indebtedness and to pay dividends. As of
March 31, 1999, the Company had $22 million outstanding under the Term Loan
bearing interest at rates ranging from 6.3125% to 7.75%.

The Company has a $65 million revolving line of credit with a commercial
bank. The Company is entitled to borrow under the line of credit up to the
lesser of $65 million or the sum of 75% of its eligible accounts receivable and
25% of its eligible inventories. Interest on the line of credit is payable
quarterly, at the Company's option, at either the bank's Eurodollar rate plus
.88% to 1.63% or its prime rate. A commitment fee of 0.20% to 0.30% per annum on
the unused portion of the line of credit is payable quarterly in arrears. 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
and to pay dividends. The line of credit matures on March 31, 2004. As of March
31, 1999, the Company had $25 million outstanding under this line of credit and
$40 million was available for future borrowings.

NOTE 4 -- INVENTORIES

Inventory costs are summarized as follows:

MARCH 31,
1999
--------------
Raw materials........................ $ 57,952,000
Work in process...................... 33,278,000
--------------
$ 91,230,000
==============

NOTE 5 -- INCOME TAXES

Income tax expense consists of the following:

THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
------------ ------------
Federal -- Current................... $ 2,305,000 $ 1,860,000
Foreign -- Current................... 105,000 --
State -- Current..................... 427,000 185,000
Federal/State -- Deferred............ 47,000 320,000
------------ ------------
Total........................... $ 2,884,000 $ 2,365,000
============ ============

Income tax expense differs from the amount computed by applying the U.S.
federal statutory income tax rate to pretax income due to the impact of
nondeductible amortization of goodwill, foreign income taxes, state income
taxes, net of federal benefit and the benefit from the use of a foreign sales
corporation and, in 1998, non-taxable interest earned on municipal investments.

The Company considers earnings from its foreign subsidiary to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been made for these earnings. Upon distribution of
foreign subsidiary earnings in the form of dividends or otherwise, the Company
would be subject to U.S. income taxes (subject to adjustment for foreign tax
credits).

In addition for a period of up to ten years the Company will be subject to
taxes in Ireland at rates substantially less than the normal tax rates for that
jurisdiction. The effects of these reduced rates on income tax expense for the
three months ended March 31, 1999 was not significant.

F-22
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6 -- NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. The Company currently
does not hold or issue derivative financial instruments in the normal course of
business. Accordingly, adoption of SFAS No. 133 as of January 1, 2000 is not
expected to affect the Company's consolidated financial statements.

In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 requires all start-up costs related to new
operations be expensed as incurred. In addition, all start-up costs that were
capitalized in the past must be expensed when SOP 98-5 is adopted. The adoption
of SOP 98-5 as of January 1, 1999 did not have a material impact on the
Company's financial position, results of operations or liquidity.

NOTE 7 -- ACQUISITIONS

On March 1, 1999, the Company acquired certain plant and equipment and
inventories from Stratus Computer Ireland (Stratus), a wholly-owned subsidiary
of Ascend Communications, Inc. (Ascend) for approximately $48 million, subject
to adjustment. Based on March 31, 1999 estimates, the acquisition price was
allocated $6.6 million to equipment, $34.8 million to inventories with an
estimated $6.6 million to other current assets (as the Company expects this
amount to be remitted back to the Company as final adjustment to the
transaction). Stratus provided systems integration services for large and very
sophisticated fault-tolerant mainframe computers. In connection with the
transaction, the Company entered into a three-year supply agreement to provide
these system integration services to Ascend and Stratus Holding Limited and the
Company hired 260 employees. In conjunction with the purchase of the Stratus
assets, the Company increased its revolving line of credit to $65 million and
borrowed $25 million.

On February 23, 1998, the Company completed its acquisition of LCEC for
$70.7 million in cash. LCEC, situated in Hudson, New Hampshire, provides a broad
range of services including printed circuit board assembly and test, system
assembly and test, prototyping, depot repair, materials procurement, and
engineering support services. The transaction was accounted for under the
purchase method of accounting, and, accordingly, the results of operations of
LCEC since February 23, 1998 have been included in the accompanying condensed
consolidated statement of income. The acquisition resulted in goodwill of
approximately $29.5 million that is being amortized on a straight-line basis
over 15 years.

F-23

<PAGE>
================================================================================

4,000,656 SHARES

BENCHMARK ELECTRONICS, INC.

COMMON STOCK

[LOGO]

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

PROSPECTUS

, 1999

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

SALOMON SMITH BARNEY
BANCBOSTON ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
SG COWEN

================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses to be incurred by Benchmark
Electronics, Inc. (the "Company") in connection with the issuance and sale of
the securities being registered. Except for the Securities and Exchange
Commission registration fee and the National Association of Securities Dealers,
Inc. filing fee, all amounts shown are estimates. All such fees and expenses
will be paid by the Company.

Securities and Exchange Commission
registration fee..................... $ 42,975
National Association of Securities
Dealers, Inc. filing fee........... 15,959
Printing expenses.................... 80,000
Listing fees......................... 12,600
Legal fees and expenses of counsel
for the Company.................... 100,000
Accounting fees and expenses......... 100,000
Blue sky filing fees and expenses
(including legal fees and
expenses).......................... 2,000
Transfer Agent fees.................. 5,000
Miscellaneous........................ 41,466
----------
Total................................ $ 400,000
==========

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>
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 shareholder 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.

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
1 -- Form of Underwriting Agreement by and among the Company, the
selling shareholder and the Underwriters.

3.1 -- Restated Articles of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (Registration No. 33-46316)).

3.2 -- Amended and Restated Bylaws of the Company (incorporated herein by
reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K
for 1998 -- File No. 001-10560).

3.3 -- Amendment to Amended and Restated Articles of Incorporation of the
Company adopted by the shareholders of the Company on May 20, 1997
(incorporated herein by reference to Exhibit 3.3 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 --
File No. 001-10560).

3.4 -- Statement of Resolution Establishing Series A Cumulative Junior
Participating Preferred Stock of Benchmark Electronics, Inc.
(incorporated by reference to Exhibit B of the Rights Agreement dated
December 11, 1998 between the Company and Harris Trust Savings Bank,
as Rights Agent, included as Exhibit 1 to the Company's Form 8A12B
filed December 11, 1998).

