UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.    )

 

Check the appropriate box:

 

BENCHMARK ELECTRONICS, INC.

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  

BENCHMARK ELECTRONICS, INC.

 

3000 Technology Drive

Angleton, Texas 77515

 

NOTICE OF 2015 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON TUESDAY, MAY 12, 2015

 

Shareholders of Benchmark Electronics, Inc.:

 

The 2015 annual meeting of shareholders of Benchmark Electronics, Inc. (the “Company”) will be held at the Four Seasons Hotel Houston, 1300 Lamar Street, Houston, Texas, on Tuesday, May 12, 2015, beginning at 9:00 a.m. local time, for the following purposes:

 

1.     to elect eight directors to serve on the Board of Directors until the 2016 annual meeting of shareholders and until their successors are duly elected and qualified;

 

2.       to vote on a proposal to reapprove the material terms of the performance goals under the Company’s 2010 Omnibus Incentive Compensation Plan for purposes of Section 162(m) of the Internal Revenue Code;

 

3.       to provide an advisory vote on the compensation of the Company’s named executive officers;

 

4.       to ratify the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2015; and

 

5.       to transact such other business as may properly come before the meeting or any adjournment thereof.

 

Shareholders of record at the close of business on March 13, 2015 are entitled to notice of and to vote at the meeting and any adjournment thereof.  You are cordially invited to attend the meeting.

 

 

 

  

 

Angleton, Texas

April 2, 2015

 

YOUR VOTE IS IMPORTANT.

 

Regardless of whether you plan to attend the meeting, please act promptly to vote your shares.  You may vote in person or by using a proxy as follows:

 

·         By internet: Go to www.proxyvote.com.  Please have the notice we sent to you in hand because it has your personal control number(s) needed for your vote.

·         By telephone: Call 1-800-690-6903 on a touch-tone phone.  Please have the notice we sent to you in hand because it has your personal control number(s) needed for your vote.

·         By mail: Please request written materials as provided in the Notice of Availability of Proxy Materials, then complete, sign, and date the proxy card and return it to the address indicated thereon.

 

Your proxy is revocable at any time before it is voted at the meeting.

BENCHMARK ELECTRONICS, INC.

3000 Technology Drive

Angleton, Texas  77515

(979) 849-6550

 

April 2, 2015

 

________________________

 

PROXY STATEMENT

FOR

2015 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON TUESDAY, MAY 12, 2015

 

________________________

 

INTRODUCTION

 

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Company’s Board of Directors (the “Board”) for use at the 2015 annual meeting of shareholders of the Company to be held on Tuesday, May 12, 2015 beginning at 9:00 a.m. local time, and any adjournment thereof (the “Meeting”) for the purposes set forth in this Proxy Statement and the accompanying Notice.  It is anticipated that this Proxy Statement, the Notice and the enclosed form of proxy will be sent to shareholders on or about April 2, 2015.

 

Proxies

 

Proxies properly submitted by internet, telephone or otherwise properly executed and received by the Company before or at the Meeting and not revoked will be voted in accordance with the directions set forth therein.  If no direction is made, a proxy that is properly submitted and received by the Company and not revoked will be voted:

-    FOR  the election of all nominees for director named herein to serve on the Board until the 2016 annual meeting of shareholders and until their successors are duly elected and qualified,

 

-    FOR  the reapproval of the material terms of the performance goals under the Company’s 2010 Omnibus Incentive Compensation Plan (the “Omnibus  Plan”) for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), 

 

-    FOR  the resolution approving the named executive officer compensation (“Say-on-Pay”) for 2014 as disclosed in this proxy statement, and

 

-    FOR  the ratification of the appointment of KPMG LLP (“KPMG”) as the independent registered public accounting firm of the Company for the year ending December 31, 2015.

 

If any other matter, not known or determined at the time of the solicitation of proxies, properly comes before the Meeting, the proxies will be voted in accordance with the discretion of the person or persons voting the proxies. 

 

The proxy also confers on the persons named therein discretionary authority to vote with respect to any matters presented at the Meeting for which advance notice was not received by the Company prior to January 27, 2015.

 

Proxies may be revoked by written notice received by the Secretary of the Company at any time before they are voted by delivering to the Secretary of the Company a signed notice of revocation, or a later dated signed proxy, or by attending the Meeting and voting in person by ballot.

 

 

Voting Securities, Broker Nonvotes

 

Shareholders of record at the close of business on March 13, 2015 are entitled to notice of and to vote at the Meeting.  As of March 13, 2015, there were 52,542,797 shares of common stock, $0.10 par value per share (“Common Shares”), issued, outstanding and entitled to vote at the Meeting.  Each Common Share is entitled to one vote on all matters that may properly come before the Meeting.  However, shares held at your broker that are subject to a Broker Nonvote (defined below) are not deemed entitled to vote with regard to certain matters.

 

Most shareholders do not have their shares registered directly with the Company in their name; instead their shares are held in their brokerage account and voted by the broker according to the instructions submitted to them by the beneficial owner of the shares.  If you do not submit voting instructions to your broker, the broker may still be permitted to vote your shares: New York Stock Exchange (“NYSE”) member brokers may vote shares on the ratification of our independent registered public accounting firm, which is a “discretionary” item.  In contrast, the election of directors, reapproval of the material terms of the performance goals under the Omnibus Plan and the Say-on-Pay vote are “nondiscretionary” items; absent specific voting instructions from the beneficial owner, NYSE member brokers may not vote on these proposals.  The result is that the shares are represented at the meeting, but as to nondiscretionary items may not be voted (“Broker Nonvotes”).  Because they cannot be voted on those matters, they are not deemed to be entitled to vote on those matters and will not be included in the calculation of voting results for those matters (neither in the numerator nor the denominator).

 

Quorum, Voting Requirements and Other Matters

 

                The presence at the Meeting, in person or by proxy, of the holders of a majority of the outstanding Common Shares is necessary to constitute a quorum.  Common Shares represented by a proxy that is properly submitted by internet or telephone, or otherwise properly completed, signed and returned, will be counted as present at the Meeting for purposes of determining a quorum, without regard to whether the proxy is marked as withholding authority, casting a vote or abstaining, or is subject to a Broker Nonvote as to certain matters.

 

All matters specified in the notice of the Meeting require the approval of the affirmative vote of a majority of the outstanding Common Shares entitled to vote and present, in person or represented by proxy, at the Meeting. An abstention on any matter, or withholding authority to vote with respect to the election of directors, will have the effect of a vote against the proposal.  Broker Nonvotes will not affect the outcome of any proposal.

 

An Inspector of Election appointed by the Company will tabulate votes at the Meeting.

 

The Board is not aware of any matters to come before the Meeting other than those referred to in this Proxy Statement.  If any other matter properly comes before the Meeting, the proxies will be voted in accordance with the discretion of the person or persons voting the proxies.

