DIODES
INCORPORATED
Notice
of Annual Meeting of Stockholders
To
Be Held May 17, 2006
Notice
is hereby given that the annual meeting (the “Meeting”) of the stockholders of
Diodes Incorporated (the “Company”) will be held at Renaissance Hotel, 30100
Agoura Road, Agoura Hills, California 91301, on Wednesday, May 17, 2006 at
9:00
a.m. (California time) for the following purposes:
1. |
Election
of Directors.
To
elect seven persons to the Board of Directors of the Company, each
to
serve until the next annual meeting of stockholders and until their
respective successors have been elected and qualified. The Board
of
Directors’ nominees are: C.H. Chen, Michael R. Giordano, Keh-Shew Lu, M.K.
Lu, Shing Mao, Raymond Soong and John M.
Stich.
|
2. |
Ratification
of Executive Stock Grant.
To
approve the restricted grant to Dr. Keh-Shew Lu of 180,000 shares
(270,000 shares split adjusted on December 1, 2005) of Common
Stock.
|
3. |
Amendment
of Certificate of Incorporation.
To
approve a proposed amendment of the Company’s Certificate of Incorporation
to increase the authorized number of shares of Common Stock from
30,000,000 to 70,000,000.
|
4. |
Amendment
of 2001 Omnibus Equity Incentive Plan.
To
approve various proposed amendments of the 2001 Omnibus Equity Incentive
Plan, including the increase by 2,200,000 in the number of shares
of
Common Stock which may be subject to awards granted
thereunder.
|
5. |
Ratification
of Appointment of Independent Registered Public Accounting
Firm.
To
ratify the appointment of Moss Adams LLP as the Company’s independent
registered public accounting firm for the year ended December 31,
2006.
|
6. |
Other
Business.
To
transact such other business as properly may come before the Meeting
or
any continuation, adjournment or postponement
thereof.
|
Only
persons who are stockholders of record (the “Stockholders”) at the close of
business on March 24, 2006 are entitled to notice of and to vote, in person
or
by proxy, at the Meeting or any continuation, adjournment or postponement
thereof.
The
Proxy
Statement, which accompanies this Notice, contains additional information
regarding the proposals to be considered at the Meeting, and Stockholders are
encouraged to read it in its entirety.
As
set
forth in the enclosed Proxy Statement, proxies are being solicited by and on
behalf of the Board of Directors of the Company. All proposals set forth above
are proposals of the Board of Directors. It is expected that these materials
first will be mailed to Stockholders on or about April 14, 2006.
Whether
or not you plan to attend the Meeting, please mark, date and sign the enclosed
proxy and return it promptly in the enclosed, postage-paid envelope to be sure
that your shares are voted. Your vote is important, whether you own a few shares
or many. If you attend the Meeting, you may revoke your proxy and vote your
shares in person. You may revoke your proxy at any time prior to its exercise
at
the Meeting.
Dated
at
Westlake Village, California, this fourth day
of
April 2006.
By
Order
of the Board of Directors,
DIODES
INCORPORATED
/s/
Carl
C. Wertz
Carl
C.
Wertz,
Secretary
This
page
left intentionally blank.
Diodes
Incorporated
3050
East Hillcrest Drive
Westlake
Village, California 91362
(805)
446-4800
Proxy
Statement
Annual
Meeting: May 17, 2006
GENERAL
INFORMATION
This
Proxy Statement is furnished in connection with the solicitation of proxies
by
the Board of Directors (the “Board”) of Diodes Incorporated (the “Company”) for
use at the annual meeting (the Meeting”) of the stockholders of the Company to
be held on Wednesday, May 17, 2006, at Renaissance Hotel, 30100 Agoura Road,
Agoura Hills, California 91301, at 9:00 a.m. (California time), and at any
adjournment or postponement thereof. Only stockholders of record (the
“Stockholders”) at the close of business on March 24, 2006 (the “Record Date”)
are entitled to notice of and to vote, in person or by proxy, at the Meeting
or
any adjournment or postponement thereof. The Notice of Annual Meeting of
Stockholders, this Proxy Statement and the enclosed proxy card first will be
mailed to Stockholders on or about April 14, 2006.
Matters
to be Considered:
The
matters to be considered and voted upon at the Meeting will be:
1. |
Election
of Directors.
To
elect seven persons to the Board, each to serve until the next annual
meeting of stockholders and until their respective successors have
been
elected and qualified. The Board’s nominees are: C.H. Chen, Michael R.
Giordano, Keh-Shew Lu, M.K. Lu, Shing Mao, Raymond Soong and John
M.
Stich.
|
2. |
Ratification
of Executive Stock Grant.
To
approve the restricted grant to Dr. Keh-Shew Lu of 180,000 shares
(270,000 shares split adjusted on December 1, 2005) of Common
Stock.
|
3. |
Amendment
of Certificate of Incorporation.
To
approve a proposed amendment of the Company’s Certificate of Incorporation
to increase the authorized number of shares of Common Stock from
30,000,000 to 70,000,000.
|
4. |
Amendment
of 2001 Omnibus Equity Incentive Plan.
To
approve various proposed amendments of the 2001 Omnibus Equity Incentive
Plan, including the increase by 2,200,000 in the number of shares
of
Common Stock which may be subject to awards granted
thereunder.
|
5. |
Ratification
of Appointment of Independent Registered Public Accounting
Firm.
To
ratify the appointment of Moss Adams LLP as the Company’s independent
registered public accounting firm for the year ended December 31,
2006.
|
6. |
Other
Business.
To
transact such other business as properly may come before the Meeting
or
any continuation, adjournment or postponement
thereof.
|
Method
of Voting
Stockholders
can vote by proxy or by attending the Meeting and voting in person. A proxy
card
(the “Proxy”) is enclosed. If you vote by means of the Proxy, the Proxy must be
completed, signed and dated by you or your authorized representative. The
completed Proxy may be returned in the postage-paid envelope provided, or by
facsimile to the Inspector of Elections at (805) 374-1255. Dr. Keh-Shew Lu
and Carl C. Wertz, the designated proxyholders (the “Proxyholders”), are members
of the Company’s management. If you hold Common Stock in “street name,” you must
either instruct your broker or nominee as to how to vote such shares or obtain
a
proxy, executed in your favor by your broker or nominee, to be able to vote
at
the Meeting.
If
a
Proxy is properly signed, dated and returned and is not revoked, the Proxy
will
be voted at the Meeting in accordance with the Stockholder’s instructions
indicated on the Proxy. If no instructions are indicated on the Proxy, the
Proxy
will be voted “FOR” the election of the Board’s nominees, “FOR” ratification of
the executive stock grant, “FOR” the proposed amendment of the Certificate of
Incorporation, “FOR” the proposed amendment of the 2001 Omnibus Equity Incentive
Plan, “FOR” ratification of the appointment of Moss Adams LLP as our independent
registered public accounting firm for the fiscal year ending December 31, 2006
and in accordance with the recommendations of the Board as to any other matter
that may properly be brought before the Meeting or any adjournment or
postponement thereof.
Revocation
of Proxies
You
may
revoke a Proxy at any time before it is exercised by filing a written
revocation, or a duly executed proxy bearing a later date, with the Company’s
Secretary at our principal executive offices located at 3050 East Hillcrest
Drive, Westlake Village, California 91362 prior to the commencement of the
Meeting. You may also revoke a Proxy by attending the Meeting and voting in
person. Stockholders whose shares are held in “street name” should consult with
their broker or nominee concerning the method for revoking their
proxy.
Voting
Rights
The
authorized capital of the Company consists of (i) 30,000,000 shares of common
stock, par value $0.66-2/3 per share (“Common Stock”), of which 25,509,213
shares were issued and outstanding on the Record Date and (ii) 1,000,000 shares
of Class A Preferred Stock, $1.00 par value (“Class A Preferred Stock”), none of
which were issued and outstanding on the Record Date. The Common Stock and
the
Class A Preferred Stock are collectively referred to as the
“Stock.”
A
majority of the shares of Common Stock issued and outstanding and entitled
to
vote at the meeting, present either in person or by Proxy, constitutes a quorum
for the conduct of business at the Meeting. Votes withheld, abstentions and
“broker non-votes” (as defined below) will be counted for the purpose of
determining the presence of a quorum.
Each
Stockholder is entitled to one vote, in person or by proxy, for each share
of
Common Stock standing in his or her name on the books of the Company at the
close of business on the Record Date on any matter submitted to the
Stockholders, except that in connection with the election of directors, each
Stockholder has the right to cumulate votes, provided that the candidates’ names
have been properly placed in nomination prior to commencement of voting and
a
Stockholder has given notice prior to commencement of voting of his or her
intention to cumulate votes. If a Stockholder has given such notice, all
Stockholders may cumulate their votes for all nominated candidates. Cumulative
voting entitles a Stockholder to give one candidate a number of votes equal
to
the number of directors to be elected multiplied by the number of shares of
Common Stock owned by such Stockholder, or to distribute such Stockholder’s
votes on the same principle among as many candidates as the Stockholder shall
think fit. Discretionary authority to cumulate votes is hereby solicited by
the
Board and the return of the Proxy shall grant such authority.
In
the
election of directors, the candidates receiving the highest number of votes,
up
to the number of directors to be elected, shall be elected. The approval of
the
proposed amendment of the Certificate of Incorporation requires the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
entitled to vote on the proposal at the Meeting. Each proposal described in
this
Proxy Statement, other than the election of director and the proposed amendment
of the Certificate of Incorporation, requires that affirmative vote of the
holders of a majority of the outstanding shares of Common Stock present, in
person or by proxy, and entitled to vote on the proposal at the Meeting.