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 LLP.

24 -- Powers of Attorney (included on the signature page of this
Registration Statement).

II-2
<PAGE>
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 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 post effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.

II-3
<PAGE>
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 or amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Angleton, State of Texas, on May 7, 1999.

BENCHMARK ELECTRONICS, INC.

By: /s/ DONALD E. NIGBOR
DONALD E. NIGBOR
PRESIDENT

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement or amendment has been signed by the following
persons in the capacities and on the dates indicated.

NAME POSITION DATE
---- -------- ----
JOHN C. CUSTER* Chairman of the Board May 7, 1999
JOHN C. CUSTER of Directors

/s/DONALD E. NIGBOR Director and President May 7, 1999
DONALD E. NIGBOR (principal executive officer)

STEVEN A. BARTON* Director and Executive May 7, 1999
STEVEN A. BARTON Vice President

/s/CARY T. FU Director and Executive May 7, 1999
CARY T. FU Vice President (principal
financial and accounting
officer)

PETER G. DORFLINGER* Director May 7, 1999
PETER G. DORFLINGER

GERALD W. BODZY* Director May 7, 1999
GERALD W. BODZY

DAVID H. ARNOLD* Director May 7, 1999
DAVID H. ARNOLD

*By: /s/CARY T. FU
CARY T. FU
ATTORNEY-IN-FACT

II-4

<PAGE>
INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
1 -- Form of Underwriting Agreement by and among the Company, the
selling shareholder and the Underwriters.

3.1 -- Restated Articles of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (Registration No. 33-46316)).

3.2 -- Amended and Restated Bylaws of the Company (incorporated herein by
reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K
for 1998 -- File No. 001-10560).

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 LLP.

24 -- Powers of Attorney (included on the signature page of this
Registration Statement).

<PAGE>

EXHIBIT 1

[Draft--5/3/99]

Benchmark Electronics, Inc.

4,000,656 Shares A/
Common Stock
($0.10 par value)

Underwriting Agreement

New York, New York
[ ], 1999

Salomon Smith Barney Inc.
BancBoston Robertson Stephens Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
SG Cowen Securities Corporation
As Representatives of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

Benchmark Electronics, Inc., a corporation organized under the laws
of Texas (the "Company"), proposes to sell to the several underwriters named in
Schedule I hereto (the "Underwriters"), for whom you (the "Representatives") are
acting as representatives, 3,000,000 shares of Common Stock, $0.10 par value
("Common Stock") of the Company, and the persons named in Schedule II hereto
(the "Selling Stockholders") propose to sell to the several Underwriters
1,000,656 shares of Common Stock (said shares to be issued and sold by the
Company and shares to be sold by the Selling Stockholders collectively being
hereinafter called the "Underwritten Securities"). The Company also proposes to
grant to the Underwriters an option to purchase up to 600,098 additional shares
of Common Stock to cover over-allotments (the "Option Securities"; the Option
Securities, together with the Underwritten Securities, being hereinafter called
the "Securities"). To the extent there are no additional Underwriters listed on
Schedule I other than you, the term Representatives as used herein shall mean
you, as Underwriters, and the terms Representatives and Underwriters shall mean
either the singular or plural as the context requires. In addition, to the
extent that there is not more than one Selling Stockholder named in Schedule II,
the term Selling Stockholder shall mean either the singular or plural. The use
of the neuter in this Agreement shall include the feminine and masculine
wherever appropriate. Any reference herein to the Registration Statement, a
Preliminary Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Exchange Act on or before the Effective Date of the
Registration Statement or the issue date of such Preliminary Prospectus or the
Prospectus, as the case may be; and any reference herein to the terms "amend",
"amendment" or "supplement" with respect to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed

- ---------------
A/ Plus an option to purchase from the Company up to
600,098 additional shares of Common Stock to cover over-allotments.

<PAGE>
2

to refer to and include the filing of any document under the Exchange Act after
the Effective Date of the Registration Statement, or the issue date of any
Preliminary Prospectus or the Prospectus, as the case may be, deemed to be
incorporated therein by reference. Certain terms used herein are defined in
Section 17 hereof.

1. REPRESENTATIONS AND WARRANTIES.

(i) The Company represents and warrants to, and agrees with, each
Underwriter as set forth below in this Section 1.

(a) The Company meets the requirements for use of Form S-3 under the
Act and has prepared and filed with the Commission a registration
statement (file number [333- ]) on Form S-3, including a related
preliminary prospectus, for registration under the Act of the offering and
sale of the Securities. The Company may have filed one or more amendments
thereto, including a related preliminary prospectus, each of which has
previously been furnished to you. The Company will next file with the
Commission one of the following: either (1) prior to the Effective Date of
such registration statement, a further amendment to such registration
statement (including the form of final prospectus), or (2) after the
Effective Date of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b). In the case of clause (2), the
Company has included in such registration statement, as amended at the
Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in such
registration statement and the Prospectus. As filed, such amendment and
form of final prospectus, or such final prospectus, shall contain all Rule
430A Information, together with all other such required information, and,
except to the extent the Representatives shall agree in writing to a
modification, shall be in all substantive respects in the form furnished
to you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information
and other changes (beyond that contained in the latest Preliminary
Prospectus) as the Company has advised you, prior to the Execution Time,
will be included or made therein.

(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date (as defined herein) and on any date on
which Option Securities are purchased, if such date is not the Closing
Date (a "settlement date"), the Prospectus (and any supplements thereto)
will, comply in all material respects with the applicable requirements of
the Act and the Exchange Act and the respective rules thereunder; on the
Effective Date and at the Execution Time, the Registration Statement did
not or will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and, on the Effective
Date, the Prospectus, if not filed pursuant to Rule 424(b), will not, and
on the date of any filing pursuant to Rule 424(b) and on the Closing Date
and any settlement date, the Prospectus (together with any supplement
thereto) will not, include any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that no representations or warranties as to
the information contained in or omitted from the Registration Statement or
the Prospectus (or any supplement thereto) in reliance upon and in
conformity with

<PAGE>
3

information furnished in writing to the Company by or on behalf of any
Underwriter through the Representatives specifically for inclusion in the
Registration Statement or the Prospectus (or any supplement thereto).