  

PROPOSAL 1

 

ELECTION OF DIRECTORS

 

Nominees for Election

 

The following table sets forth information with respect to each nominee for election as a director of the Company.  Each nominee was proposed for reelection by the Nominating/Governance Committee for consideration by the Board and proposal to the shareholders.  The Board has reviewed the qualifications of each nominee and has determined that, other than Ms. Delly, each satisfies the (i) independence standards promulgated by the NYSE and applicable regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (ii) “non-employee director” standards set forth in such regulations, and (iii) “outside director” requirements of Section 162(m) of the Code and applicable regulations.  The information as to age, principal occupation, and directorships has been furnished by each such nominee.

 

 

Mr. Dorflinger has been a director of the Company since 1990 and Chairman of the Board since January 2013.  He is a member of the Audit and Nominating/Governance Committees.  He is a general partner of MAD Capital Partners, which focuses on private investments in oil and gas exploration, commercial property development, and early stage medical product companies.  He is the former President of GlasTech, Inc., a dental products manufacturer, a position he held from 1998-2002.  During 1998, he served as President and Chief Operating Officer of Physicians Resource Group, Inc., a physicians’ practice management company, and from 1997-1998, he served as Vice President and General Counsel of Advanced Medical Instruments, Inc., a manufacturer of medical monitoring equipment.  From 1987-1996, he served as Vice President, General Counsel and Secretary of Intermedics.  From 1990-1996, he also served as Group Vice President and General Counsel of SULZERmedica, a division of Sulzer Limited of Switzerland, composed of eight operating medical companies, including Intermedics. Mr. Dorflinger received a J.D. degree from the University of Houston and is also a director of several privately held companies.  He brings the experience of many years of service as a director of the Company and his intimate understanding of the Company and its business.

 

Mr. Dawson has been a director of the Company since 2006.  He chairs the Audit Committee and is a member of the Compensation Committee.  He was Senior Vice President, Chief Financial Officer and director of Northern Offshore, Ltd., an offshore oil and gas drilling contractor from 2008-2010.  He served as Senior Vice President and Chief Financial Officer of GlobalSantaFe Corporation from 2005-2007, as Vice President and Controller from 2003- 2005, and as Vice President and Treasurer from 2001-2003.  Previously, he served as Vice President of Investor Relations and Corporate Communications for Global Marine Inc.  A former Certified Public Accountant, Mr. Dawson joined Global Marine in 1999 after 16 years with Union Texas Petroleum Holdings, where he served as Director of Acquisitions and Portfolio Management, Director of Investor Relations and in numerous financial management positions in the Controller’s organization.  He began his career at Shell Oil Company in 1975 after receiving a B.B.A. degree from the University of Iowa.  In recommending Mr. Dawson as a nominee for

election as a director of the Company, the Nominating/Governance Committee considered his experience as a chief financial officer and related positions with various companies, all of which enhance his service on the Audit Committee and help qualify him as an “audit committee financial expert” under the rules of the Securities and Exchange Commission (the “SEC”). 

 

Ms. Delly has been a director of the Company since 2011 and has served as President and Chief Executive Officer since January 1, 2012.  From December 2006 to December 2011, she was President and from 2001 to December 2006 served as Chief Financial Officer.  She was Executive Vice President of the Company from 2004-2006, Vice President Finance from 2000-2004, Treasurer from 1996-2006, and Controller from 1996-2002. Ms. Delly holds a B.S. degree in accounting from Samford University and is a Certified Public Accountant.  She also serves as a director of Flowserve Corporation.  Ms. Delly brings to the Board her long-term experience with the Company’s business and industry.

 

Mr. Duncan has been a director of the Company since 2006 and is a member of the Audit and Nominating/Governance Committees.  He is the retired President and Chief Executive Officer of FedEx Freight Corporation, a provider of regional and interregional less-than-truckload freight services.  He was founding CEO of this stand-alone corporation for FedEx and served in that capacity from 2001-2010.  He graduated from Christopher Newport University.  In recommending Mr. Duncan as a nominee for election to the Board, the Nominating/Governance Committee considered not only his experience as a chief executive officer, but also his skills and leadership with logistics.  He also serves on the board of directors of J.B. Hunt Transport Services, Inc. and previously served on the board of Brambles LTD.

 

Mr. Lamneck has been a director of the Company since 2013 and is a member of the Audit and Compensation Committees.  Since 2010, he has been the President and Chief Executive Officer of Insight Enterprises, Inc., a global provider of information technology hardware, software and service solutions to businesses and public sector clients in over 190 countries.  He also serves as a director of Insight.  From 2004-2009, he was President, the Americas, at Tech Data Corporation, a wholesale distributor of technology products, where he led operations in the United States, Canada and Latin America.  From 1996-2003, he held various executive management positions at Arrow Electronics, including President of Arrow/Richey Electronics and President of Arrow’s Industrial Computer Products business.  Mr. Lamneck received an MBA from the University of Texas at El Paso and a Bachelor of Science from the United States Military Academy at West Point.  His experience as a chief executive officer of a global technology provider was an important consideration in the Nominating/Governance Committee’s evaluation of Mr. Lamneck’s qualifications.

 

Mr. Scheible has been a director of the Company since 2011.  He chairs the Compensation Committee and also serves on the Audit Committee.  Since 2006, he has been Chief Executive Officer, President and Director of Graphic Packaging Holding Company, a global manufacturer of custom packaging, paperboard, laminations and coatings, systems and machinery and provider of contract packaging services to multinational companies.  He was the Chief Operating Officer of Graphic Packaging from 1999-2006 and President of their Flexible Packaging Division from 1998-1999.  From 1986-1998, he served as an executive with Avery Dennison Corporation, a global manufacturer of self-adhesive products, office products and specialized label systems.  He began his career at B.F. Goodrich Corporation in 1980, and has held various positions in the manufacturing industry for more than 30 years.  Mr. Scheible received an MBA in Finance and a Bachelor of Science in Biochemistry from Purdue University.  He brings his experience as a chief executive officer of a global manufacturing entity to the Board.