Abstentions and broker non-votes will have no effect with respect to the
election of directors, but will have the same effect as votes “AGAINST” the
proposed amendment of the Certificate of Incorporation. With respect to all
other proposals submitted to the Stockholders, abstentions will be included
in
the number of votes present and entitled to vote on that proposal and,
accordingly, will have the effect of a vote “AGAINST” the proposal. However,
broker non-votes with respect to any proposal submitted to the Stockholders
will
not be counted as shares present and entitled to vote on that proposal and,
accordingly, will not have any effect with respect to the approval of that
proposal (other than to reduce the number of affirmative votes required to
approve the proposal).
Of
the
shares of Common Stock outstanding on the Record Date, 5,777,187 (or
approximately 22.6%) (the “Shares”) were held in the name of Lite-On
Semiconductor Corporation (“LSC”), formerly named Lite-On Power Semiconductor
(“LPSC”). See “General Information - Security Ownership of Certain Beneficial
Owners and Management” and “Proposal One - Election of Directors - Certain
Relationships and Related Transactions” for a discussion of the relationship
between LPSC, LSC and the Company. An additional 536,037 shares (or
approximately 2.1%) were owned by directors and executive officers of the
Company on the Record Date. LSC and each director and executive officer has
informed the Company that they will vote “FOR” the election of the nominees to
the Board identified herein, “FOR” the ratification of the executive stock
grant, “FOR” the proposed amendment of the Certificate of Incorporation, “FOR”
the proposed amendment of the 2001 Omnibus Equity Incentive Plan, and “FOR” the
appointment of Moss Adams LLP as the Company’s independent registered public
accounting firm.
Brokers
holding Common Stock in “street name” who are members of a stock exchange are
required by the rules of the exchange to transmit this Proxy Statement to the
beneficial owner of the Common Stock and to solicit voting instructions with
respect to the matters submitted to the Stockholders. If the broker has not
received instructions from the beneficial owner by the date specified in the
statement accompanying such material, the broker may give or authorize the
giving of a Proxy to vote the Common Stock in his discretion as to some matters,
but not as to certain other proposals without specific instructions from the
beneficial owner. When a broker or nominee is unable to vote a client’s shares
on proposals, the missing votes are referred to as “broker non-votes.” If you
hold Common Stock in “street name” and you fail to instruct your broker or
nominee as to how to vote such Common Stock, your broker or nominee may, in
its
discretion, vote such Common Stock “FOR” the election of the Board’s nominees,
“FOR” the ratification of the executive stock grant, and “FOR” ratification of
the appointment of Moss Adams LLP as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2006, but not with
respect to the proposed amendment of the Certificate of Incorporation or the
proposed amendments of the 2001 Omnibus Equity Incentive Plan.
Cost
of Solicitation of Proxies
This
Proxy solicitation is made by the Board of the Company, and the Company will
bear the costs of this solicitation, including the expense of preparing,
assembling, printing and mailing this Proxy Statement and any other material
used in this solicitation of Proxies. If it should appear desirable to do so
to
ensure adequate representation at the Meeting, officers and regular employees
may communicate with Stockholders, beneficial owners, banks, brokerage houses,
custodians, nominees and others, by telephone, facsimile transmissions,
telegraph, e-mail or in person to request that Proxies be furnished. No
additional compensation will be paid for these services to officers or employees
of the Company. The Company will reimburse banks, brokerage houses, and other
custodians, nominees and fiduciaries, for their reasonable expenses in
forwarding proxy materials to their principals. The total estimated cost for
the
printing and solicitation of Proxies is $12,000.
Other
Business
As
of the
date of this Proxy Statement, the Board knows of no business to be presented
for
consideration at the Meeting other than as stated in the Notice of Annual
Meeting of Stockholders. However, if any other matters properly come before
the
Meeting, including a motion to adjourn the Meeting to another time or place
to
solicit additional Proxies in favor of the recommendation of the Board, the
Proxyholders will vote the shares represented by the Proxies on such matters
in
accordance with the recommendation of the Board, and authority to do so is
included in the Proxy. Such authorization includes authority to appoint a
substitute nominee or nominees to the Board’s nominees identified herein where
death, illness or other circumstances arise which prevent any such nominee
for
directors from serving in such position and to vote such Proxy for such
substitute nominee.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth the beneficial ownership of Common Stock as of the
Record Date by (i) each person known to the Company to be the beneficial owner
of more than five percent of the outstanding shares of Common Stock (other
than
depositories), (ii) each executive officer, director and nominee for director
of
the Company, and (iii) all directors and executive officers as a
group.
Name
and Address of Beneficial Owner(1)
|
|
Amount
and
Nature
of
Beneficial
Ownership(2)
|
|
|
Percent
of
Class(3)
|
|
|
|
|
|
|
|
|
Lite-On
Semiconductor Corporation (“LSC”)
|
|
5,777,187
|
(4)
|
|
22.6
|
%
|
Munder
Capital Management
|
|
1,438,350
|
|
|
5.6
|
%
|
Raymond
Soong
|
|
403,650
|
(5)
|
|
1.6
|
%
|
C.H.
Chen
|
|
288,750
|
(5)
(6)
|
|
1.1
|
%
|
Michael
R. Giordano
|
|
153,280
|
(5)
(7)
|
|
*
|
|
Keh-Shew
Lu
|
|
381,750
|
(5)
(6)
|
|
1.5
|
%
|
M.K.
Lu
|
|
34,500
|
(5)
|
|
*
|
|
Shing
Mao
|
|
177,250
|
(5)
|
|
*
|
|
John
M. Stich
|
|
54,750
|
(5)(8)
|
|
*
|
|
Joseph
Liu
|
|
353,466
|
(5)
|
|
1.4
|
%
|
Mark
A. King
|
|
121,500
|
(5)
|
|
*
|
|
Carl
C. Wertz
|
|
216,421
|
(5)
|
|
*
|
|
Steven
Ho
|
|
75,562
|
(5)
|
|
*
|
|
All
directors, nominees and executive officers as a group (11
persons)
|
|
2,260,878
|
(9)
|
|
8.3
|
%
|
*
Less
than 1%.
(1) |
The
address of LSC is 9F. No. 233-2, Pao-Chiao Road, Hsin-Tien, Taipei-hsien
23115, Taiwan, R.O.C. The address of Munder Capital Management is
480
Pierce Street Birmingham, MI 48009-6063. The
address of each director and executive officer of the Company is
3050 East
Hillcrest Drive, Westlake Village, California
91362.
|
(2)
|
The
named stockholder has sole voting power and investment power with
respect
to the shares listed, except as indicated and subject to community
property laws where applicable.
|
(3) |
Under
Rule 13d-3 of the Securities and Exchange Act of 1934 (the “Exchange
Act”), certain shares may be deemed to be beneficially owned by more
than
one person (if, for example, a person shares the power to vote or
the
power to dispose of the shares). In addition, under Rule 13d-3(d)(1)
of
the Exchange Act, shares which the person (or group) has the right
to
acquire within 60 days after the Record Date are deemed to be outstanding
in calculating the beneficial ownership and the percentage ownership
of
the person (or group) but are not deemed to be outstanding as to
any other
person or group. As a result, the percentage of outstanding shares
of any
person as shown in this table does not necessarily reflect the person’s
actual ownership of voting power with respect to the number of shares
of
Common Stock actually outstanding at the Record
Date.
|
(4) |
LSC
is a public company listed on the Taiwan
Stock Exchange Corporation (“TSEC”) and a member of The Lite-On Group of
companies. See “Proposal One – Election of Directors – Certain
Relationships and Related Transactions” for a discussion of the
relationship among LSC, the Company and certain directors and executive
officers of the Company.
|
(Footnotes
continued on following page)
(Footnotes
continued from previous page)
(5) |
Includes
the following shares of Common Stock that the named individual has
the
right to acquire within 60 days after the Record
Date
by
the exercise of vested stock
options:
|
Named
Individual
|
|
Shares
|
Raymond
Soong
|
|
354,375
|
C.H.
Chen
|
|
228,750
|
Michael
R. Giordano
|
|
135,750
|
Keh-Shew
Lu
|
|
81,750
|
M.K.
Lu
|
|
34,500
|
Shing
Mao
|
|
142,500
|
John
M. Stich
|
|
52,500
|
Joseph
Liu
|
|
304,716
|
Mark
A. King
|
|
121,500
|
Carl
C. Wertz
|
|
209,250
|
Steven
Ho
|
|
59,250
|
(6)
|
Includes
180,000 and 40,000 shares (270,000 shares and 60,000 shares split
adjusted
on December 1, 2005) of restricted stock granted to Dr. Lu and
Mr. Chen, respectively. See “Proposal Two – Ratification of
Executive Stock Grant.”
|
(7)
|
Includes
3,375 shares of Common Stock held in the name of UBS Trust for the
IRA of
Mr. Giordano.
|
(8)
|
Includes
2,250 shares of Common Stock held in the name of Stich Family Holdings
LP.
|
(9)
|
Includes
1,724,841 shares that the directors and executive officers have the
right
to acquire within 60 days after the Record
Date,
by the exercise of vested stock options, but excludes an additional
769,500 shares that the directors and executive officers will have
the
right to acquire upon the exercise of stock options which will become
exercisable in installments more than 60 days after the
Record
Date.
|
PROPOSAL
ONE –
ELECTION
OF DIRECTORS
Directors
and Executive Officers
The
Company’s Bylaws provide that the number of directors shall be determined from
time to time by the Board, but may not be less than five nor more than
seventeen. Currently, the Board has fixed the number of directors at seven.