(c) To the Company's best knowledge, there are no disputes, problems
or indications of a decline in business with any customer which
represented 10% or more of the sales of the Company in the year ended
December 31, 1998, or the quarter ended March 31, 1999, which could have a
material adverse change in the condition (financial or otherwise),
prospects, earnings, business or results of operations of the Company.

Any certificate signed by any officer of the Company and delivered
to the Representatives or counsel for the Underwriters in connection with
the offering of the Securities shall be deemed a representation and
warranty by the Company, as to matters covered thereby, to each
Underwriter.

(ii) Each Selling Stockholder represents and warrants to, and agrees
with, each Underwriter that:

(a) Such Selling Stockholder is the lawful owner of the Securities
to be sold by such Selling Stockholder hereunder and upon sale and
delivery of, and payment for, such Securities, as provided herein, such
Selling Stockholder will convey to the Underwriters good and marketable
title to such Securities, free and clear of all liens, encumbrances,
equities and claims whatsoever.

(b) Such Selling Stockholder has not taken, directly or indirectly,
any action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities.

(c) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by such
Selling Stockholder of the transactions contemplated herein, except such
as may have been obtained under the Act and such as may be required under
the blue sky laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters and such other
approvals as have been obtained.

(d) Neither the sale of the Securities being sold by such Selling
Stockholder nor the consummation of any other of the transactions herein
contemplated by such Selling Stockholder or the fulfillment of the terms
hereof by such Selling Stockholder will conflict with, result in a breach
or violation of, or constitute a default under any law or the charter or
by-laws of such Selling Stockholder or the terms of any indenture or other
agreement or instrument to which such Selling Stockholder [or any of its
subsidiaries] is a party or bound, or any judgment, order or decree
applicable to such Selling Stockholder [or any of its subsidiaries] of any
court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over such Selling Stockholder [or any of
its subsidiaries].

(e) Such Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in this Section 1
are not

<PAGE>
4

true and correct, is familiar with the Registration Statement and has no
knowledge of any material fact, condition or information not disclosed in
the Prospectus or any supplement thereto which has adversely affected or
may adversely affect the business of the Company or any of its
subsidiaries; and the sale of Securities by such Selling Stockholder
pursuant hereto is not prompted by any information concerning the Company
or any of its subsidiaries which is not set forth in the Prospectus or any
supplement thereto.

(f) In respect of any statements in or omissions from the
Registration Statement or the Prospectus or any supplements thereto made
in reliance upon and in conformity with information furnished in writing
to the Company by any Selling Stockholder specifically for use in
connection with the preparation thereof, such Selling Stockholder hereby
makes the same representations and warranties to each Underwriter as the
Company makes to such Underwriter under paragraph (i)(b) of this Section.

Any certificate signed by any officer of any Selling Stockholder and
delivered to the Representatives or counsel for the Underwriters in connection
with the offering of the Securities shall be deemed a representation and
warranty by such Selling Stockholder, as to matters covered thereby, to each
Underwriter.

2. PURCHASE AND SALE. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
and the Selling Stockholders agree, severally and not jointly, to sell to each
Underwriter, and each Underwriter agrees, severally and not jointly, to purchase
from the Company and the Selling Stockholders, at a purchase price of $[ ] per
share, the amount of the Underwritten Securities set forth opposite such
Underwriter's name in Schedule I hereto.

(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up to
600,098 Option Securities at the same purchase price per share as the
Underwriters shall pay for the Underwritten Securities. Said option may be
exercised only to cover over-allotments in the sale of the Underwritten
Securities by the Underwriters. Said option may be exercised in whole or in part
at any time (but not more than once) on or before the 30th day after the date of
the Prospectus upon written or telegraphic notice by the Representatives to the
Company setting forth the number of shares of the Option Securities as to which
the several Underwriters are exercising the option and the settlement date. The
number of Option Securities to be purchased by each Underwriter shall be the
same percentage of the total number of shares of the Option Securities to be
purchased by the several Underwriters as such Underwriter is purchasing of the
Underwritten Securities, subject to such adjustments as you in your absolute
discretion shall make to eliminate any fractional shares.

3. DELIVERY AND PAYMENT. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third Business
Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
[ ], 1999, or at such time on such later date not more than three Business Days
after the foregoing date as the Representatives shall designate, which date and
time may be postponed by agreement among the Representatives, the Company and
the Selling Stockholders or as provided in

<PAGE>
5

Section 9 hereof (such date and time of delivery and payment for the Securities
being herein called the "Closing Date"). Delivery of the Securities shall be
made to the Representatives for the respective accounts of the several
Underwriters against payment by the several Underwriters through the
Representatives of the respective aggregate purchase prices of the Securities
being sold by the Company and each of the Selling Stockholders to or upon the
order of the Company and the Selling Stockholders by wire transfer payable in
same-day funds to the accounts specified by the Company and the Selling
Stockholders. Delivery of the Underwritten Securities and the Option Securities
shall be made through the facilities of The Depository Trust Company unless the
Representatives shall otherwise instruct.

Each Selling Stockholder will pay all applicable state transfer
taxes, if any, involved in the transfer to the several Underwriters of the
Securities to be purchased by them from such Selling Stockholder and the
respective Underwriters will pay any additional stock transfer taxes involved in
further transfers.

If the option provided for in Section 2(b) hereof is exercised after
the third Business Day prior to the Closing Date, the Company will deliver the
Option Securities (at the expense of the Company) to the Representatives through
the facilities of the Depository Trust Company on the date specified by the
Representatives (which shall be within three Business Days after exercise of
said option) for the respective accounts of the several Underwriters, against
payment by the several Underwriters through the Representatives of the purchase
price thereof to or upon the order of the Company by wire transfer payable in
same-day funds to the accounts specified by the Company. If settlement for the
Option Securities occurs after the Closing Date, the Company will deliver to the
Representatives on the settlement date for the Option Securities, and the
obligation of the Underwriters to purchase the Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.

4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.