 

Ms. Strom has been a director of the Company since 2004, is a member of the Compensation Committee and chairs the Nominating/Governance Committee.  She has served as Founder and Executive Chairman of WebTuner Corp., a developer of software infrastructure for next generation pay television systems since October 2014.  From 2008 until October 2014, she was Chairman and CEO.  She is a Founding Partner of Revitalization Partners LLC, an international specialty management services firm that provides hands-on interim executive management and advisory services to client companies.  She also served as a director of Ensequence, Inc., a software company that has developed a cross platform technology for interactive video across cable, satellite, broadband and mobile devices.  She has been President and Chief Executive Officer of The Strom Group, an investment and business advisory firm, since 1990.  In 2000, she was President of InfoSpace.com Ventures, LLC, the venture capital arm of InfoSpace.com, Inc., a global provider of information and commerce infrastructure services for wireless devices and web sites.  From 1998 to 1999, she was President and Chief Operating Officer of InfoSpace.com, Inc.  From 1997 to 1998, she was CEO of Walker Digital and its first spin-out, priceline.com.  From 1995 to 1997, she was President and Chief Executive Officer of HD Radio (formerly USA Digital Radio Partners,

LP), a radio broadcasting technology company.  Ms. Strom has served as a Director of Hughes Electronics/DirectTV, the Polaroid Corporation, Software Publishing, and other public and private companies.  She is a Trustee of the National Public Radio Foundation.  Ms. Strom received her B.S. in mathematics and history, her M.A. and her Ph.D. (ABD) in mathematics and mathematics education from New York University.  She received her MBA from the Anderson School at the University of California, Los Angeles, where she has been recognized as one its “100 Most Impactful” alumni.  She brings her extensive experience gained through her service on boards or as an officer of several companies to the Board.

 

Mr. Williams has been a director of the Company since 2008 and is a member of the Compensation and Nominating/Governance Committees.  Since May 2014, he has been Chairman of the Board, President and CEO of National Oilwell Varco, Inc., a global service provider and manufacturer of equipment for oil and gas producers.  From February-May 2014, he was a director, President and CEO, and from December 2012-February 2014, he served as President and Chief Operating Officer.  Prior to December 2012, he was their Executive Vice President and Chief Financial Officer and also served as the Chief Financial Officer of Varco International, Inc. prior to its merger with National-Oilwell.  Mr. Williams began his career at Shell Oil Company in 1985, and has held various positions in the energy industry for 30 years.  He received a B.S. degree in Civil/Geological Engineering from Princeton University and an MBA from the University of Texas at Austin.  In recommending Mr. Williams for membership on the Board, the Nominating/Governance Committee considered his experience as a chief financial officer and now chief executive officer.  The Board has determined that he qualifies as an “audit committee financial expert” under the SEC’s rules.

 

The officers of the Company are elected by, and serve at the discretion of, the Board.

 

Election Procedures; Term

 

                Directors will be elected by the affirmative vote of the holders of a majority of the outstanding Common Shares present in person or represented by proxy at the Meeting.  Unless authority to vote for the election of directors is withheld as to any or all of the nominees, all Common Shares represented by proxy will be voted for the election of the nominees.  If the authority to vote for the election of directors is withheld as to any but not all of the nominees, all Common Shares represented by any such proxy will be voted for the election of the nominees as to whom such authority is not withheld.  If a nominee becomes unavailable to serve for any reason before the election, the shares represented by proxy will be voted for such other person, if any, as may be designated by the Board.  The Board, however, has no reason to believe that any nominee will be unavailable to serve as a director.

 

                Any vacancy on the Board occurring after the election may be filled (1) by election at any annual or special meeting of the shareholders called for that purpose, or (2) by a majority of the remaining directors.  However, the remaining directors may not fill more than two such vacancies during the period between any two successive annual meetings of shareholders.  A director elected to fill a vacancy will be elected for the unexpired portion of the term of his or her predecessor.

 

                All directors will be elected to serve until the 2016 annual meeting of shareholders and until their successors are duly elected and qualified.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR  THE ELECTION OF EACH OF THE NOMINEES TO THE BOARD OF DIRECTORS.

Executive Officers

 

The executive officers of the Company are Gayla J. Delly, Donald F. Adam and Jon J. King.  See “Election of Directors — Nominees for Election” for information regarding Ms. Delly’s age, Company service and business experience.

 

Mr. Adam, 51, has been Chief Financial Officer of the Company since December 2006.  He served as Vice President and Corporate Controller from 2005-2006 and as Corporate Controller from 2002-2005.  From 1998-2002, he was Chief Financial Officer of Specialty Piping Components, Inc.  Mr. Adam holds a B.B.A. degree in accounting from the University of Texas and is a Certified Public Accountant.

 

Mr. King, 58, has been Executive VP of Global Operations and Engineering since July 2014.  Since 1996, he held various Company positions, most recently as Group President from 2003-2014, responsible for various divisions in Asia and the Americas.  Previously, he worked for Honeywell International Inc. and as a Captain in the US Army Corp of Engineers.  He has been in the contract manufacturing business for over 30 years and holds a B.S. degree from James Madison University in Geology and an MBA from the Florida Institute of Technology.

 

Corporate Governance, Committee Charters, Director Independence

 

The Company places integrity first and foremost, which has long been a part of our corporate identity.  The Company’s practices reflect corporate governance compliant with existing standards of the NYSE and the requirements of the SEC, including:

 

·         A majority of our Board members are independent of the Company and its management;

·         The independent members of the Board meet regularly without the presence of management;

·         The Audit, Compensation and Nominating/Governance Committees operate under charters that clearly establish their respective roles and responsibilities and are comprised solely of directors who meet the independence requirements established by the SEC, NYSE and Internal Revenue Service;

·         The chairman of the Audit Committee qualifies as an “audit committee financial expert”, as defined by the SEC;

·         The Audit Committee meets with management and the independent auditors to receive information concerning the design and operation of internal controls;

·         KPMG, our independent registered public accounting firm, reports directly to the Audit Committee;

·         The Company’s internal audit group reports directly to the Audit Committee periodically during the year;

·         The Company prohibits personal loans or extensions of credit to any executive officer or director;

·         The Company’s Code of Conduct applies to all employees, officers and directors;

·         The Company has a system in place to encourage and facilitate confidential and anonymous reports of compliance concerns, including to the Audit Committee; and

·         The Board operates under a set of published corporate governance guidelines.

 

The Board will continue to enhance the Company’s governance practices as new ideas and best practices emerge.  You may access our current committee charters, Code of Conduct and Corporate Governance Guidelines, on our website at www.bench.com under “Investor Relations—Corporate Governance,” or obtain copies by writing to the Corporate Secretary at Benchmark Electronics, Inc., 3000 Technology Drive, Angleton, Texas 77515, phone 979-849-6550.

 

Shareholders and other interested parties may send communications to the Board, the nonemployee directors as a group or to individual directors, in each case, care of Benchmark Electronics, Inc., 3000 Technology Drive, Angleton, Texas 77515.

 

Operation of Board of Directors and Committees, Attendance

 

The Board is responsible for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations.  The Board’s primary responsibility is to oversee the Company’s management and, in so doing, serve the best interests of the Company and its shareholders.  The Board selects, evaluates and provides for the succession of executive officers and, subject to shareholder election, directors.  It reviews and approves corporate objectives and strategies, and evaluates significant policies and proposed major commitments of

corporate resources.  It participates in decisions that have a potential major economic impact on the Company.  Management keeps the directors informed of Company activity through regular written and oral reports and through presentations at Board and committee meetings.