The
Bylaws further provide for the election of each director at each annual meeting
of stockholders.
The
persons named below have been nominated for election to the Board to serve
until
the next annual meeting of stockholders and until their respective successors
have been elected and qualified. All nominees have indicated their willingness
to serve and, unless otherwise instructed, Proxies will be voted in such a
way
as to elect as many of these nominees as possible under applicable voting rules.
In the event that any of the nominees should be unable or unwilling to serve
as
a director, the Proxies will be voted for the election of such substitute
nominees, if any, as shall be designated by the Board. The Board has no reason
to believe that any nominee will be unable or unwilling to serve. The seven
nominees who receive the highest number of affirmative votes will be
elected.
None
of
the directors, nominees for director or executive officers were selected
pursuant to any arrangement or understanding, other than with the directors
and
executive officers of the Company acting within their capacity as such. There
are no family relationships among directors or executive officers of the Company
as of the date hereof, and, except as set forth below, as of the date hereof,
no
directorships are held by any director in a company that has a class of
securities registered pursuant to Section 12 of the Securities Exchange Act
of
1934, as amended (the “Exchange Act”), or subject to the requirements of Section
15(d) of the Exchange Act or any company registered as an investment company
under the Investment Company Act of 1940. Officers serve at the discretion
of
the Board.
The
following table sets forth certain biographical information concerning the
nominees for director and the executive officers of the Company as of the Record
Date.
Officers
and Directors
|
|
Age
|
|
Position
with the Company
|
|
Director
Since
|
|
|
|
|
|
|
|
Raymond
Soong (1)
|
|
64
|
|
Chairman
of the Board
|
|
1993
|
C.H.
Chen (2)
|
|
63
|
|
Vice
Chairman of the Board
|
|
2000
|
Keh-Shew
Lu (3)
|
|
59
|
|
President,
Chief Executive Officer, and Director
|
|
2001
|
Michael
R. Giordano (4)
|
|
59
|
|
Director
|
|
1990
|
M.K.
Lu (5)
|
|
57
|
|
Director
|
|
1995
|
Shing
Mao (6)
|
|
70
|
|
Director
|
|
1990
|
John
M. Stich (7)
|
|
64
|
|
Director
|
|
2000
|
Joseph
Liu (8)
|
|
64
|
|
Senior
Vice President, Operations
|
|
—
|
Mark
A. King (9)
|
|
47
|
|
Senior
Vice President, Sales and Marketing
|
|
—
|
Carl
C. Wertz (10)
|
|
51
|
|
Chief
Financial Officer, Secretary and Treasurer
|
|
—
|
Steven
Ho (11)
|
|
50
|
|
Vice
President, Asia Sales
|
|
—
|
(1)
|
Raymond
Soong has been the Chairman of the Board of Silitek Corporation
(“Silitek”) since 1990 and has been Chairman of the Boards of LSC,
formerly LPSC, since 1992, and Lite-On Technology Corporation (a
Lite-On
Group company), since 1992. In October 2002, Silitek and Taiwan
Lite-On
merged with Lite-On Technology Corporation. See “General
Information – Security Ownership of Certain Beneficial Owners and
Management” and “Proposal One – Election of Directors – Certain
Relationships and Related Transactions” for a discussion of the
relationships among Lite-On Technology, Silitek, LPSC, LSC and
the
Company. Since 1996, Mr. Soong has also been Chairman of the Board of
FabTech, Inc. (“Diodes-FabTech” or “FabTech”) (formerly a subsidiary of
LSC, acquired by the Company in December 2000).
Mr. Soong
is a graduate of the National Taipei Institute of Technology’s Electronic
Engineering Department. After serving as a senior engineer for
RCA and as
a chief engineer for Texas Instruments, Inc. (“TI”), Mr. Soong,
together with several of his co-workers, founded Taiwan Lite-On
Electronic
Co. Ltd. (“Taiwan Lite-On”), a manufacturer of electronic components and
subsystems, in 1975. Mr. Soong is also Chairman of the Boards of the
Company’s manufacturing subsidiaries in Shanghai, China (“Diodes-China”
and “Diodes Shanghai”) and its Taipei, Taiwan subsidiary
(“Diodes-Taiwan”), and is an ex officio member of the Nominating
Committee. Mr. Soong also serves on the board of Actron Technology
Corporation, a Lite-On Group company.
|
|
|
(2)
|
C.H.
Chen was appointed Vice Chairman of the Board of Directors in June
2005.
Mr. Chen was the Company’s President and Chief Executive Officer
since 2000. From 1969 to 1990, Mr. Chen held various positions at TI,
most recently as Vice President of TI-Taiwan. In 1990, he left
TI to found
Dyna Image Corporation (then a public company listed on the Taiwan
OTC
market), a Lite-On Group company and the world’s leading supplier of
contact image sensors (CISs), which are key components in fax machines
and
scanners. In December 2000, Dyna Image Corporation merged with
LPSC to
form LSC. Mr. Chen is currently the Vice Chairman of LSC, board
member of Actron Technology Corporation, Chairman of the Board
of the
recently acquired Diodes-Anachip Corporation, Chairman of the Company’s
Nominating Committee, and
member of the Compensation and Stock Options and Strategic Planning
Committees. He also serves as director
of Diodes-Taiwan, Diodes-FabTech, Diodes-China, Diodes-Shanghai,
and
Diodes-Hong Kong.
|
(Footnotes
continued on following page)
(Footnotes
continued from previous page)
(3)
|
Dr. Keh-Shew
Lu was appointed President and Chief Executive Officer of the Company
in
June 2005 after serving on the Board of Directors since 2001. From
1998 to
2001, Dr. Keh-Shew Lu served as Senior Vice President of TI and
General Manager of Worldwide Mixed-Signal and Logic Products. His
responsibilities included all aspects of the analog, mixed-signal
and
logic products for TI worldwide business, including design, process
and
product development, manufacturing and marketing. Dr. Lu’s business
areas also included the mixed-signal and RF portion of TI’s digital signal
processing solutions, display solutions, and wireless communications.
From
1996 to 1998 Dr. Lu was manager of TI’s worldwide memory business. In
addition, he served as President of TI Asia from 1994 until 1997,
where he
had responsibility for all of TI’s activities in Asia (excluding Japan).
Since beginning his career at TI in 1974, Dr. Lu has held a number of
technical and managerial positions within TI’s Semiconductor Group,
including Vice President and division manager of the Linear Products
Division. Dr. Lu holds a Bachelor’s degree in engineering from the
National Cheng Kung University in Taiwan, and a Master’s degree and
doctorate in electrical engineering from Texas Tech University.
Dr. Lu is Chairman of the boards of two privately held companies:
PicoNetics, an emerging developer of ultra low power display driver
chips,
and LedEngine, an emerging developer of LED solutions. Dr. Lu is also
a director of two publicly held companies in Taiwan: Lite-On Technology
Corporation and Winbond Electronics Corporation (“Winbond”). Winbond is
focused on the development, manufacture, and marketing of personal
computer, telecommunications, and consumer electronics products.
Dr. Lu is also a director of Lorentz Solution and MicroFabrica.
Dr. Lu is Founding Chairman of Asia American Citizen’s Council, and
is a member of the Advisory Board to Southern Methodist University’s Asian
Studies Program. Dr. Lu is Chairman of the Strategic Planning
Committee, and is an ex-officio member of the Nominating
Committee.
|
|
|
(4)
|
Michael
R. Giordano, CIMA, joined the private-banking firm of UBS Financial
Services, Inc. as a Senior Vice President-Investment Consulting
when UBS
acquired PaineWebber, Inc in 2000. PaineWebber, Inc. acquired his
previous
employer, Kidder Peabody and Co., Inc., with whom he was employed
since
1979. Mr. Giordano advises corporations, foundations, trusts, and
municipal governments in investments and finance. Formerly a captain
and
pilot in the United States Air Force, Mr. Giordano received his
Bachelor of Science degree in Aerospace Engineering from California
State
Polytechnic University and his Masters degree in Business Administration
(Management and Finance) from the University of Utah. Mr. Giordano
also did post-graduate work in International Investments at Babson
College. Mr. Giordano is certified by the Investment Management
Consultants Association. Mr. Giordano is also certified by the John
E. Anderson Graduate School of Management, UCLA as a Corporate
Director
having demonstrated understanding of Directorship and Corporate
Governance. Mr. Giordano was Chairman of the Board and Chief
Executive Officer of the Leo D. Fields Co. from 1980 to 1990, when
GWC
Holdings acquired it. Mr. Giordano served as a director to
Professional Business Bank, a publicly traded corporation from
2001 to
2003. Mr. Giordano is Chairman of the Company’s Audit Committee and
the Compensation and Stock Options Committee, and is a member of
the
Strategic Planning Committee. Mr. Giordano is also the pension
consultant for the Company’s 401(k) plan, which is managed by UBS
Fiduciary Trust.
|
|
|
(5)
|
M.K.