5. AGREEMENTS.

(i) The Company agrees with the several Underwriters that:

(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereof, to become effective. Prior to the termination of the offering of
the Securities, the Company will not file any amendment of the
Registration Statement or supplement to the Prospectus or any Rule 462(b)
Registration Statement unless the Company has furnished you a copy for
your review prior to filing and will not file any such proposed amendment
or supplement to which you reasonably object. Subject to the foregoing
sentence, if the Registration Statement has become or becomes effective
pursuant to Rule 430A, or filing of the Prospectus is otherwise required
under Rule 424(b), the Company will cause the Prospectus, properly
completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Representatives
of such timely filing. The Company will promptly advise the
Representatives (1) when the Registration Statement, if not

<PAGE>
6

effective at the Execution Time, shall have become effective, (2) when the
Prospectus, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b) or when any Rule
462(b) Registration Statement shall have been filed with the Commission,
(3) when, prior to termination of the offering of the Securities, any
amendment to the Registration Statement shall have been filed or become
effective, (4) of any request by the Commission or its staff for any
amendment of the Registration Statement, or any Rule 462(b) Registration
Statement, or for any supplement to the Prospectus or for any additional
information, (5) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (6) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the institution or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of
any such stop order or the suspension of any such qualification and, if
issued, to obtain as soon as possible the withdrawal thereof.

(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Prospectus to comply with the
Act or the Exchange Act or the respective rules thereunder, the Company
promptly will (1) notify the Representatives of such event, (2) prepare
and file with the Commission, subject to the second sentence of paragraph
(i)(a) of this Section 5, an amendment or supplement which will correct
such statement or omission or effect such compliance and (3) supply any
supplemented Prospectus to you in such quantities as you may reasonably
request.

(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an earnings
statement or statements of the Company and its subsidiaries which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under the
Act.

(d) The Company will furnish to the Representatives and counsel for
the Underwriters, without charge, signed copies of the Registration
Statement (including exhibits thereto) and to each other Underwriter a
copy of the Registration Statement (without exhibits thereto) and, so long
as delivery of a prospectus by an Underwriter or dealer may be required by
the Act, as many copies of each Preliminary Prospectus and the Prospectus
and any supplement thereto as the Representatives may reasonably request.
The Company will pay the expenses of printing or other production of all
documents relating to the offering.

(e) The Company will arrange, if necessary, for the qualification of
the Securities for sale under the laws of such jurisdictions as the
Representatives may designate, will maintain such qualifications in effect
so long as required for the distribution of the Securities and will pay
any fee of the National Association of Securities Dealers, Inc., in
connection with its review of the offering; provided that in no event
shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action that
would subject

<PAGE>
7

it to service of process in suits, other than those arising out of the
offering or sale of the Securities, in any jurisdiction where it is not
now so subject.

(f) The Company will not, without the prior written consent of
Salomon Smith Barney Inc., offer, sell, contract to sell, pledge, or
otherwise dispose of, (or enter into any transaction which is designed to,
or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash
settlement or otherwise) by the Company or any affiliate of the Company or
any person in privity with the Company or any affiliate of the Company)
directly or indirectly, including the filing (or participation in the
filing) of a registration statement with the Commission in respect of, or
establish or increase a put equivalent position or liquidate or decrease a
call equivalent position within the meaning of Section 16 of the Exchange
Act, any other shares of Common Stock or any securities convertible into,
or exercisable, or exchangeable for, shares of Common Stock; or publicly
announce an intention to effect any such transaction, for a period of 90
days after the date of the Underwriting Agreement; provided, however, that
the Company may issue and sell Common Stock pursuant to any employee stock
option plan, stock ownership plan or dividend reinvestment plan of the
Company in effect at the Execution Time and the Company may issue Common
Stock issuable upon the conversion of securities or the exercise of
warrants outstanding at the Execution Time.

(g) The Company will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected
to cause or result, under the Exchange Act or otherwise, in stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.

(ii) Each Selling Stockholder agrees with the several Underwriters
that:

(a) Such Selling Stockholder will not, without the prior written
consent of Salomon Smith Barney, offer, sell, contract to sell, pledge or
otherwise dispose of, (or enter into any transaction which is designed to,
or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash
settlement or otherwise) by the Company or any affiliate of the Company or
any person in privity with the Company or any affiliate of the Company)
directly or indirectly, or file (or participate in the filing of) a
registration statement with the Commission in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of Section 16 of the Exchange Act
with respect to, any shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for such
capital stock, or publicly announce an intention to effect any such
transaction, for a period of 90 days after the date of the Underwriting
Agreement, other than shares of Common Stock disposed of as bona fide
gifts approved by Salomon Smith Barney Inc.

(b) Such Selling Stockholder will not take any action designed to or
which has constituted or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities.

<PAGE>
8

(c) Such Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, so long as delivery
of a prospectus relating to the Securities by an underwriter or dealer may
be required under the Act, of (i) any material change in the Company's
condition (financial or otherwise), prospects, earnings, business or
properties, (ii) any change in information in the Registration Statement
or the Prospectus relating to such Selling Stockholder or (iii) any new
material information relating to the Company or relating to any matter
stated in the Prospectus which comes to the attention of such Selling
Stockholder.

6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Company and the Selling Stockholders made in any certificates pursuant to
the provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective obligations hereunder and to the following
additional conditions:

(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later
time, the Registration Statement will become effective not later than (i)
6:00 PM New York City time on the date of determination of the public
offering price, if such determination occurred at or prior to 3:00 PM New
York City time on such date or (ii) 9:30 AM on the Business Day following
the day on which the public offering price was determined, if such
determination occurred after 3:00 PM New York City time on such date; if
filing of the Prospectus, or any supplement thereto, is required pursuant
to Rule 424(b), the Prospectus, and any such supplement, will be filed in
the manner and within the time period required by Rule 424(b); and no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or threatened.