 

Directors are elected annually by the shareholders and hold office until their successors are duly elected and qualified.  Our Bylaws provide for a Board of Directors consisting of between five and nine members as determined from time to time by the Board.  The Board currently has eight members, all of whom are nominees for election at the Meeting.

 

NYSE rules require that the Company have a majority of independent directors.  The rules provide that no director will qualify as “independent” unless the Board affirmatively determines that the director has no material relationship with the Company and its subsidiaries, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company.  In evaluating each director’s independence, the Board considers the NYSE rules as well as all facts and circumstances deemed relevant.  As of the date of this Proxy Statement, the Board has determined that each nominee other than Ms. Delly, our President and CEO, is “independent.”  The Board determined that each independent director had no material relationship with the Company or management other than as a director or shareholder, and that none of the express disqualifications contained in the NYSE rules apply to any of them.  In making this determination, the Board considered any transactions, relationships and arrangements as required by the NYSE listing requirements.

 

The Board oversees an enterprise-wide approach to risk management.  The Board seeks not only to understand the risks facing the Company and management’s approach to address them, but also actively decides on the levels of risk appropriate for the Company when designing and implementing its business strategy.  In achieving this objective, the full Board participates in an annual enterprise risk management assessment.  In this process, risk is assessed throughout the business, focusing on six primary areas: financial, legal/compliance, operational/transactional, customer services/reputation, information technology/security and inherent (other) risks.  In addition to reviewing risk with the full Board at least annually, the independent directors discuss risk management during nonmanagement executive sessions led by the Chairman of the Board.

 

While the Board has the ultimate oversight responsibility for the risk management process, committees of the Board have also been entrusted with responsibility for risk management.  In particular, the Audit Committee focuses on assessing and mitigating financial reporting risk, including internal controls, and receives an annual risk assessment report from the Company’s internal auditor and quarterly reports on identified risk areas.  In setting compensation, the Compensation Committee also strives to create incentives that encourage a level of risk taking consistent with the Company’s business strategy.

 

The Board held five meetings during 2014.  Each director attended at least 75% of the Board meetings, as well as the committee meetings held during their tenure thereon.  Ms. Delly, who serves as President and CEO of the Company, does not vote or participate in portions of Compensation Committee meetings that determine, or Board meetings that ratify, her compensation.  In addition to committee meetings, the nonemployee directors regularly meet in executive session without members of management present, including Ms. Delly.  These sessions are currently held either before, after or otherwise in conjunction with the Board’s regularly scheduled meetings.  Additional executive sessions can be scheduled at the request of the nonemployee directors.

 

The Board has Audit, Compensation and Nominating/Governance Committees.

 

The Audit Committee, consisting of Messrs. Dawson, Dorflinger, Duncan, Lamneck and Scheible, met 11 times during 2014.  Mr. Dawson chairs the committee and qualifies as an “audit committee financial expert” under the rules of the SEC.  An “audit committee financial expert” is defined as a person who has the following attributes: (i) an understanding of generally accepted accounting principles and financial statements; (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to the breadth and complexity of issues that can reasonably be expected in the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities; (iv) an understanding of internal controls and procedures for financial reporting; and (v) an understanding of audit committee functions.  The principal function of the committee is to assist the Board in fulfilling its responsibility to oversee (i) management’s conduct of the Company’s financial reporting process (including management’s development and maintenance of systems of internal accounting and financial controls),

(ii) the integrity of the Company’s financial statements, (iii) the Company’s compliance with legal and regulatory requirements and ethical standards, (iv) the qualifications and independence of the Company’s outside auditors and (v) the performance of the Company’s internal audit function and the outside auditors.  The committee also prepares the audit committee report required by the rules of the SEC to be included in the Company’s annual proxy statement.  Additional information regarding the functions performed by the committee is set forth below in the “Report of the Audit Committee.”

 

The Compensation Committee, consisting of Messrs. Dawson, Lamneck, Scheible and Williams and Ms. Strom, met four times during 2014.  The principal functions of the committee are to (i) oversee the administration of the compensation plans, in particular the incentive compensation and equity-based plans, of the Company (and, to the extent appropriate, the subsidiaries of the Company), (ii) discharge the Board’s responsibilities relating to the compensation of the Company’s executives, (iii) review and make recommendations on director compensation and (iv) prepare the annual report on executive compensation required in the Company’s annual proxy statement.  Additional information regarding the functions performed by the committee is set forth below in the “Report of the Compensation Committee.”

 

The Nominating/Governance Committee, consisting of Messrs. Dorflinger, Duncan, Williams and Ms. Strom, met four times during 2014.  The principal functions of the committee are to (i) identify individuals qualified to become Board members and recommend such individuals to the Board for nomination for election to the Board, (ii) make recommendations to the Board concerning committee appointments, (iii) develop, recommend and annually review corporate governance guidelines for the Company, (iv) oversee corporate governance matters, and (v) coordinate an annual evaluation of the Board, including each committee and each member of the Board.

 

To be considered by the Nominating/Governance Committee, a director nominee should have experience as a board member or senior executive of a public company or nationally recognized private company.  In addition to these minimum requirements, the committee will also evaluate whether the nominee’s skills are complementary to the incumbent Board members’ skills and the Board’s needs for operational, management, financial, international, technological or other expertise.  In addition, although there is no specific policy on considering diversity, the Board and the committee believe that the Board membership should reflect diversity in its broadest sense, including geography, gender, ethnicity, viewpoint, education, skills and professional experience.  The committee typically retains a search firm to identify and screen the candidates, do reference checks, prepare a biography for each candidate for the committee’s review and coordinate interviews.  The committee, the Chairman of the Board and executive officers interview candidates that meet the criteria, and the committee selects nominees who best suit the Board’s needs.  The committee will consider for nomination to the Board candidates suggested by shareholders, provided that recommendations are submitted and received by us at our principal executive offices at 3000 Technology Drive, Angleton, Texas 77515, with an appropriate biographical summary, in accordance with the requirements described below under “Date of Submission of Shareholder Proposals.”

 

The Board does not have a written policy requiring members to attend the annual shareholders meetings, although all members have traditionally attended.  We anticipate that all of our directors will attend the Meeting.

 

Certain Transactions

 

The Board reviews Related-Party Transactions (as defined below) in which the Company is or will be a participant to determine if they are in the best interests of our shareholders and the Company.  Financial transactions, arrangements, relationships or any series of similar transactions, arrangements or relationships in which a Related Party (as defined below) had or will have a direct or indirect material interest and that exceed $120,000 (“Related-Party Transactions”) are subject to the Board’s review.  “Related Parties” are directors, director nominees, executive officers, holders of 5% or more of our Common Shares and their immediate family members.  Immediate family members are children, stepchildren, spouses, parents, siblings, stepparents, mothers-in-law, fathers-in-law, brothers-in-law, sisters-in-law, daughters-in-law, sons-in-law and any person, other than a tenant or domestic employee, in the household of a director, director nominee, executive officer or holder of 5% or more of our Common Shares.