Lu is currently President of LSC, to which position he was re-appointed
in
March 2000. In November 1998, Mr. Lu formed a new company, Actron
Technology Corporation, and is also acting Chairman of this manufacturer
of pressfit diodes for the automotive market. From 1991 to June
1998,
Mr. Lu was President and a director of LPSC. From 1983 to 1990,
Mr. Lu was General Manager/Vice President of Silitek. See
“General – Security Ownership of Certain Beneficial Owners and
Management” and “Proposal One - Election of Directors - Certain
Relationships and Related Transactions” for a discussion of the
relationship among Silitek, LPSC, LSC and the Company. Since 1995,
Mr. Lu has been a director of FabTech. Mr. Lu earned his
Bachelor’s degree in Electrical Engineering at Tatung University of
Technology and is a Business Administration graduate of the National
Chengchi University. Mr. Lu is also a member of the Chinese
Management Association and the Chinese Association for Advancement
of
Management, and is a director of Diodes-China and
Diodes-Shanghai.
|
(Footnotes
continued on following page)
(Footnotes
continued from previous page)
(6)
|
In
2000, Dr. Shing Mao retired as Chairman of the Board of Lite-On,
Inc., a California corporation located in Milpitas, California,
and a
wholly owned subsidiary of Taiwan Lite-On, in which position he
served
since 1988. See “General Information - Security Ownership of Certain
Beneficial Owners and Management” and “Proposal One - Election of
Directors – Certain Relationships and Related Transactions” for a
discussion of the relationship among Silitek, LSC and the Company.
Since
1989, Dr. Mao has been a director of Dyna Investment Co., Ltd. of
Taiwan, a venture capital company. Dr. Mao was a director of LSC from
1989 to 2000. Since 1996, Dr. Mao has also been a director of
FabTech. Before
joining Lite-On, Dr. Mao served in a variety of management positions
with Raytheon Company for four years, with TI
for 11 years, and with UTL Corporation (later acquired by Boeing
Aircraft
Company) for seven years. Dr. Mao earned his Ph.D.
degree in electrical engineering at Stanford University in 1963.
Dr. Mao
is a member of the Company’s Audit and Nominating
Committee.
|
|
|
(7)
|
John
M. Stich is the President and Chief Executive Officer of The Asian
Network; a consulting company that specializes in assisting
high-technology companies to expand their business in Asia. Prior
to this
position, Mr. Stich was the Chief Marketing Officer for TI in Japan
with responsibility for TI’s sales and marketing in Japan from 1994 to
1999. Mr. Stich joined TI in 1964, and has served in various
management positions, including a total of 24 years leading TI’s Asian
business growth while living in Taipei, Hong Kong and Tokyo.
Mr. Stich currently serves as the Honorary Consul General of Japan
at
Dallas, and is a Director of Stonestreet One, Inc., a leading provider
of
short distance wireless technologies. He serves numerous non-profit
organizations, including President of Project Oasis, Board Member
of the
Dallas/Fort Worth Consular Corps, Board Member of the Japan America
Society of Dallas/Fort Worth, Member of the Advisory Council for
Southern
Methodist University’s Asian Studies, Member of the Pastoral Council at
Prince of Peace church, and Member of the Dallas-Taipei Sister
City
Committee. Mr. Stich is a member of the Company’s Audit Committee,
the Compensation and Stock Options Committee, the Nominating Committee
and
the Strategic Planning Committee.
|
|
|
(8)
|
In
May 1998, Joseph Liu was appointed President of Vishay/LPSC and
Vice
President, Far East Operations for the Company, the former position
in
which he served until March 2000, when Vishay agreed to sell its
65%
interest in the Vishay/LPSC joint venture to The Lite-On Group,
the 35%
owner of the joint venture. Mr. Liu continues to serve as the
Company’s Senior Vice-President, Operations. Mr. Liu previously
served as Vice President, Operations of the Company from 1994 to
1998 and
Chief Financial Officer, Secretary and Treasurer from 1990 to 1998.
Mr. Liu was also the Company’s Vice-President, Administration from
1990 to 1994. Prior to joining the Company, Mr. Liu held various
management positions with TI Dallas, since 1971, including Planning
Manager, Financial Planning Manager, Treasury Manager, Cost Accounting
Manager and General Accounting Manager with TI Taiwan, Ltd. in
Taipei;
from 1981 to 1986 as Controller with TI Asia in Singapore and Hong
Kong;
from 1986 to 1989 as Financial Planning Manager, TI Latin America
Division
(for TI Argentina, TI Brazil and TI Mexico) in Dallas; and from
1989 to
1990 as Chief Coordinator of Strategic Business Systems for TI
Asia
Pacific Division in Dallas. Mr. Liu is also President and a director
of Diodes-China and Diodes-Shanghai, and is President of Diodes-FabTech.
See “Proposal One – Election of Directors – Certain
Relationships and Related Transactions” for a discussion of the
relationship among Diodes-China, Diodes-Shanghai, Diodes-FabTech
and the
Company.
|
|
|
(9)
|
Mark
A. King was appointed Sr. VP Sales & Marketing in 2005. He previously
served as the Company’s Vice President, Sales and Marketing since May
1998, and Vice President, Sales since 1991. Before joining the
Company,
Mr. King served for nine years in various sales management positions
at Lite-On, Inc., a California corporation located in Milpitas,
California, and a manufacturer of optoelectronic
products.
|
|
|
(10)
|
Carl
C. Wertz was appointed the Company’s Chief Financial Officer, Secretary
and Treasurer in 1998. Mr. Wertz was the Company’s Controller since
1993. Before joining the Company, Mr. Wertz served in various
financial management and accounting positions, most recently as
Controller
of Westco Products, a manufacturer and distributor of food products,
headquartered in Southern California. Mr. Wertz, a licensed CPA, has
over 20 years of manufacturing and distribution experience, and
began his
accounting career with Deloitte & Touche LLP. Mr. Wertz is a
director of the Company’s Asian subsidiaries, Diodes-China,
Diodes-Shanghai, Diodes-Taiwan, and Diodes-Hong
Kong.
|
(Footnotes
continued on following page)
(Footnotes
continued from previous page)
(11)
|
Steven
Ho was appointed the Company’s Vice-President, Asia Sales in 2005.
Mr. Ho has held the position of General Manager, Diodes Taiwan since
1991. From 1984 to 1991, Mr. Ho was the Production Manager of
Discrete Products for the Lite-On Group and, prior to that, held
several
positions with Texas Instruments Taiwan, Ltd. Mr. Ho serves as a
Director of the Company’s Asian subsidiaries; Diodes-Hong Kong and the
recently acquired
Diodes-Anachip.
|
Committees
of the Board of Directors
The
Board
has a standing Audit Committee, a Compensation and Stock Options Committee,
a
Nominating Committee and a Strategic Planning Committee, each of which consists
of two or more directors who serve at the discretion of the Board. The members
of each Committee are as follows:
|
|
Audit
Committee
|
|
Compensation
and Stock Options Committee
|
|
Nominating
Committee
|
|
Strategic
Planning Committee
|
Raymond
Soong (2)
|
|
|
|
|
|
Ex
officio
member (1)
|
|
|
C.
H. Chen
|
|
|
|
Member
|
|
Chair
|
|
Member
|
Keh-Shew
Lu
|
|
|
|
|
|
Ex
officio
member (1)
|
|
Chair
|
Michael
R. Giordano (2)
|
|
Chair
(3)
|
|
Chair
|
|
|
|
Member
|
M.K.
Lu
|
|
|
|
|
|
|
|
|
Shing
Mao (2)
|
|
Member
|
|
|
|
Member
|
|
|
John
M. Stich (2)
|
|
Member
|
|
Member
|
|
Member
|
|
Member
|
(1)
|
–
|
Non-voting
Member
|
(2)
|
–
|
Independent
Director (as determined by the Board under the rules of the Nasdaq
Stock
Market)
|
(3)
|
–
|
Audit
Committee Financial Expert
|
Audit
Committee.
The
Audit Committee makes recommendations to the Board regarding the engagement
of
the Company’s independent
registered public accounting firm,
reviews
the plan, scope and results of the audit, reviews with management the Company’s
policies and procedures with respect to internal accounting and financial
controls and reviews changes in accounting policy and the scope of the non-audit
services which may be performed by the Company’s independent
registered public accounting firm.
The
Audit Committee also monitors policies to prohibit unethical, questionable
or
illegal activities by the Company’s employees.
The
Board
has determined that each member of the Audit Committee is “independent,” as that
term is defined under the rules of Nasdaq and the SEC, and is able to read
and
understand fundamental financial statements, and that Mr. Giordano
qualifies as an “audit committee financial expert” as defined under the rules of
the SEC.
Compensation
and Stock Options Committee.
The
Compensation and Stock Options Committee makes recommendations to the Board
regarding compensation, benefits and incentive arrangements for the Chief
Executive Officer and other officers and key employees of the Company. The
Compensation and Stock Options Committee also administers the Company’s 1993
Incentive Stock Option Plan (“1993 ISO Plan”), the 1993 Non-Qualified Stock
Option Plan (“1993 NQO Plan”), the Incentive Bonus Stock Plan, the Company’s
401(k) profit sharing plan (the “401(k) Plan”), and the 2001 Omnibus Equity
Incentive Plan.