(b) The Company shall have requested and caused Bracewell &
Patterson, L.L.P., counsel for the Company, to have furnished to the
Representatives their opinion, dated the Closing Date and addressed to the
Representatives, to the effect that:

(i) each of the Company and BEI Electronics Ireland Limited, a
Republic of Ireland private limited company (the "Subsidiary"), has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and authority to
own or lease, as the case may be, and to operate its properties and
conduct its business as described in the Prospectus, and is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification;

(ii) all the outstanding shares of capital stock of the
Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except as otherwise set forth in
the Prospectus, all

<PAGE>
9

outstanding shares of capital stock of the Subsidiary are owned by
the Company either directly or through wholly owned subsidiaries
free and clear of any perfected security interest and, to the
knowledge of such counsel, after due inquiry, any other security
interest, claim, lien or encumbrance;

(iii) the Company's authorized equity capitalization is as set
forth in the Prospectus; the capital stock of the Company conforms
in all material respects to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock (including the
Securities being sold hereunder by the Selling Stockholders) have
been duly and validly authorized and issued and are fully paid and
nonassessable; the Securities being sold hereunder by the Company
have been duly and validly authorized, and, when issued and
delivered to and paid for by the Underwriters pursuant to this
Agreement, will be fully paid and nonassessable; the Securities
being sold by the Selling Stockholders are duly listed, and admitted
and authorized for trading on the New York Stock Exchange and the
Securities being sold hereunder by the Company are duly listed, and
admitted and authorized for trading, subject to official notice of
issuance, on the New York Stock Exchange; the certificates for the
Securities are in valid and sufficient form; the holders of
outstanding shares of capital stock of the Company are not entitled
to preemptive or other rights to subscribe for the Securities; and,
except as set forth in the Prospectus, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or
rights to convert any obligations into or exchange any securities
for, shares of capital stock of or ownership interests in the
Company are outstanding;

(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any of its subsidiaries or its or their property of a
character required to be disclosed in the Registration Statement
which is not adequately disclosed in the Prospectus, and there is no
franchise, contract or other document of a character required to be
described in the Registration Statement or Prospectus, or to be
filed as an exhibit thereto, which is not described or filed as
required;

(v) the Registration Statement has become effective under the
Act; any required filing of the Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the knowledge of
such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened and the Registration
Statement and the Prospectus (other than the financial statements
and other financial information contained therein, as to which such
counsel need express no opinion) comply as to form in all material
respects with the applicable requirements of the Act and the
Exchange Act and the respective rules thereunder; and such counsel
has no reason to believe that on the Effective Date or at the
Execution Time the Registration Statement contained any untrue
statement of a material fact or omitted to

<PAGE>
10

state any material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus
as of its date and on the Closing Date included or includes any
untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading (in
each case, other than the financial statements and other financial
information contained therein, as to which such counsel need express
no opinion);

(vi) this Agreement has been duly authorized, executed and
delivered by the Company;

(vii) the Company is not and, after giving effect to the
offering and sale of the Securities and the application of the
proceeds thereof as described in the Prospectus, will not be, an
"investment company" as defined in the Investment Company Act of
1940, as amended;

(viii) no consent, approval, authorization, filing with or
order of any court or governmental agency or body is required in
connection with the transactions contemplated herein, except such as
have been obtained under the Act and such as may be required under
the blue sky laws of any jurisdiction in connection with the
purchase and distribution of the Securities by the Underwriters in
the manner contemplated in this Agreement and in the Prospectus and
such other approvals (specified in such opinion) as have been
obtained;

(ix) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated
nor the fulfillment of the terms hereof will conflict with, result
in a breach or violation of or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or its
subsidiaries pursuant to, (1) the charter or by-laws of the Company
or its subsidiaries, (2) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to
which the Company or its subsidiaries is a party or bound or to
which its or their property is subject, or (3) any statute, law,
rule, regulation, judgment, order or decree applicable to the
Company or its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or its subsidiaries
or any of its or their properties; and

(x) no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement
except for such rights of the Selling Stockholders.

In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
States of New York and Texas or the Federal laws of the United States, to
the extent they deem proper and specified in such opinion, upon the
opinion of other counsel of good standing whom they believe to be reliable
and who are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on

<PAGE>
11

certificates of responsible officers of the Company and public officials.
References to the Prospectus in this paragraph (b) include any supplements
thereto at the Closing Date.

(c) The Selling Stockholders shall have requested and caused Wyatt,
Tarrant & Combs, counsel for the Selling Stockholders, to have furnished
to the Representatives their opinion dated the Closing Date and addressed
to the Representatives, to the effect that:

(i) this Agreement has been duly authorized, executed and
delivered by the Selling Stockholders and each Selling Stockholder
has full legal right and authority to sell, transfer and deliver in
the manner provided in this Agreement the Securities being sold by
such Selling Stockholder hereunder;

(ii) the delivery by each Selling Stockholder to the several
Underwriters of certificates for the Securities being sold hereunder
by such Selling Stockholder against payment therefor as provided
herein, will pass good and marketable title to such Securities to
the several Underwriters, free and clear of all liens, encumbrances,
equities and claims whatsoever;

(iii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation by any Selling Stockholder of the transactions
contemplated herein, except such as may have been obtained under the
Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals (specified
in such opinion) as have been obtained; and

(iv) neither the sale of the Securities being sold by any
Selling Stockholder nor the consummation of any other of the
transactions herein contemplated by any Selling Stockholder or the
fulfillment of the terms hereof by any Selling Stockholder will
conflict with, result in a breach or violation of, or constitute a
default under any law or the charter or By-laws of the Selling
Stockholder or the terms of any indenture or other agreement or
instrument known to such counsel and to which any Selling
Stockholder [or any of its subsidiaries] is a party or bound, or any
judgment, order or decree known to such counsel to be applicable to
any Selling Stockholder [or any of its subsidiaries] of any court,
regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over any Selling Stockholder [or any
of its subsidiaries].

In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of [ ] or the Federal laws of the United States, to the extent they deem
proper and specified in such opinion, upon the opinion of other counsel of
good standing whom they believe to be reliable and who are satisfactory to
counsel for the Underwriters, and (B) as to matters of fact, to the extent
they deem proper, on certificates of responsible officers of the Selling
Stockholders and public officials.

(d) The Representatives shall have received from Cravath, Swaine &
Moore, counsel for the Underwriters, such opinion or opinions, dated the
Closing

<PAGE>
12

Date and addressed to the Representatives, with respect to the issuance
and sale of the Securities, the Registration Statement, the Prospectus
(together with any supplement thereto) and other related matters as the
Representatives may reasonably require, and the Company and each Selling
Stockholder shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.

