Benchmark Electronics (BHE)

Long-Term Incentive Compensation

In 2008, long-term incentive compensation of the executive officers took the form of stock option and restricted stock awards. The Compensation Committee believes that stock options, restricted stock and other methods of equity-based incentive compensation are critical in motivating the long-term creation of shareholder value because methods of equity-based incentive compensation focus executive attention on share price as the primary measure of the Company’s overall performance. In February 2008, the Compensation Committee approved a new approach to long-term incentive compensation in which the mix of equity-based incentives would include restricted stock awards. Previous long-term incentive compensation consisted of stock options only. Under this approach, the Compensation Committee will issue a portion of the annual long-term incentive compensation in the form of restricted stock awards. The Compensation Committee grants stock options at not less than 100% of the fair market value of the common shares on the date of grant. Because stock options provide value only in the event of share price appreciation, the Compensation Committee believes these awards are, by their nature, performance-based and are an important component of our executive compensation program. Although management may recommend the number of shares to be covered by equity awards granted to employees, the Compensation Committee approves the grant of all equity awards and does not delegate the timing of such grants. Equity award grants to our Chief Executive Officer and other executive officers are not made automatically each year. The amount and terms of equity awards already held by an executive officer generally are not significant factors in the Compensation Committee’s determination of whether and how many equity awards should be granted to the executive officer. Approximately 80% of the equity awards granted since 2000 have been granted to employees who are not executive officers. We believe that through our broad-based plan, the economic interests of our employees, including our executives, are more closely aligned to those of the shareholders. Equity award grants provide an incentive that focuses the executives’ attention on managing the Company from the perspective of an owner with an equity stake in the business.

Long-Term Incentive Compensation

        In 2007, long-term incentive compensation of executive officers took the form of stock option awards. The Compensation Committee believes that stock options and other methods of equity-based incentive compensation are critical in motivating the long-term creation of shareholder value because methods of equity-based incentive compensation focus executive attention on share price as the primary

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measure of the Company's overall performance. The Compensation Committee grants stock options at not less than 100% of the fair market value of the Common Stock on the date of grant. Because stock options provide value only in the event of share price appreciation, the Compensation Committee believes these awards are, by their nature, performance-based and are an important component of our executive compensation program. Although management may recommend the amount of stock options granted to employees, the Compensation Committee approves the grant of all stock options and does not delegate the timing of stock option grants. The Compensation Committee approves the number of shares to be covered by options granted to its employees and executive officers, including the Chief Executive Officer. Stock option grants to our Chief Executive Officer and other executive officers are not made automatically each year. The amount and terms of options already held by an executive officer generally are not significant factors in the Compensation Committee's determination of whether and how many options should be granted to the executive officer. Approximately 81% of the stock options granted since 2000 have been granted to employees who are not executive officers. We believe that through our broad-based plan, the economic interests of our employees, including our executives, are more closely aligned to those of the shareholders. Stock option grants provide an incentive that focuses the executives' attention on managing the Company from the perspective of an owner with an equity stake in the business. Accordingly, these stock options are tied to the future performance of the Company's Common Shares and provide value to the recipient only when the price of the Company's Common Shares increase above the option grant price.

        The Company's executive officers who are also Directors are subject to a minimum share ownership requirement. Within three years after joining the Board, each Director is required to directly own common shares of the Company with a market value of at least $100,000. Messrs. Fu, Nigbor and Barton are in compliance with this ownership requirement.

        In February 2008, the Compensation Committee approved a new approach to long-term incentive compensation in which the mix of equity-based incentives would include restricted stock awards. Previous long-term incentive compensation consisted of stock options only. Under this approach, the Compensation Committee will issue a portion of the annual long-term incentive compensation in the form of restricted stock awards.

        On March 17, 2008, the Company entered into restricted stock agreements pursuant to which Mr. Fu, Mr. Adam and Ms. Delly each received 8,500, 4,000 and 6,000 restricted common shares, respectively, of the Company. The restricted common shares vest as follows (i) 50% on March 17, 2010, (ii) 25% on March 17, 2011 and (iii) 25% on March 17, 2012. The vesting of each tranche of restricted common shares for each executive is subject to the continued employment of such executive by the Company.

Long-Term Incentive Compensation

In 2006, long-term incentive compensation of executive officers took the form of stock option awards. The Compensation Committee believes that stock options and other methods of equity-based incentive compensation are critical in motivating the long-term creation of shareholder value because methods of equity-based incentive compensation focus executive attention on share price as the primary measure of the Company’s overall performance. The Compensation Committee grants stock options at not less than 100% of the fair market value of the Common Stock on the date of grant. Because stock options provide value only in the event of share price appreciation, the Compensation Committee believes these awards are, by their nature, performance-based and are an important component of our executive compensation program. Although management may recommend the amount of stock options granted to employees, the Compensation Committee approves the grant of all stock options and does not delegate the timing of stock option grants. The Compensation Committee approves the number of shares to be covered by options granted to its employees and executive officers, including the Chief Executive Officer. Stock option grants to our Chief Executive Officer and other executive officers are not made automatically each year. The amount and terms of options already held by an executive officer generally are not significant factors in the Compensation Committee’s determination of whether and how many options should be granted to the executive officer. Approximately 81% of the stock options granted since 2000 have been granted to employees who are not executive officers. We believe that through our broad-based plan, the economic interests of our employees, including our executives, are more closely aligned to those of the shareholders. Stock option grants provide an incentive that focuses the executives’ attention on managing the Company from the perspective of an owner with an equity stake in the business. Accordingly, these stock options are tied to the future performance of the Company’s Common Shares and provide value to the recipient only when the price of the Company’s Common Shares increase above the option grant price.

The Company’s executive officers who are also Directors are subject to a minimum share ownership requirement. Within three years after joining the Board, each Director is required to directly own common shares of the Company with a market value of at least $100,000. Messrs. Fu, Nigbor and Barton are in compliance with this ownership requirement.