The
Board
has determined that each member of the Compensation and Stock Options Committee
is “independent,” as that term is defined under the rules of Nasdaq, except for
Mr. Chen who was the Company’s President and Chief Executive Officer from
March 2000 until June 2005. This committee is not intended to qualify as a
fully
independent compensation committee under the Nasdaq rules. As required by the
rules of Nasdaq, the compensation of the Chief Executive Officer and other
executive officers is determined, or recommended to the Board for determination,
by a majority of independent directors.
Nominating
Committee.
The
principal purposes of the Nominating Committee are to help ensure that the
Board
(i) identifies individuals qualified to become members of the Board,
consistent with criteria approved by the Board, and (ii) selects the
director nominees for the next annual meeting of stockholders.
The
Board
has determined that each member of the committee is “independent” as that term
is defined under the rules of Nasdaq and the SEC, except for Mr. Chen who
was the Company’s President and Chief Executive Officer from March 2000 until
June 2005. In addition, Messrs. Lu and Soong attend meetings of this
committee, at the invitation of the committee, in a non-voting capacity. This
committee is not intended to qualify as a fully independent nominating committee
under the Nasdaq rules. As required by the rules of Nasdaq, director nominees
are either selected, or recommended for selection by the Board, by a majority
of
the independent directors.
Strategic
Planning Committee.
The
Strategic Planning Committee focuses on new product development, marketing,
and
research and development operations of the Company.
Charters
of the Committees.
The
charters of the Audit Committee, the Compensation and Stock Options Committee,
and the Nominating Committee are available on the Company’s website at
www.diodes.com.
Meetings
of the Board and Committees
The
Board
held four meetings during 2005. The Audit Committee held five meetings; the
Compensation and Stock Options Committee held eight meetings, and the Nominating
Committee and Strategic Planning Committee each held one meeting during 2005.
A
Special Committee comprised of Mr. Giordano and Mr. Stich held four
meetings in 2005 related to the Anachip acquisition. All of the persons who
were
directors of the Company or members of committees were present for at least
75%
of the meetings during 2005.
It
is the
policy of the Company to require members of the Board to attend the annual
meetings of stockholders, if practicable. Each director attended the 2005 annual
meeting of stockholders.
Nominating
Procedures and Criteria
Among
its
functions, the Nominating Committee considers and approves nominees for election
to the Board. In addition to the candidates proposed by the Board or identified
by the committee, the committee considers candidates for director suggested
by
stockholders provided such recommendations are made in accordance with the
procedures set forth under “Proposals of Stockholders and Stockholder
Nominations for 2007 Annual Meeting.” Stockholder nominations that comply with
these procedures and meet the criteria outlined below will receive the same
consideration that the committee’s nominees receive.
Essential
criteria for all candidates considered by the Nominating Committee include
the
following: integrity and ethical behavior, maturity, management experience
and
expertise, independence and diversity of thought and broad business or
professional experience, with an understanding of business and financial affairs
and the complexities of business organizations.
In
evaluating candidates for certain Board positions, the committee evaluates
additional criteria, including the following: financial or accounting expertise;
experience in the semiconductor industry or other technology industries;
scientific accomplishment; experience in commercializing and marketing
semiconductors or other electronic components; business and other experience
relevant to public companies of a size comparable to the Company; and experience
in investment banking, commercial lending or other financing
activities.
In
selecting nominees for the Board, the committee evaluates the general and
specialized criteria set forth above, identifying the relevant specialized
criteria prior to commencement of the recruitment process, considers previous
performance if the candidate is candidate for re-election, and generally
considers the candidate’s ability to contribute to the success of he
Company.
The
Nominating Committee, as well as the full Board, has recommended the Board’s
nominees for the Meeting. Stockholders did not propose any candidates for
election at the Meeting.
Communications
with Directors
You
may
communicate with the chair of our Audit Committee, our Nominating Committee,
or
our Compensation and Stock Options Committee, or with our independent directors
as a group, by writing to any such person or group c/o Carl C. Wertz, Secretary,
Diodes Incorporated 3050 East Hillcrest Drive, Westlake Village, California
91362.
Communications
are distributed to the Board, or to any individual director, depending on the
facts and circumstances set forth in the communication. In that regard, the
Board has requested that certain items that are unrelated to the duties and
responsibilities of the Board should be excluded, including the following:
junk
mail and mass mailings; product complaints; product inquiries; new product
suggestions; résumés and other forms of job inquiries; surveys; and business
solicitations or advertisements. In addition,
material that is unduly
hostile,
threatening, illegal or similarly unsuitable will not be distributed, with
the
provision
that any
communication that is not distributed will be made available to any independent
director upon request.
Communications
that include information better addressed by the complaint hotline supervised
by
the Audit Committee will be delivered to the Audit Committee.
Compensation
of Directors
Each
non-employee director of the Company receives $1,500 for each meeting of the
Board or committee meeting attended in person, and $750 for each meeting in
which such director participates by telephone.
In
addition, the following annual, non-qualified stock options are granted to
both
employee and non-employee directors. The exercise price of each option is no
less than that fair market value of the Common Stock on the date of grant,
and
the option vests in three equal annual installments commencing on the first
anniversary of the date of grant:
· |
The
Chairman of the Board receives an option to purchase 49,500 shares
of the
Company’s Common Stock.
|
· |
The
Vice Chairman of the Board receives an option to purchase 37,500
shares of
the Company’s Common Stock.
|
· |
All
other directors each receive an option to purchase 7,000 shares of
the
Company’s Common Stock.
|
· |
In
addition, the Audit Committee members receive an option to purchase
4,500
shares of the Company’s Common Stock, with the Audit Committee chairman
receiving an additional option to purchase 3,000 shares, and all
other
committee members receive an option to purchase 1,500 shares of the
Company’s Common Stock for each committee on which they serve, with each
committee chairman receiving an additional option to purchase 1,500
shares.
|
The
Board
may modify such compensation in the future.
EXECUTIVE
COMPENSATION
Summary
of Cash and Certain Other Compensation
The
following table sets forth certain information concerning all cash and non-cash
compensation paid or accrued for services to the Company in all capacities
to
its Chief Executive Officer and to each of the other four most highly
compensated executive officers (the “Named Executives”) for each of the fiscal
years ended December 31, 2003, 2004 and 2005.
Summary
Compensation Table
|
|
|
|
|
|
Long
Term Compensation
|
|
|
|
|
|
|
Annual
Compensation
|
|
Awards
|
|
|
Payouts
|
|
|
Name
and
Principal
Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Other
Annual
Compensation
($) (1)
|
|
Restricted
Stock
Awards
($)
|
|
|
Securities
Underlying Options/ SARs (#)(2)
|
|
|
LTIP
Payouts
($)
|
|
All
Other
Compensation($)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keh-Shew
Lu
President
and
Chief
Executive
Officer
|
|
2005
|
|
175,000
|
(3)
|
|
480,000
|
(4)
|
|
12,700
|
|
4,671,000
|
(5)
|
|
78,750
|
|
|
—
|
|
17,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C.H.
Chen
Former
President
and
Chief
Executive
Officer
|
|
2005
2004
2003
|
|
62,500
150,000
150,000
|
(6) |
|
201,000
383,700
272,000
|
(4) |
|
230
540
—
|
|
—
—
—
|
(7) |
|
—
78,750
78,750
|
(7) |
|
—
—
—
|
|
760
1,810
1,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
Liu
Sr.
Vice President,
Operations
|
|
2005
2004
2003
|
|
218,000
208,000
200,000
|
|
|
381,500
314,400
224,000
|
|
|
15,660
15,800
17,090
|
|
—
—
—
|
|
|
33,750
33,750
33,750
|
|
|
—
—
—
|
|
23,750
21,420
17,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. King
Sr.
Vice President,
Sales
and Marketing
|
|
2005
2004
2003
|
|
187,000
177,000
170,000
|
|
|
380,500
281,900
191,000
|
|
|
18,200
17,330
18,200
|
|
—
—
—
|
|
|
30,750
27,000
27,000
|
|
|
—
—
—
|
|
23,750
21,420
17,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl
C. Wertz
Chief
Financial Officer,
Secretary
and Treasurer
|
|
2005
2004
2003
|
|
156,000
146,000
140,000
|
|
|
303,500
216,800
138,000
|
|
|
15,020
14,630
12,070
|
|
—
—
—
|
|
|
23,250
20,250
20,250
|
|
|
—
—
—
|
|
23,750
21,420
17,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Ho (9)
Vice
President,
Asia
Sales
|
|
2005
2004
2003
|
|
124,050
123,650
110,050
|
|
|
219,000
186,500
103,600
|
|
|
11,000
11,680
11,420
|
|
—
—
—
|
|
|
22,500
20,250
20,250
|
|
|
—
—
—
|
|
2,000
1,220
1,140
|
(Footnotes
continued on following page)
(Footnotes
continued from previous page)
(1) |
Certain
of the Company’s executive officers receive personal benefits in addition
to salary and cash bonuses, including, but not limited to, auto
allowances, per-diem, life insurance payable at the direction of
the
employee, contributions under the Company’s retirement plans, and group
health insurance. Other Annual Compensation consists of the
following:
|
|
|
Year
|
|
Dr. Lu
|
|
Mr. Chen
|
|
Mr. Liu
|
|
Mr. King
|
|
Mr. Wertz
|
|
Mr. Ho
|
|
Auto
Allowance
|
|
|
2005
|
|
|
9,100
|
|
|
—
|
|
|
10,130
|
|
|
9,600
|
|
|
9,600
|
|
|
8,790
|
|
|
|
|
2004
|
|
|
—
|
|
|
—
|
|
|
10,130
|
|
|
9,600
|
|
|
9,600
|
|
|
9,390
|
|
|
|
|
2003
|
|
|
—
|
|
|
—
|
|
|
7,240
|
|
|
9,600
|
|
|
7,200
|
|
|
9,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health
Insurance
|
|
|
2005
|
|
|
3,600
|
|
|
230
|
|
|
5,530
|
|
|
8,600
|
|
|
5,420
|
|
|
1,970
|
|
|
|
|
2004
|
|
|
—
|
|
|
540
|
|
|
5,670
|
|
|
7,730
|
|
|
5,030
|
|
|
2,040
|
|
|
|
|
2003
|
|
|
—
|
|
|
—
|
|
|
4,400
|
|
|
8,600
|
|
|
4,870
|
|
|
1,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per-diem
/ Travel
|
|
|
2005
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
240
|
|
|
|
|
2004
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
250
|
|
|
|
|
2003
|
|
|
—
|
|
|
—
|
|
|
5,450
|
|
|
—
|
|
|
—
|
|
|
240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2005
|
|
|
12,700
|
|
|
230
|
|
|
15,660
|
|
|
18,200
|
|
|
15,020
|
|
|
11,000
|
|
|
|
|
2004
|
|
|
—
|
|
|
540
|
|
|
15,800
|
|
|
17,330
|
|
|
14,630
|
|
|
11,680
|
|
|
|
|
2003
|
|
|
—
|
|
|
—
|
|
|
17,090
|
|
|
18,200
|
|
|
12,070
|
|
|
11,420
|
|
(2) |
Stock
options are adjusted for 3-for-2 stock splits in November 2003
and
December 2005.