 

The Board does not have a written policy regarding Related-Party Transactions.  The Board does not believe a written policy is necessary because the Board has not approved, and does not expect to approve, the Company’s engagement in any Related-Party Transactions other than in rare circumstances.  Any Related-Party Transaction would be considered on a stand-alone basis based on facts and circumstances at the time.  After review,

the Board would decide whether to approve a Related-Party Transaction that is in, or is not inconsistent with, the best interests of the Company and its shareholders, as the Board determines in good faith.

 

Compensation Committee Interlocks and Insider Participation

 

Each member of the Board’s Compensation Committee is independent, and no member was ever employed by the Company.  None of our directors has interlocking or other relationships with other boards, compensation committees or our executive officers that require disclosure under Item 407(e)(4) of Regulation S-K.

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Philosophy and Objectives

 

Our executive compensation program is designed to:

 

·         Attract, retain and reward high-caliber management talent;

·         Incentivize the achievement of both the Company’s short-term and long-term operating objectives and strategic plan;

·         Be transparent, fair, objective and, to the extent practical, formulaic;

·         Encourage the taking of prudent business risks for appropriate potential long-term benefits, while avoiding excessive, unnecessary or unwise risk; and;

·         Encourage smart investment and prudent deployment of capital.

At-risk, incentive compensation commits our executives to delivering positive results over both the short- and long-terms by rewarding the achievement of those results and aligning their interests with the financial interests of our shareholders.  The Company’s target compensation opportunity is generally set in the median range of market compensation survey data and a peer group of companies (“Peer Group” further detailed below), which was selected in 2012 upon the recommendation of the Compensation Committee’s independent consultant.  Our compensation program is designed to deliver above-median compensation for above-median performance and below-median compensation for below-median performance.

 

In order to more closely align the financial interests of our executive officers with that of our shareholders, we have (i) share ownership guidelines requiring our executives to acquire a long-term ownership stake in the Company (see “Share Ownership Guidelines”), (ii) a practice of making all board-level compensation decisions (base salary adjustments, annual bonuses, and long-term equity-based incentives) on a single day to reinforce performance feedback to the executives (see “Timing of Compensation Decisions”), and (iii) a performance-based restricted stock unit (“PSU”) component in our compensation program, to more closely tie pay to performance.  The vesting of PSUs depends on the Company’s achievement of financial goals set by the Compensation Committee and derived from the Company’s overall financial objectives, which for 2014 included goals relating to annual revenue growth rate, operating income margin, and return on invested capital over a four-year period (see “Long-Term Equity-Based Incentive Compensation”).  The performance cycle for the PSUs awarded in 2011 concluded in December 2014 and resulted in no shares being issued under the awards.

 

The primary components of our executive compensation program, described in more detail below, are (i) base salary, (ii) annual performance-based incentive compensation, and (iii) long-term incentive (“LTI”) compensation comprised of restricted stock units (“RSUs”), PSUs and stock options:

 

·         Base Salary, which pays a set level of monthly cash income to the executive, generally within the median range of the Peer Group.

·         Annual Performance-Based Incentive Award, which pays a variable cash award to reward good short-term operational performance, which in 2014 was based on sales, earnings per share and inventory turn targets set by the Compensation Committee at the beginning of each year.

·         RSUs, which typically vest over a four-year period, are awarded to retain management and permit each executive to steadily build an ownership stake in the Company to encourage the creation of long-term shareholder value.

·         PSUs, designed to reward performance and accelerate the executive’s ownership stake, subject to the achievement of specific long-term financial objectives generally over a four-year period.

·         Stock Options, which directly align the interests of executives with the financial interest of our shareholders by increasing in value to the executive with the increase in value of our Common Shares, typically over a four-year vesting period and as long as the executive holds the options.

Three of the components—Annual Incentive Awards, PSUs, and Stock Options—are “at-risk”: they have value only if the Company’s financial objectives are achieved or the value of the Company’s Common Shares rises.  The Company believes that the design of these at-risk components closely aligns executive pay with performance beneficial to the Company and its shareholders.

 

Role of Compensation Committee

 

The Compensation Committee is responsible for reviewing and approving all salary and annual incentive compensation paid to officers of the Company who are subject to Section 16 of the Exchange Act (“Section 16”), including our Chief Executive Officer (or CEO) and the other executive officers named below in the Summary Compensation Table (collectively with the CEO, the “Named Executive Officers”).  The committee also approves the LTI equity compensation paid to our executives, as well as most other employees (except for certain employees not subject to Section 16 for whom the CEO has delegated authority to make certain awards).

 

The Compensation Committee has retained Pearl Meyer & Partners to serve as the committee’s independent compensation consultant (the “consultant”) and perform reviews from time to time of our executive compensation practices, as well as the compensation of our Board of Directors.  The consultant performed such a review in connection with the committee’s decisions relating to 2014 compensation.  The consultant does not provide any services on behalf of management and does not have any potential business conflicts with its role as an independent advisor.

 

Role of Management

 

Regarding most compensation matters, including executive and director compensation, management provides recommendations to the Compensation Committee; however, the committee does not delegate any of its responsibilities to others in setting compensation for the executive officers.  The Chief Executive Officer annually reviews the performance of the other executive officers, and presents her conclusions and recommendations as to salary adjustments and annual equity awards to the committee for its consideration.  The committee exercises its discretion in determining any adjustments or awards to the officers of the Company (which includes the executive officers).  The committee does not take into account any recommendations from the Chief Executive Officer with respect to her own compensation.

 

Evaluation of Say-on-Pay Advisory Vote

 

At our 2013 annual meeting, shareholders voted 91% in favor of the Named Executive Officer compensation described in the 2013 proxy statement.  With the goal of continuing to meet the approval of shareholders and remaining responsive to their concerns, we engaged our institutional investors prior to and following the 2013 annual meeting.  No significant issues with our executive compensation program were raised during these discussions.  The Compensation Committee reviewed the foregoing and determined that it indicates confirmation and overwhelming support by shareholders of the Company’s existing executive compensation policies and decisions.  Accordingly, we did not significantly change our compensation philosophy or objectives in 2014.