(e) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
Prospectus, any supplements to the Prospectus and this Agreement and that:

(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or
prior to the Closing Date;

(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and

(iii) since the date of the most recent financial statements
included or incorporated by reference in the Prospectus (exclusive
of any supplement thereto), there has been no material adverse
effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth
in or contemplated in the Prospectus (exclusive of any supplement
thereto).

(f) Each Selling Stockholder shall have furnished to the
Representatives a certificate, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of such
Selling Stockholder, dated the Closing Date, to the effect that the
signers of such certificate have carefully examined the Registration
Statement, the Prospectus, any supplement to the Prospectus and this
Agreement and that the representations and warranties of such Selling
Stockholder in this Agreement are true and correct in all material
respects on and as of the Closing Date to the same effect as if made on
the Closing Date.

(g) The Company shall have requested and caused KPMG LLP to have
furnished to the Representatives, at the Execution Time and at the Closing
Date, letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Representatives,
confirming that they are independent accountants within the meaning of the
Act and the Exchange Act and the respective applicable rules and
regulations adopted by the Commission thereunder and that they have
performed a review of the unaudited interim financial information of the
Company for the three-month period ended March 31, 1999, and

<PAGE>
13

as at March 31, 1999, in accordance with Statement on Auditing Standards
No. 71, and stating in effect that:

(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated by reference
in the Registration Statement and the Prospectus and reported on by
them comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the
related rules and regulations adopted by the Commission;

(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; their limited review, in accordance with standards
established under Statement on Auditing Standards No. 71, of the
unaudited interim financial information for the three-month period
ended March 31, 1999, and as at March 31, 1999; carrying out certain
specified procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily
reveal matters of significance with respect to the comments set
forth in such letter; a reading of the minutes of the meetings of
the stockholders and directors of the Company and the Subsidiary;
and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the Company
and its subsidiaries as to transactions and events subsequent to
December 31, 1998, nothing came to their attention which caused them
to believe that:

(1) any unaudited financial statements included or
incorporated by reference in the Registration Statement and
the Prospectus do not comply as to form in all material
respects with applicable accounting requirements of the Act
and with the related rules and regulations adopted by the
Commission with respect to financial statements included or
incorporated by reference in quarterly reports on Form 10-Q
under the Exchange Act; and said unaudited financial
statements are not in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the audited financial statements
included or incorporated by reference in the Registration
Statement and the Prospectus;

(2) with respect to the period subsequent to March 31,
1999, there were any changes, at a specified date not more
than five days prior to the date of the letter, in the
long-term debt or net current assets of the Company and its
subsidiaries or capital stock of the Company or decreases in
the shareholders' equity of the Company as compared with the
amounts shown on the March 31, 1999, consolidated balance
sheet included or incorporated by reference in the
Registration Statement and the Prospectus, or for the period
from April 1, 1999, to such specified date there were any
decreases, as compared with the corresponding period in the
preceding fiscal quarter, in sales, operating income or in
total or per share amounts of net income of the Company and
its subsidiaries, except in all instances for changes or
decreases set forth in such letter, in which

<PAGE>
14

case the letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said explanation
is not deemed necessary by the Representatives; and

(3) the information included or incorporated by
reference in the Registration Statement and Prospectus in
response to Regulation S-K, Item 301 (Selected Financial
Data), Item 302 (Supplementary Financial Information), Item
402 (Executive Compensation) and Item 503(d) (Ratio of
Earnings to Fixed Charges) is not in conformity with the
applicable disclosure requirements of Regulation S-K; and

(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Registration Statement and the Prospectus and in
Exhibit 12 to the Registration Statement, including the information
set forth under the captions "Summary Financial Information",
"Capitalization" and "Selected Financial Information" in the
Prospectus, the information included or incorporated by reference in
Items 1, 2, 6, 7 and 11 of the Company's Annual Report on Form 10-K,
incorporated by reference in the Registration Statement and the
Prospectus, and the information included in the "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q, incorporated by reference in the
Registration Statement and the Prospectus, agrees with the
accounting records of the Company and its subsidiaries, excluding
any questions of legal interpretation.

References to the Prospectus in this paragraph (g) include any
supplement thereto at the date of the letter.

(h) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified
in the letter or letters referred to in paragraph (g) of this Section 6 or
(ii) any change, or any development involving a prospective change, in or
affecting the condition (financial or otherwise), earnings, business or
properties of the Company and its subsidiaries, taken as a whole, whether
or not arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto) the effect of which, in any case referred to in clause
(i) or (ii) above, is, in the sole judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to proceed
with the offering or delivery of the Securities as contemplated by the
Registration Statement (exclusive of any amendment thereof) and the
Prospectus (exclusive of any supplement thereto).

(i) The Securities shall have been listed and admitted and
authorized for trading on the New York Stock Exchange, and satisfactory
evidence of such actions shall have been provided to the Representatives.

<PAGE>
15

(j) On or prior to the Execution Time, the New York Stock Exchange
shall have approved the Underwriters' participation in the distribution of
the Securities to be sold by the Selling Stockholders in accordance with
Rule 393 of the New York Stock Exchange.

(k) At the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto
from each officer and director of the Company addressed to the
Representatives.

(l) Prior to the Closing Date, the Company and the Selling
Stockholders shall have furnished to the Representatives such further
information, certificates and documents as the Representatives may
reasonably request.

If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of such
cancelation shall be given to the Company and each Selling Stockholder in
writing or by telephone or facsimile confirmed in writing.

The documents required to be delivered by this Section 6 shall be
delivered at the office of Cravath, Swaine & Moore, counsel for the
Underwriters, at 825 Eighth Avenue, New York, New York 10019, on the Closing
Date.

7. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company or any Selling
Stockholders to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally through Salomon Smith Barney on demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Securities. If the Company is required to make any
payments to the Underwriters under this Section 7 because of any Selling
Stockholder's refusal, inability or failure to satisfy any condition to the
obligations of the Underwriters set forth in Section 6, the Selling Stockholders
PRO RATA in proportion to the percentage of Securities to be sold by each shall
reimburse the Company on demand for all amounts so paid.