|
(3)
|
The
base salary for Dr. Lu was $300,000 in 2005. The $175,000 represents
the earned amount from June 1, 2005, the date of his appointment
as
President and Chief Executive
Officer.
|
(4)
|
Bonus
amounts for Dr. Lu and Mr. Chen represent amounts earned as
President and Chief Executive Officer during
2005.
|
(5)
|
Represents
180,000 shares (270,000 shares split adjusted on December 1, 2005)
of
restricted stock granted April 14, 2005, in connection with Dr. Lu’s
appointment as President and Chief Executive Officer, multiplied
by $25.95
($17.30 split adjusted), which was the closing stock price on that
day.
See “Proposal Two - Ratification of Executive Stock Grant.” The value of
the shares of restricted stock as of December 30, 2005 was $8,383,500
based on a closing price of $31.05 per share on December 30, 2005.
|
(6)
|
Represents
the portion of Mr. Chen’s base salary of $150,000 earned before his
resignation as President and Chief Executive Officer and his appointment
as Vice Chairman of the Board on June 1,
2005.
|
(7)
|
Does
not include 40,000 shares (60,000 shares split adjusted on December
1,
2005) of restricted stock and options to purchase 56,250 shares granted
to
Mr. Chen in 2005 in connection with his appointment as Vice Chairman
of the Board.
|
(Footnotes
continued on following page)
(Footnotes
continued from previous page)
(8) |
All
Other Compensation consists of the
following:
|
|
|
Year
|
|
Dr. Lu
|
|
Mr. Chen
|
|
Mr. Liu
|
|
Mr. King
|
|
Mr. Wertz
|
|
Mr. Ho
|
|
Retirement
Plans
|
|
|
2005
|
|
|
16,290
|
|
|
—
|
|
|
21,940
|
|
|
21,940
|
|
|
21,940
|
|
|
820
|
|
|
|
|
2004
|
|
|
—
|
|
|
—
|
|
|
19,610
|
|
|
19,610
|
|
|
19,610
|
|
|
—
|
|
|
|
|
2003
|
|
|
—
|
|
|
—
|
|
|
16,000
|
|
|
16,000
|
|
|
16,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
Insurance
|
|
|
2005
|
|
|
1,060
|
|
|
760
|
|
|
1,810
|
|
|
1,810
|
|
|
1,810
|
|
|
1,180
|
|
|
|
|
2004
|
|
|
—
|
|
|
1,810
|
|
|
1,810
|
|
|
1,810
|
|
|
1,810
|
|
|
1,220
|
|
|
|
|
2003
|
|
|
—
|
|
|
1,810
|
|
|
1,810
|
|
|
1,810
|
|
|
1,810
|
|
|
1,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2005
|
|
|
17,350
|
|
|
760
|
|
|
23,750
|
|
|
23,750
|
|
|
23,750
|
|
|
2,000
|
|
|
|
|
2004
|
|
|
—
|
|
|
1,810
|
|
|
21,420
|
|
|
21,420
|
|
|
21,420
|
|
|
1,220
|
|
|
|
|
2003
|
|
|
—
|
|
|
1,810
|
|
|
17,810
|
|
|
17,810
|
|
|
17,810
|
|
|
1,140
|
|
(9) |
For
presentation purposes, amounts paid to Mr. Ho have been converted to
U.S. dollars from Taiwan dollars using the exchange rate at December
31st
of
each year.
|
Stock
Option Grants
The
following table contains certain information concerning the grant of stock
options during the fiscal year ended December 31, 2005 to the Named
Executives (adjusted for a 3-for-2 stock split in December 2005). The Company
granted no Stock Appreciation Rights (“SARs”) during 2005.
Option/SAR
Grants In Fiscal Year 2005
Individual
Grants
|
|
Potential
Realizable Value
at
Assumed
Annual
Rates of Stock Price Appreciation for Ten-Year Option
Term(1)
|
Name
|
Number
of Securities Underlying
Options/SARs
Granted
(#)
|
Percent
of Total
Options/SARs
Granted
to
Employees
(%)
|
Exercise
or
Base
Price
($/Sh)
|
Expiration
Date
|
5%
($)
|
10%
($)
|
Keh-Shew
Lu
|
78,750
|
12.7
|
17.30
|
4/14/2015
|
856,790
|
2,171,275
|
Joseph
Liu
|
33,750
|
5.4
|
23.31
|
7/12/2015
|
494,830
|
1,253,996
|
Mark
A. King
|
30,750
|
5.0
|
23.31
|
7/12/2015
|
450,845
|
1,142,530
|
Carl
C. Wertz
|
23,250
|
3.8
|
23.31
|
7/12/2015
|
340,883
|
863,864
|
Steven
Ho
|
22,500
|
3.6
|
23.31
|
7/12/2015
|
329,887
|
835,998
|
(1)
|
The
Potential Realizable Value is the product of (a) the difference between
(i) the product of the closing sale price per share at the date of
grant
and the sum of (A) 1 plus (B) the assumed rate of appreciation of
the
market price of the Common Stock, compounded annually over the term
of the
option and (ii) the per share exercise price of the option and (b)
the
number of shares of Common Stock underlying the option at December
31,
2005. These amounts represent certain assumed rates of appreciation
only.
For example, a $23.31 grant price with a 5% annual growth rate for
10
years results in a stock price of $37.98 per share and a 10% growth
rate
results in a price of $60.47 per share. Actual gains, if any, on
stock
option exercises are dependent upon a variety of factors, including
market
conditions and the price performance of the Common Stock. No assurance
can
be made that the rate of appreciation presented in this table can
be
achieved.
|
Stock
Option Exercises and Holdings
The
following table contains certain information with respect to the Named
Executives concerning the exercise of options during the fiscal year ended
December 31, 2005 and unexercised options held by the Named Executives as of
December 31, 2005.
Aggregated
Option / SAR Exercises in Fiscal Year 2005
and
Fiscal Year-End Option/SAR Values (1)
|
|
Name
|
|
Shares
Acquired
on Exercise
(#)
|
|
Value
Realized
($)
|
|
Number
of Unexercised
Options/SARs
at 12/31/05 (#)
|
|
Value
of Unexercised
“In-the-Money”
Options/SARs
at
12/31/05 ($) (2)
|
|
|
|
|
|
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
|
Keh-Shew
Lu
|
|
|
—
|
|
|
—
|
|
|
81,750
|
|
|
98,250
|
|
|
2,027,068
|
|
|
1,450,128
|
|
C.H.
Chen
|
|
|
90,000
|
|
|
975,396
|
|
|
288,750
|
|
|
135,000
|
|
|
6,891,910
|
|
|
2,349,225
|
|
Joseph
Liu
|
|
|
60,000
|
|
|
1,054,412
|
|
|
401,250
|
|
|
67,500
|
|
|
9,501,689
|
|
|
936,450
|
|
Mark
A. King
|
|
|
—
|
|
|
—
|
|
|
121,500
|
|
|
57,750
|
|
|
2,873,475
|
|
|
778,173
|
|
Carl
C. Wertz
|
|
|
—
|
|
|
—
|
|
|
209,250
|
|
|
43,500
|
|
|
5,575,388
|
|
|
585,080
|
|
Steven
Ho
|
|
|
—
|
|
|
—
|
|
|
59,250
|
|
|
42,750
|
|
|
1,284,339
|
|
|
579,278
|
|
(1) |
All
share amounts have been adjusted to account for the Company’s 3-for-2
stock splits in July 2000, November 2003 and December
2005.
|
(Footnotes
continued on following page)
(Footnotes
continued from previous page)
(2) |
The
value of unexercised “in-the-money” options is the difference between the
closing sale price of the Company’s Common Stock on December 30, 2005
($31.05 per share) and the exercise price of the option, multiplied
by the
number of shares subject to the
option.
|
Equity
Compensation Plan Information
The
following table sets forth information with respect to shares of Common Stock
that may be issued under our equity compensation plans as of December 31,
2005.