 

 

Competitive Market Review

 

In setting executive compensation, the Compensation Committee considers all factors it deems relevant.  The committee also considers data and recommendations presented by the consultant and/or management based on market data that provide information on the level of the total target compensation (comprised of salary, annual incentive and LTI compensation) paid to similarly positioned executives at companies in the Peer Group.  To determine the amount of compensation to be paid to each of our executives, the committee performs a subjective evaluation of:

 

·         each executive’s performance and responsibilities;

·         market survey data;

·         relativity in pay among the Company’s executive officers;

·         comparability of each executive’s role to executive officers named in the proxy statements of other companies in our Peer Group;

·         general compensation trends;

·         the Company’s financial position;

·         specific challenges faced by the executive; and

·         for each executive other than the CEO, the recommendation of the Chief Executive Officer (without assigning specific weight to each factor).

 

The committee has not established a set formula or other quantitative policy for allocating between long-term and immediately payable compensation, cash and noncash compensation, establishing the amount of equity awards or allocating equity awards between stock options, RSUs and PSUs, but rather considers compensation in total for each individual.

 

In establishing the Peer Group, the Compensation Committee evaluates peer companies selected from publicly traded companies that are major competitors or customers.  The committee seeks to select peer companies that are comparable to Benchmark based on various criteria, including revenue, market capitalization, similar industry affiliation, scope of global operations and a belief that these companies compete for similar executive talent.  The Peer Group used in setting compensation for 2014 was selected by the committee in 2012 based on a recommendation from the consultant.  The companies involved included entities with revenues between $0.8 billion and $6.8 billion, manufacturers and companies in the electrical components, systems software, semiconductor components and electronics manufacturing services industries.  The Peer Group consisted of the following:

 

 

Timing of Compensation Decisions

 

In order to reinforce performance feedback through compensation, the Compensation Committee makes executive compensation decisions in the first quarter of each year.  The committee reviews and approves stock-based awards to all eligible employees, including executive officers, once a year, on the date of the committee’s regularly scheduled first quarter meeting.  Stock options granted at that time have an exercise price equal to the closing price of the Common Shares on that date.  The Company believes that the practice of granting stock-based awards in the first quarter of each year is reasonable when followed on a consistent basis each year and reduces the risk of inadvertently timing the grant of such awards with the release of material nonpublic information.

2014 Compensation

 

In assessing the 2013 individual performance of Ms. Delly and Mr. Adam, which was the basis for setting their 2014 compensation, the Compensation Committee noted that each gave exceptional focus on improving the Company’s net sales, net income, operating margin and earnings per share.

 

·         Under Ms. Delly’s leadership, the Company completed the strategic acquisitions of Suntron Corporation (two manufacturing facilities and approximately 500 employees) and the EMS segment of CTS Corporation (which included five manufacturing facilities and approximately 1,000 employees).  Also under Ms. Delly’s leadership, the Company continued enhancing its quality management system, which includes continuous improvement activities, such as lean manufacturing initiatives.

·         Under Mr. Adam’s leadership as CFO, the Company managed its capital structure by effecting the acquisitions noted above for cash, returning over $40 million to shareholders by repurchasing Common Shares, continuing its expense reduction efforts, and maintaining strong income from operations performance and proper internal controls and financial compliance.

 

The Compensation Committee did not set the 2014 base salary or approve the annual performance-based incentive award for Mr. King, who became an executive officer in July 2014.  The committee did approve his award of RSUs and PSUs.  His promotion resulted in part from his performance as a Group President in 2013, where he successfully oversaw the Company’s engineering and managed its operations in the Americas.  The committee did set the base salary and approve the other awards for Kenneth S. Barrow; Mr. Barrow left the Company in May 2014 and forfeited such awards.

 

Base Salary Compensation

 

The Compensation Committee reviews base salaries for executive officers annually.  In making salary determinations, the committee considers the terms of any employment contract with the executive, the recommendations of the Chief Executive Officer (as to executive officers other than the CEO), salary norms for persons in comparable positions in the Peer Group, the executive’s experience and scope of responsibility, and the committee’s assessment of the executive’s individual past and potential future contribution to the Company’s results (without assigning a specific weight to each factor).  During its review of base salaries for executives for 2014, the committee primarily considered market data provided by the consultant, the results of a review of the executive’s compensation relative to the Company’s other executive officers, the executive’s individual performance and the committee members’ own business experience and views on appropriate compensation levels.

 

Annual Cash-Based Incentive Compensation

 

The purpose of the executive annual incentive compensation plan is to align the interests of executive officers with shareholders by motivating the executives to achieve superior financial and operational performance that increases shareholder value.  Incentive bonuses are generally granted based on a percentage of each executive’s base salary earned during the year.  Targets under the executive annual incentive plan for 2014 were set by the Compensation Committee in the first quarter of 2014.  Our practice is to award cash incentive bonuses based on the attainment of corporate performance goals.  The following table sets forth the threshold, target, incremental and maximum performance goals with respect to 2014 financial results of the Company for each of the executive officers:

                               

 

⁽¹⁾        Earnings per share before special items excludes restructuring charges, integration and acquisition-related costs and final Thailand flood-related items.

 

⁽²⁾        Inventory turns was calculated as cost of sales divided by average inventory for each of the four quarters ended December 31, 2014.

 

The following table sets forth the potential 2014 threshold, target, incremental and maximum cash incentive payment levels, as a percentage of salary, for the Named Executive Officers based on the Company’s achievement of each of the three performance goals above.  Below the threshold, no award is earned; achievements between the different levels are paid ratably:

  

 

The total incentive award is determined according to the level of achievement of the aggregate corporate performance goals.  The maximum incentive bonus for these executive officers was 200% for Ms. Delly and 125% for Messrs. Adam, King and Barrow.

 

At its first quarter 2015 meeting, the Compensation Committee determined the extent to which the 2014 performance goals were achieved and approved the amount to be paid to each executive.  The committee determined that the Company had exceeded threshold performance in earnings per share before special items and revenue and exceeded target level performance in inventory turns.  The table below sets forth the incentive award earned and the corresponding percentage of 2014 salary that the amount represented.

  

                               

 

⁽¹⁾        Ms. Delly’s incentive payment consisted of the following percentages for each performance goal: 34.0% for earnings per share before special items, 43.0% for inventory turns and 37.3% for revenue.

 

⁽²⁾        Messrs. Adam and King’s incentive payments consisted of the following percentages for each performance goal: 23.3% for earnings per share before special items, 28.3% for inventory turns and 24.6% for revenue.

 

⁽³⁾        Mr. Barrow left the Company in May 2014 and received no incentive payment for the year.