8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement for the registration of
the Securities as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the

<PAGE>
16

Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter through the Representatives specifically for inclusion therein.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.

(b) Each Selling Stockholder severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person who controls the Company or any
Underwriter within the meaning of either the Act or the Exchange Act and each
other Selling Stockholder, if any, to the same extent as the foregoing indemnity
from the Company to each Underwriter, but only with reference to written
information furnished to the Company by or on behalf of such Selling Stockholder
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability which
any Selling Stockholder may otherwise have.

(c) Each Underwriter severally and not jointly agrees to indemnify
and hold harmless the Company, each of its directors, each of its officers who
signs the Registration Statement, and each person who controls the Company
within the meaning of either the Act or the Exchange Act and each Selling
Stockholder, to the same extent as the foregoing indemnity to each Underwriter,
but only with reference to written information relating to such Underwriter
furnished to the Company by or on behalf of such Underwriter through the
Representatives specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any Underwriter may otherwise have. The Company and each Selling
Stockholder acknowledge that the statements set forth in the last paragraph of
the cover page regarding delivery of the Securities and, under the heading
"Underwriting", (i) the sentences related to concessions and reallowances and
(ii) the paragraph related to stabilization, syndicate covering transactions and
penalty bids in any Preliminary Prospectus and the Prospectus constitute the
only information furnished in writing by or on behalf of the several
Underwriters for inclusion in any Preliminary Prospectus or the Prospectus.

(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a), (b) or (c) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a), (b) or (c) above. The indemnifying party
shall be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the

<PAGE>
17

indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); PROVIDED, HOWEVER, that such counsel shall be
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.

(e) In the event that the indemnity provided in paragraph (a), (b)
or (c) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company, the Selling Stockholders and the
Underwriters agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company, one or more of the Selling Stockholders and one or more of the
Underwriters may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company, by the Selling Stockholders and by
the Underwriters from the offering of the Securities; provided, HOWEVER, that in
no case shall any Underwriter (except as may be provided in any agreement among
underwriters relating to the offering of the Securities) be responsible for any
amount in excess of the underwriting discount or commission applicable to the
Securities purchased by such Underwriter hereunder. If the allocation provided
by the immediately preceding sentence is unavailable for any reason, the
Company, the Selling Stockholders and the Underwriters shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company, of the Selling Stockholders and of the
Underwriters in connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable considerations. Benefits
received by the Company and by the Selling Stockholders shall be deemed to be
equal to the total net proceeds from the offering (before deducting expenses)
received by each of them, and benefits received by the Underwriters shall be
deemed to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information provided by the Company, the
Selling Stockholders on the one hand or the Underwriters on the other, the
intent of the parties and their relative

<PAGE>
18

knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company, the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (e), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls an Underwriter within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of an Underwriter shall have the
same rights to contribution as such Underwriter, and each person who controls
the Company within the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (e).

9. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; PROVIDED, HOWEVER, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter, the
Selling Stockholders or the Company. In the event of a default by any
Underwriter as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding five Business Days, as the Representatives shall
determine in order that the required changes in the Registration Statement and
the Prospectus or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting Underwriter of
its liability, if any, to the Company, the Selling Stockholders and any
nondefaulting Underwriter for damages occasioned by its default hereunder.

10. TERMINATION. This Agreement shall be subject to termination in
the absolute discretion of the Representatives, by notice given to the Company
prior to delivery of and payment for the Securities, if at any time prior to
such time (i) trading in the Company's Common Stock shall have been suspended by
the Commission or the New York Stock Exchange or trading in securities generally
on the New York Stock Exchange shall have been suspended or limited or minimum
prices shall have been established on such Exchange, (ii) a banking moratorium
shall have been declared either by Federal or New York State authorities or
(iii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war, or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the sole judgment of the Representatives, impractical or inadvisable to
proceed with the offering

<PAGE>
19

or delivery of the Securities as contemplated by the Prospectus (exclusive of
any supplement thereto).

11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, of each Selling Stockholder and of the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter,
any Selling Stockholder or the Company or any of the officers, directors,
employees, agents or controlling persons referred to in Section 8 hereof, and
will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancelation of this
Agreement.

12. NOTICES. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telefaxed to the Salomon Smith Barney Inc. General Counsel (fax
no.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith Barney
Inc., at 388 Greenwich Street, New York, New York, 10013, Attention: General
Counsel; or, if sent to the Company, will be mailed, delivered or telefaxed to
(409) 849-5269 and confirmed to it at Benchmark Electronics, Inc., 3000
Technology Drive, Angleton, Texas 77515, attention of [ ]; or if sent to any
Selling Stockholder, will be mailed, delivered or telefaxed and confirmed to it
at the address set forth in Schedule II hereto.

13. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 8 hereof, and no other person will have any right or obligation
hereunder.

14. APPLICABLE LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed within the State of New York.

15. COUNTERPARTS. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.

16. HEADINGS. The section headings used herein are for convenience
only and shall not affect the construction hereof.

17. DEFINITIONS. The terms which follow, when
used in this Agreement, shall have the meanings indicated.

"Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.

"Business Day" shall mean any day other than a Saturday, a Sunday or
a legal holiday or a day on which banking institutions or trust companies
are authorized or obligated by law to close in New York City or Texas.

"Commission" shall mean the Securities and Exchange Commission.

<PAGE>
20

"Effective Date" shall mean each date and time that the Registration
Statement, any post-effective amendment or amendments thereto and any Rule
462(b) Registration Statement became or become effective.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.

"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.

"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(i)(a) above and any preliminary prospectus
included in the Registration Statement at the Effective Date that
omits Rule 430A Information.

"Prospectus" shall mean the prospectus relating to the Securities
that is first filed pursuant to Rule 424(b) after the Execution Time or,
if no filing pursuant to Rule 424(b) is required, shall mean the form of
final prospectus relating to the Securities included in the Registration
Statement at the Effective Date.

"Registration Statement" shall mean the registration statement
referred to in paragraph 1(i)(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in
the event any post-effective amendment thereto or any Rule 462(b)
Registration Statement becomes effective prior to the Closing Date, shall
also mean such registration statement as so amended or such Rule 462(b)
Registration Statement, as the case may be. Such term shall include any
Rule 430A Information deemed to be included therein at the Effective Date
as provided by Rule 430A.