Plan
Category
|
|
Number
of Securities to
be
Issued Upon Exercise
of
Outstanding Options,
Warrants
and Rights
(a)
|
|
Weighted-Average
Exercise
Price of
Outstanding
Options,
Warrants
and Rights
(b)
|
|
Number
of Securities
Remaining
Available for
Future
Issuance Under
Equity
Compensation Plans
(Excluding
Securities
Reflected
in Column (a))
(c)
|
|
Equity
Compensation Plans Approved by Security Holders
|
|
|
4,095,113
(1)
|
|
$
|
10.45
|
|
|
161,137(2)
|
|
Equity
Compensation Plans Not Approved by Security Holders
|
|
|
0
|
|
|
n/m
|
|
|
0
|
|
Total
|
|
|
4,095,113
|
|
$
|
10.45
|
|
|
161,137
|
|
|
(1)
|
Shares
issuable pursuant to outstanding options under the 1993 Non-qualified
Stock Option Plan, the 1993 Incentive Stock Option Plan, and the
2001
Omnibus Equity Incentive Plan as of December 31,
2005.
|
|
(2)
|
Represents
116,512 and 44,625 shares of Common Stock that may be issued pursuant
to
future awards under the 2001 Omnibus Equity Incentive Plan and the
Incentive Bonus Plan, respectively.
|
Employee
Benefits Plans
1993
ISO Plan
The
1993
Incentive Stock Option Plan (the “1993 ISO Plan”) provides for the grant of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), to purchase up to 3,375,000
shares (split adjusted) of the Company’s Common Stock. Options granted under the
1993 ISO Plan are not transferable, except by will or the laws of descent
or distribution. A vested but unexercised option is normally exercisable for
90
days after termination of employment, other than by death or retirement. In
the
event of death, unvested options are accelerated to maturity. An option granted
under the 1993 ISO Plan may not be priced at less than 100% of fair market
value on the date of grant and expires ten years from the date of grant. As
of
the Record Date, 2,723,875 shares have been issued on the exercise of options
granted and 626,900 shares were subject to outstanding options under the 1993
ISO Plan. The 1993 ISO Plan expired on May 10, 2003, and, therefore, no
additional options can be granted under this plan.
1993
NQO Plan
The
1993
Non-Qualified Stock Option Plan (the “1993 NQO Plan”) became effective on July
6, 1993. The 1993 NQO Plan provides for the grant of options that do not qualify
as incentive stock options under Section 422 of the Code to purchase up to
3,375,000 shares (split adjusted) of the Company’s Common Stock. The options may
be exercised by the optionee during his or her lifetime or after his or her
death by those who have inherited by will or intestacy. A vested but unexercised
option is normally exercisable for 90 days after termination of employment,
other than by death or retirement. In the event of death, unvested options
are
accelerated to maturity. The shares to be issued upon exercise of options under
the 1993 NQO Plan require a three-year vesting period. An option granted under
the 1993 NQO Plan may not be priced at less than 100% of fair market value
on
the date of grant and expires ten years from the date of grant. As of the Record
Date, 2,767,033 shares have been issued on the exercise of options granted
and
565,866 shares were subject to outstanding options under the 1993 NQO Plan.
The
1993 NQO Plan expired on May 10, 2003, and, therefore, no additional
options can be granted under this plan.
2001
Omnibus Equity Incentive Plan
For
a
description of the 2001 Omnibus Equity Incentive Plan (the “2001 Incentive
Plan”), see “PROPOSAL FOUR - AMENDMENT OF 2001 OMNIBUS EQUITY INCENTIVE
PLAN.”
Incentive
Bonus Plan
The
Company’s Incentive Bonus Plan provides that the Board may fix a dollar value to
an employee bonus and determine to pay such bonus in the form of shares of
the
Common Stock of the Company. The number of shares to be awarded to the employee
is determined by dividing the dollar amount of the bonus by the fair market
value of one share of Common Stock. The Board may also elect to grant a number
of shares of Common Stock to the employee. As of the Record Date, 44,625 shares
of Common Stock were available for issuance under the Incentive Bonus
Plan.
401(k)
Plan / Retirement Plans
The
Company maintains a 401(k) profit sharing plan (the “401(k) Plan”) for the
benefit of qualified employees at its North American locations. Employees who
participate may elect to make salary deferral contributions to the 401(k) Plan
up to 100% of the employees’ eligible payroll subject to annual Internal Revenue
Code maximum limitations. The Company makes a matching contribution of $1 for
every $2 contributed by the participant up to 6% (3% maximum matching) of the
participant’s eligible payroll. In addition, the Company may make a
discretionary contribution to the entire qualified employee pool, in accordance
with the 401(k) Plan.
As
stipulated by the regulations of the PRC, the Company maintains a retirement
plan pursuant to the local municipal government for its employees in China.
The
Company is required to make contributions to the retirement plan at a rate
of
22.5% of the employee’s eligible payroll.
Pursuant
to the Taiwan Labor Standard Law and Factory Law, the Company maintains a
retirement plan for its employees in Taiwan. The Company makes contributions
at
a rate of 6% of the employee’s eligible payroll.
Employment
Contracts and Termination of Employment and Change in Control
Arrangements
On
August 29, 2005, the Company entered into employment agreements with
Messrs. Lu, Liu, King and Wertz, pursuant to which they are entitled to (1)
receive an annual base salary (subject to increase from time to time in the
discretion of the Board) of $300,000, $208,000, $177,000, and $146,000,
respectively, (2) participate in any executive bonus plan, (3) receive
reimbursement for all reasonable and documented business expenses, (4) paid
vacation in accordance with the vacation policy for employees generally, (5)
participate in all plans provided to employees in general, (6) receive a life
insurance policy in the amount in effect on the date of the agreement, and
(7)
receive a disability policy in the maximum insurable amount. Employment is
“at
will” and may be terminated by either the Company or the employee at any time.
The employee is prohibited from disclosing the Company’s trade secrets, engaging
in any “competitive activity” (as defined) or soliciting our current or, in some
cases, former employees or independent contractors, during his employment and
for the two years following the beginning of the leave of absence described
below if his employment is terminated without “cause” (as defined), and
acknowledges that all tangible items related to the Company are its exclusive
property.
In
the
event employment is terminated by the Company without “cause” (as defined), the
employee either may (a) commence a one year paid leave of absence or (b) forego
such leave of absence and the benefits associated therewith. During the leave
of
absence, the employee will continue as our full-time employee, entitled to
receive the benefits described above (other than the bonus described in clause
(2), which will be prorated to the beginning of the leave of absence). During
the leave of absence the employee will not be obligated to perform any services
for the Company, but will have all other obligations provided by the agreement.
At the end of the leave of absence, neither the Company nor the employee shall
have any further duties under these agreements, except that (1) the Company
will
continue to pay to the employee, or his estate, the annual base salary for
one
year, (2) all stock-based compensation previously granted will continue to
vest
and shall remain exercisable for the full term thereof, determined without
regard to the termination of employment, and (3) the employee will continue
to
be bound by the trade secrets, noncompetition and non-solicitation provisions
of
the agreement for one year after the end of the leave of absence. In addition,
all stock-based compensation will vest immediately upon a “change in control”
(as defined).
In
addition, the Company has entered into an indemnification agreement with each
of
these employees that may require the Company to indemnify the employee against
liabilities that may arise by reason of his service with the
Company.
Report
of the Compensation and Stock Options Committee of the Board of Directors to
Stockholders
The
Report of the Compensation and Stock Options Committee of the Board of Directors
shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such
Acts.
REPORT
OF THE COMPENSATION AND STOCK OPTIONS COMMITTEE
General
The
Compensation and Stock Options Committee (the “Committee”) consists of three
directors, Michael
R. Giordano (Chairman), John M. Stich and C.H. Chen.
The
Board has determined that each member of the Committee is “independent” as that
term is defined under the rules of Nasdaq, except for Mr. Chen who was
President and Chief Executive Officer from March 2000 until June 2005. The
Committee is not intended to qualify as a fully independent compensation
committee under the Nasdaq rules. As required by the rules of Nasdaq, the
compensation of the Chief Executive Officer and other executive officers is
determined, or recommended to the Board for determination, by a majority of
the
independent directors. The
Committee also
administers the Company’s equity incentive plans and 401(k) plan. The Committee
operates under a written charter approved by the Board.
Compensation
Philosophy
The
Company’s compensation programs are designed to attract, retain and motivate
executives critical to the Company’s long-term growth and profitability.
Compensation of executive officers consists of base salaries, performance-based
incentive bonuses, and long-term equity incentive awards. The Committee’s policy
generally is to design the total compensation package to be competitive with
the
total compensation paid to executives of other companies in the Company’s
industry that are of similar size and similar performance. Bonus programs and
equity incentive plans are designed to motivate our executives to achieve
strategic objectives and performance objectives established by the
Board.
Base
Salaries
Executive
officers receive a relatively small portion of their total compensation as
base
salary. Base salaries are generally at or below the median base salaries paid
to
officers with comparable duties by other companies in our industry that are
of a
similar size and similar performance. The Committee periodically reviews an
independent survey of executive compensation. Salaries are established by the
Committee based on its subjective assessment of the executive’s scope of
responsibility, level of experience, individual performance, and past and
potential contribution to the Company’s business.