 

Long-Term Incentive Compensation

 

The Compensation Committee believes that our LTI compensation, which is equity-based, is critical in motivating increases in shareholder value over the longer term because it focuses executive attention on share price as the primary measure of the Company’s overall performance.  In 2014, the committee awarded executive officers a combination of stock options, RSUs and PSUs under the Omnibus Plan (in each case, as further described below).  To determine the awards for each executive, the committee evaluated each executive’s performance and responsibilities, and also considered market data, relative pay among the Company’s executive officers and other factors (without assigning a specific weight to each factor).  The evaluation was made with significant input from our Chief Executive Officer, and also factored in the future potential contribution from each executive according to the Company’s long-term and emergency succession plans.  Although management recommended the number of shares to be covered by equity awards granted to employees, the committee approved the grant of all equity awards and did 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

executives generally are not significant factors in the committee’s determination of whether and how many equity awards should be granted to the executives.

 

Stock Options - 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 committee believes these awards are, by their nature, performance-based and are an important component of our executive compensation program.

 

RSUs - Long-term equity-based incentive compensation awards also include time-based awards, which vest over four years, to improve retention of executives and to enable a steadily growing ownership stake in the Company that encourages long-term strategic performance.

 

PSUs – The committee believes the PSUs, which generally vest over four years subject to the achievement of measurable, absolute financial goals, enable management to build a meaningful ownership stake in the Company to encourage long-term strategic thinking and the avoidance of unnecessary or excessive risk taking.  The financial goals are set by the Compensation Committee, and in order to receive any payment, the Company is required to exceed the following fiscal 2014 thresholds: an annual revenue growth rate of 8.3%; operating income margins of 4.6%; and return on invested capital of 8.2%.

 

The long-term equity-based incentive compensation awards made in the first quarter of 2014 were evenly balanced, with approximately one-third of the total value awarded in stock options, RSUs and PSUs, respectively.  Ms. Delly also received certain additional grants as detailed below in “Compensation Tables and Narratives– Grants of Plan-Based Awards”.

 

Deferred Compensation Benefits

 

In order to attract and retain key employees, the Company established the Benchmark Electronics, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”), which allows certain designated employees, including our Named Executive Officers, the opportunity to defer, on a pretax basis, their salary, bonus awards, and other specified compensation and to receive the deferred amounts, together with an investment return (positive or negative), either at a predetermined time in the future or upon termination of employment with the Company.  The Company intends that the Deferred Compensation Plan will at all times be maintained on an unfunded basis for federal income tax purposes under the Code, and be administered as a nonqualified ‘‘top-hat’’ plan exempt from the substantive requirements of the Employee Retirement Income Security Act.  All contributions to the Deferred Compensation Plan, as well as any matching contributions, are fully vested upon contribution.

 

Retirement Benefits

 

All employees in the United States, including the executive officers, are eligible to participate in the Company’s 401(k) Employee Savings Plan (the “Savings Plan”).  The Savings Plan is a defined contribution tax-qualified retirement savings plan pursuant to which employees are able to contribute a portion of their eligible cash compensation to the Savings Plan and the Company provides matching cash contributions up to 4% of the employees’ eligible compensation.  All contributions to the Savings Plan, as well as any matching contributions, are fully vested upon contribution.

 

Perquisites and Personal Benefits

 

The Company offers only minimal perquisites or other personal benefits to executive officers, consisting primarily of a portion of the cost of financial planning services, health club memberships and annual physical exams.

  

Other Matters

 

Share Ownership Guidelines

 

Our senior officers are subject to a share ownership requirement implemented in 2008.  During their term of employment with the Company, these officers are expected to directly own Common Shares having a market value of at least (a) 3x annual base salary for the President or Chief Executive Officer and (b) 2x annual base salary for the other senior officers.  Any senior officers who have not yet achieved this ownership requirement are expected to retain 20% of their stock awards.  Once achieved, the officer remains in compliance despite any decrease in the market value of the Common Shares or any increase in base salary.  Ms. Delly and Mr. Adam have met their ownership requirement.

 

Analysis of Compensation Risk

 

During 2014 our Compensation Committee conducted an analysis of potential risks posed by the Company’s compensation program to determine whether the program might encourage the executive officers to take unnecessary or excessive risks, or whether the program might encourage the manipulation of reported earnings.  As part of its analysis the committee also considered mitigating factors and controls:

  

 

 

Based on its analysis the Compensation Committee determined that our compensation program is unlikely to motivate inappropriate risk-taking.

Limits on Deductibility of Compensation

 

An income tax deduction under Section 162(m) of the Code will generally be available for annual compensation in excess of $1 million paid to certain executive officers only if that compensation is ‘‘performance-based’’ and complies with certain other requirements.  Although the Compensation Committee considers deductibility issues when approving executive compensation elements, we believe that other compensation objectives, such as attracting, retaining and providing incentives to qualified managers, are important and may supersede the goal of maintaining deductibility.  Consequently, the committee may decide to pay compensation that is not deductible when it believes it is in the best interests of the Company and shareholders to do so.

 

REPORT OF COMPENSATION COMMITTEE

 

The Compensation Committee operates under a written charter previously approved by the Board.  As required by the charter, each member of the committee is independent.  Moreover, no member of the committee has any interlocking or other relationships with the Company.

 

The committee administers our executive compensation program.  Among other things, the committee is responsible for:

 

·         establishing the compensation of our Chief Executive Officer, which is then ratified by the full Board;

·         determining the compensation of our other officers subject to Section 16, including the Named Executive Officers other than the CEO; and

·         administering our employee benefit plans.

 

The committee has reviewed and discussed the Compensation Discussion and Analysis for the year ended December 31, 2014 and other compensation disclosures in this proxy statement with management.  Based on such reviews and discussions, the committee recommended to the Board that the compensation-related disclosures made in this proxy statement be included herein and incorporated by reference into the Company’s annual report on Form 10-K for the year ended December 31, 2014.

 

Respectfully submitted,

 

Compensation Committee

 

David W. Scheible, Chair

Michael R. Dawson

Kenneth T. Lamneck

Bernee D. L. Strom

Clay C. Williams

COMPENSATION TABLES AND NARRATIVES

 

The following tables, narratives and footnotes describe the total compensation and benefits of our Chief Executive Officer and our other Named Executive Officers for 2014.

 

Summary Compensation Table

 

The following table sets forth information concerning the compensation and benefits of our Named Executive Officers during the fiscal years ended December 31, 2014, 2013 and 2012.

  

                               

 

⁽¹⁾        The amounts reflect the aggregate grant date fair value of RSU and PSU grants pursuant to the Company’s equity plans during the fiscal years ended December 31, 2014, 2013 and 2012, respectively, computed in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718.  Stock awards were valued using the closing market price of the Common Shares on the grant date.  A portion of the awards listed above are subject to performance conditions, with the grant date fair value calculated for purposes of the Stock Awards column assuming a target level of achievement.  Assuming the performance conditions will be achieved at a maximum level of 300% for grants in 2014, the grant date fair value of stock awards for each of our Named Executive Officers would be as follows:

 

 

The 2014 amounts reflect awards that the Company granted to Ms. Delly in May 2014, and the 2012 amounts exclude certain ineffective grants originally reported, each as described below in “Compensation Tables and Narratives – Grants of Plan-Based Awards”.