"Rule 424", "Rule 430A" and "Rule 462" refer to such rules under the
Act.

"Rule 430A Information" shall mean information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.

"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the registration statement referred to
in Section 1(a) hereof.

<PAGE>
21

If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Underwriters.

Very truly yours,

BENCHMARK ELECTRONICS, INC.,

by
_________________________________
Name:
Title:

MASON & HANGER CORPORATION,

by
__________________________________
Name:
Title:

<PAGE>
22

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

SALOMON SMITH BARNEY INC.
BANCBOSTON ROBERTSON STEPHENS INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SG COWEN SECURITIES CORPORATION

By: SALOMON SMITH BARNEY INC.,

by
____________________________
Name:
Title:

For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.

<PAGE>
SCHEDULE I

NUMBER OF UNDERWRITTEN SECURITIES
UNDERWRITERS TO BE PURCHASED
- ------------ ---------------------------------

Salomon Smith Barney Inc.

BancBoston Robertson Stephens Inc.

Donaldson, Lufkin & Jenrette Securities
Corporation

SG Cowen Securities Corporation

----------------
Total 4,000,656
================

<PAGE>
SCHEDULE II

MAXIMUM NUMBER OF
NUMBER OF UNDERWRITTEN OPTION SECURITIES
SELLING STOCKHOLDERS: SECURITIES TO BE SOLD TO BE SOLD
- --------------------- ---------------------- ------------------
Mason & Hanger 1,000,656 -0-
Corporation
2355 Harrodsburg Road
Lexington, Kentucky
40504

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

Total ================ ================

<PAGE>
[FORM OF LOCK-UP AGREEMENT] EXHIBIT A

[LETTERHEAD OF OFFICER, DIRECTOR OR MAJOR STOCKHOLDER OF
CORPORATION]

BENCHMARK ELECTRONICS, INC.
PUBLIC OFFERING OF COMMON STOCK

[ ], 1999

Ladies and Gentlemen:

This letter is being delivered to you in connection with the
proposed Underwriting Agreement (the "Underwriting Agreement"), among Benchmark
Electronics, Inc., a Texas corporation (the "Company"), Mason & Hanger
Corporation, a West Virginia corporation and you as representatives of a group
of Underwriters named therein, relating to an underwritten public offering of
Common Stock, $0.10 par value (the "Common Stock"), of the Company.

In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned will not, without the prior written
consent of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge or
otherwise dispose of, (or enter into any transaction which is designed to, or
might reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, including the filing (or participation in the filing of) a
registration statement with the Securities and Exchange Commission in respect
of, or establish or increase a put equivalent position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder with respect to, any
shares of capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for such capital stock, or publicly announce an
intention to effect any such transaction, for a period of 90 days after the date
of the Underwriting Agreement, other than shares of Common Stock disposed of as
bona fide gifts approved by Salomon Smith Barney Inc.

<PAGE>
2

If for any reason the Underwriting Agreement shall be terminated
prior to the Closing Date (as defined in the Underwriting Agreement), the
agreement set forth above shall likewise be terminated.

Yours very truly,

[SIGNATURE OF OFFICER, DIRECTOR OR MAJOR
STOCKHOLDER]

[NAME AND ADDRESS OF OFFICER, DIRECTOR
OR MAJOR STOCKHOLDER]

EXHIBIT 5

May 6, 1999

Benchmark Electronics, Inc.
3000 Technology Drive
Angleton, Texas 77515

Ladies and Gentlemen:

We have acted as counsel to Benchmark Electronics, Inc., a Texas corporation
(the "Company"), in connection with the proposed sale of 3,000,000 shares
(3,600,098 if the over-allotment option granted to the underwriters is exercised
in full) (the "Shares") of its Common Stock, par value $0.10 per share (the
"Common Stock").

A Registration Statement on Form S-3 (Registration No. 333-77567) (including all
amendments thereto, the "Registration Statement") relating to the Shares and to
shares of Common Stock to be sold by the Selling Shareholder named in the
Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended.

We have examined originals or copies of (1) the Registration Statement; (2) the
Articles of Incorporation of the Company, as amended; (3) the Bylaws of the
Company, as amended; (4) certain resolutions of the Board of Directors of the
Company; and (5) such other documents and records as we have deemed necessary
and relevant for purposes hereof. In addition, we have relied on certificates of
officers of the Company as to certain matters of fact relating to this opinion
and have made such investigations of law as we have deemed necessary and
relevant as a basis hereof.

We have assumed the genuineness of all signatures, the authenticity of all
documents, certificates and records submitted to us as originals, the conformity
to original documents, certificates and records of all documents, certificates
and records submitted to us as copies, and the truthfulness of all statements of
fact contained therein.

Based on the foregoing, and subject to the limitations set forth herein, and
having due regard for such legal considerations as we deem relevant, we are of
the opinion that:

<PAGE>
Benchmark Electronics, Inc.
May 6, 1999
Page 2

1. The Shares have been duly authorized and (subject to the
Registration Statement becoming effective and applicable Blue Sky
laws being complied with), when issued against receipt of the
consideration therefor in the manner contemplated by the
Registration Statement, will be legally issued, fully paid and
nonassessable; and

2. The shares of Common Stock to be sold by the Selling Shareholder
are, and upon sale will be, legally issued, fully paid and
nonassessable.

The foregoing opinion is based on and is limited to the law of the State of
Texas and the relevant law of the United States of America, and we render no
opinion with respect to the laws of any other jurisdiction.

We hereby consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement and to the reference to
us under "Legal Matters" in the Prospectus included in the Registration
Statement. By giving such consent we do not admit that we are experts with
respect to any part of the Registration Statement, including this exhibit,
within the meaning of the term "expert" as used in the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission issued thereunder.

Very truly yours,

Bracewell & Patterson, L.L.P.

/pd

EXHIBIT 23.2

ACCOUNTANTS' CONSENT

The Board of Directors
Benchmark Electronics, Inc.

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

KPMG LLP

Houston, Texas
May 7, 1999