⁽²⁾        The amounts reflect the aggregate grant date fair value of stock option grants pursuant to the Company’s equity plans during the years ended December 31, 2014, 2013 and 2012, respectively, computed in accordance with the provisions of FASB ASC Topic 718.  Assumptions used in the calculation of this amount are included in footnote 1(m) to the Company’s audited financial statements for the year ended December 31, 2014, included in the Company’s Annual Report on Form 10−K filed with the SEC on February 27, 2015.  The 2014 amounts reflect awards that the Company granted to Ms. Delly in May 2014, and the 2012 amounts exclude certain ineffective grants originally reported, each as described below in “Compensation Tables and Narratives – Grants of Plan-Based Awards”.

⁽³⁾        The amounts shown in this column reflect cash incentive bonuses earned by our Named Executive Officers pursuant to the Company’s annual executive incentive compensation plan.  The amounts include cash bonuses earned in year of service regardless of when paid.

⁽⁴⁾        For the year ended December 31, 2014, the “All Other Compensation” column includes (a) $10,200 paid by the Company pursuant to the Company’s Savings Plan to each of our Named Executive Officers (under the Savings Plan, the Company is obligated to make matching contributions to the Savings Plan in an amount equal to 100% of each participant’s elective contributions, to the extent that such elective contributions do not exceed 4% of such participant’s eligible compensation), (b) payments by the Company to Ms. Delly and Messrs. Adam and King pursuant to the Company’s Deferred Compensation Plan as elective matching contributions and (c) payments by the Company of premiums for term life insurance on behalf of each of our Named Executive Officers.

⁽⁵⁾        Mr. King became an executive officer July 22, 2014.

⁽⁶⁾        Mr. Barrow left the Company in May 2014.

 

Employment Agreements

 

The Company has entered into employment agreements with each of the Named Executive Officers.  The agreements provide for annual base salaries, subject to increases from time to time as determined by the Compensation Committee.  These agreements are automatically extended by successive one-year terms, unless terminated by the Company or the executive.  Effective March 1, 2014, Ms. Delly’s annual base salary was $825,000, while those for Messrs. Adam, King and Barrow were $400,000, $370,000 and $370,000, respectively.

 

In addition to annual base salaries, each employment agreement provides for payment of bonuses if the Company attains or exceeds its corporate performance goals which are specified each year by the Compensation Committee.  A more detailed discussion of the corporate performance goals and these bonuses, including the percentage of base salary and the mechanism by which the bonuses are paid and determined by the committee is set forth in “Compensation Discussion and Analysis—2014 Compensation — Annual Cash-Based Incentive Compensation”.

 

Each employment agreement also provides for severance payments if the applicable Named Executive Officer’s employment is terminated under certain qualifying circumstances.  A more detailed discussion of the severance terms is set forth in “—Potential Payments upon Termination or Change in Control”.

 

Each employment agreement contains restrictive covenants that prohibit the applicable Named Executive Officer from competing with the Company or soliciting its customers or service providers during the term of the employment agreement and for two years thereafter, as well as a confidentiality covenant of indefinite length.

 

In addition to the restrictive covenants described in the preceding sentence, Ms. Delly may not, during her period of employment and for two years thereafter, make disparaging remarks about the Company, its subsidiaries or products and services or divert customers of the Company to its competitors.

 

Grants of Plan-Based Awards

 

The Benchmark Electronics, Inc. 2000 Stock Awards Plan (the “2000 Plan”) authorized, and the Omnibus Plan authorizes, the Company, upon recommendation of the Compensation Committee, to grant a variety of types of awards, including stock options, restricted shares, RSUs, stock appreciation rights, performance compensation awards, phantom stock awards and deferred share units, or any combination thereof, to any director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of the Company.  The 2000 Plan expired in 2010 and no additional grants can be made under that plan.  The Omnibus Plan was approved by the Company’s shareholders in 2010 and replaced the 2000 Plan.  As of December 31, 2014, the Company had equity awards outstanding with respect to 3.2 million Common Shares under the Company’s 2000 and Omnibus Plans, and 4.3 million additional Common Shares are available for issuance under the Omnibus Plan.

 

As described in our 2014 proxy statement, the Compensation Committee approved a grant to Ms. Delly in 2012 of 49,899 stock options, 83,202 PSUs (assuming the performance conditions were achieved at a maximum level of 300%) and 27,734 restricted shares.  However, in 2013, the Company determined that 45,430 options, 75,750 PSUs (assuming 300% achievement) and 25,250 restricted shares were not validly granted pursuant to the Omnibus Plan because they exceeded plan limits on the maximum shares that may be granted to a participant in any fiscal year.  Accordingly, the attempted grant of such awards was ineffective, and such awards were never granted.  References in this proxy statement to Ms. Delly’s 2012 grants reflect only the awards that were validly granted.  After shareholders approved the First Amendment to the Omnibus Plan in 2014, the Compensation Committee

granted 45,430 options, 75,750 PSUs (assuming 300% achievement) and 38,669 RSUs to Ms. Delly.  Such awards were designed to replace the value of the stock options, restricted shares and PSUs granted in 2012 that were not validly granted.

 

The following table sets forth information concerning grants of nonqualified stock options and RSUs to the Named Executive Officers during 2014 under the Omnibus Plan, as well as estimated possible payouts under cash and equity incentive plans.

 

2014 Grants of Plan-Based Awards

  

 

 

 

⁽¹⁾        The information included in the “Threshold”, “Target” and “Maximum” columns represent the range of potential payout under the 2014 annual executive incentive compensation plan for the Named Executive Officers in February 2014.

⁽²⁾        The information included in the “Threshold”, “Target” and “Maximum” columns represent the range of potential shares that may be earned in respect of PSUs granted under the 2014 incentive compensation program for the Named Executive Officers in 2014.  The number of PSUs that will ultimately be earned will not be determined until the end of the performance period, which is December 31, 2017.  Shares earned will be proportionately increased in the event of attainment of performance goals at levels between “Threshold” and “Target” or “Target” and “Maximum”.

⁽³⁾        Represents closing market price of a Common Share on the option’s grant date.

⁽⁴⁾        The amounts shown in this column reflect the grant date fair value of the restricted share, PSU and stock option awards granted in 2014, as computed in accordance with FASB ASC Topic 718.  The RSUs and PSUs were valued using the closing market price of the Common Shares on the grant date.  The stock option awards were valued using the Black-Scholes option-pricing model.  Assumptions used in the Black-Scholes model are included in footnote 1(m) to the Company’s audited financial statements for the year ended December 31, 2014, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2015.

2014 Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth information concerning stock options and stock awards held by our Named Executive Officers at December 31, 2014.