Bonuses
Performance-based
incentive bonuses are based upon the achievement of specific financial
performance objectives established at the beginning of each fiscal year. Bonuses
are primarily based upon (i) the Company’s revenue growth exceeding that of the
Company’s industry and (ii) the growth in the Company’s net income over the
prior year. In addition, Messrs. Wertz and King received bonuses of $31,000
and $26,000, respectively, in recognition of the successful follow-on public
offering, and Dr. Lu received the bonus described below.
Equity
Incentives
The
Committee believes that long-term equity incentive awards serve to align the
interests of the executive officers with those of the Company’s stockholders.
Under the 2001 Omnibus Equity Incentive Plan, the Company may grant any type
of
award whose value is derived from the value of the Common Stock of the Company,
including shares of Common Stock, options and stock appreciation rights. To
date, the Company has only granted stock options under the 2001 Omnibus Equity
Incentive Plan. Restricted stock grants for Dr. Lu and Mr. Chen were
granted under the Company’s Incentive Bonus Plan.
The
exercise price of the stock options granted to date has been no less than the
fair market value of the Common Stock as of the date of grant. To encourage
retention, the ability to exercise the option is subject to vesting
restrictions. The Committee’s policy is to award options annually, which
generally vest over three years, and are in recognition of the executive
officer’s current and potential contribution to the Company. Decisions made by
the Committee regarding the timing and size of subsequent option grants take
into consideration the Company’s and the individual’s performance, competitive
market practices, and the size and term of option grants made in prior
years.
Compensation
for the President and Chief Executive Officer
Dr. Keh-Shew
Lu was appointed President and Chief Executive Officer of the Company on June
1,
2005. The
Committee believes that Dr. Lu’s base salary of $300,000 is at or below the
median base salary of the chief executive officers of other companies in the
industry.
Dr. Lu’s
bonus of $480,000 in 2005 was based upon the achievement of financial
performance objectives established at the beginning of that year and relating
to
the Company’s growth in revenue and net income over the prior year.
Specifically, for 2005, the Company increased revenue 15.6%, while the industry,
measured by the serviceable area market in which the Company participates,
grew
less than 1%, and the Company increased net income 30.4% from $25.6 million
to
$33.3 million. In addition, the 2005 bonus was based upon the Committee’s
subjective assessment of the performance of Dr. Lu related to the
successful completion of the follow-on public offering, the successful
acquisition of Anachip, implementing the Company’s business strategy to enter
the analog market, identifying other possible acquisition targets, and improving
communication between the Board and management.
Dr. Lu
was granted options to purchase 52,500 shares of the Company’s Common Stock at
$25.95 per share (78,750 shares at $17.30 per share split adjusted on December
1, 2005) pursuant to the 2001 Omnibus Equity Incentive Plan. Such options vest
in equal annual installments over a 3-year period and have a term of 10 years.
Stock options granted to Dr. Lu are based upon the Committee’s subjective
assessment of the performance of Dr. Lu and the Company.
In
addition, Dr. Lu was awarded a restricted stock grant upon his employment
as President and Chief Executive Officer of 180,000 shares (270,000 shares
split
adjusted on December 1, 2005) of the Company’s Common Stock under the Incentive
Bonus Plan subject to the satisfaction of the following conditions by April
15,
2008 (the date the first such shares vest): (i) the attainment of the
performance goals described below, (ii) the approval of the award by the
stockholders of the Company, and (iii) Dr. Lu’s continued employment by the
Company. The performance measures are: (i) the completion of a follow-on public
offering, the net proceeds of which to the Company exceed $50 million, (ii)
the
increase in the market capitalization of the Company (i.e., number of shares
outstanding multiplied by the closing sales price of the Company’s Common Stock)
to $1 billion, and (iii) attaining aggregate net sales of analog devices of
at
least $40 million during any four successive fiscal quarters. Such shares become
salable (i.e., vested), with respect to 50% on April 15, 2008 and 50% on April
15, 2009. If Dr. Lu voluntarily leaves employment of the Company or is
terminated for cause, he forfeits any stock not yet vested.
Deductibility
of Compensation
Under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), a
public company generally will not be entitled to a deduction for
non-performance-based compensation paid to certain executive officers to the
extent such compensation exceeds $1.0 million. Special rules apply for
“performance-based” compensation, including the approval of the performance
goals by the stockholders of the Company.
The
stockholders of the Company have approved each of the Company’s incentive plans
for the purpose of qualifying those plans under Section 162(m). Therefore,
the
Committee believes that all compensation paid to the Company’s executive
officers in fiscal 2005 will be fully deductible. In order to maintain
flexibility in compensating executive officers in a manner designed to promote
the Company’s goals, the Committee reserves the right to award future
compensation which would not comply with Section 162(m) if it concludes that
this is in the Company’s best interests.
Dated:
March 31, 2006
Compensation
and Stock Options Committee of the Board of Directors of Diodes
Incorporated
Michael
R. Giordano, Chairman
John
M.
Stich
C.H.
Chen
Compensation
and Stock Options Committee Interlocks and Insider
Participation
The
Compensation and Stock Options Committee consists of three directors,
Michael
R. Giordano (Chairman), John M. Stich, and C.H. Chen. Mr. Chen served
as the Company’s President and Chief Executive Officer from March 2000 until his
appointment to Vice Chairman on June 1, 2005. During 2005, no executive officer
of the Company served on the compensation committee (or equivalent), of the
Board of Directors of another entity whose executive officer(s) served on the
Company’s Compensation and Stock Options Committee or Board.
Report
of the Audit Committee of the Board of Directors to
Stockholders
The
Report of the Audit Committee of the Board shall not be deemed incorporated
by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
REPORT
OF THE AUDIT COMMITTEE
The
Board
maintains an Audit Committee comprised of three of the Company’s directors,
Michael R. Giordano (Chairman), John M. Stich and Dr. Shing Mao. Each
member of the Audit Committee meets the independence and experience requirements
of the Nasdaq Stock Market. Mr. Giordano qualifies as an “audit committee
financial expert” as defined under the rules of the SEC. The Audit Committee
assists the Board in monitoring the accounting, auditing and financial reporting
practices of the Company.
Management
is responsible for the preparation of the Company’s financial statements and
financial reporting process, including its system of internal controls. In
fulfilling its oversight responsibilities, the Audit Committee:
· |
Reviewed
and discussed with management the audited financial statements contained
in the Company’s Annual Report on Form 10-K for fiscal 2005;
and
|
· |
Obtained
from management their representation that the Company’s financial
statements have been prepared in accordance with accounting principles
generally accepted in the United
States.
|
The
independent registered public accounting firm is responsible for performing
an
audit of the Company’s financial statements in accordance with the auditing
standards generally accepted in the United States and expressing an opinion
on
whether the Company’s financial statements present fairly, in all material
respects, the Company’s financial position and results of operations for the
periods presented and conform with accounting principles generally accepted
in
the United States. In fulfilling its oversight responsibilities, the Audit
Committee:
· |
Discussed
with the independent registered public accounting firm the matters
required to be discussed by Statement on Auditing Standards No. 61,
as amended (“Communication with Audit Committees”);
and
|
· |
Received
and discussed with the independent registered public accounting firm
the
written disclosures and the letter from the independent registered
public
accounting firm required by Independent Standards Board Standard
No. 1
(“Independence Discussions with Audit Committees”), and reviewed and
discussed with the independent registered public accounting firm
whether
the rendering of the non-audit services provided by them to the Company
during fiscal 2005 was compatible with their
independence.
|
The
Audit
Committee operates under a written charter, which was adopted by the Board
and
is assessed annually for adequacy by the Audit Committee. The Audit Committee
held five meetings during fiscal 2005.
In
performing its functions, the Audit Committee acts only in an oversight
capacity. It is not the responsibility of the Audit Committee to determine
that
the Company’s financial statements are complete and accurate, are presented in
accordance with accounting principles generally accepted in the United States
or
present fairly the results of operations of the Company for the periods
presented or that the Company maintains appropriate internal controls. Nor
is it
the duty of the Audit Committee to determine that the audit of the Company’s
financial statements has been carried out in accordance with generally accepted
auditing standards or that the Company’s auditors are independent.
Based
upon the reviews and discussions described above, and the report of the
independent registered public accounting firm, the Audit Committee has
recommended to the Board, and the Board has approved, that the audited financial
statements be included in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2005 for filing with the Securities and Exchange
Commission. The Audit Committee also has recommended, and the Board also has
approved, subject to stockholder ratification, the selection of Moss Adams
LLP as the Company’s independent registered public accounting firm for the
fiscal year ending December 31, 2006.
Dated:
March 31, 2006
The
Audit Committee of the Board of Directors of Diodes
Incorporated,
Michael
R. Giordano, Chairman
John
M.
Stich
Dr. Shing
Mao
Code
of Ethics
The
Company has adopted a Code of Ethics applicable to the principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions of the Company. The Code
of
Ethics is published on our website, at www.diodes.com. We intend to disclose
future amendments to, or waivers from, certain provisions of the Code of Ethics
applicable to senior financial executives on our website within two business
days following the date of such amendment or waiver.
Performance
Graph
On
June
19, 2000, the Company’s Common Stock commenced trading on the Nasdaq
Stock Market, National Market System (“Nasdaq”), under the symbol “DIOD.” From
November 10, 1966
to June
16, 2000, the Company’s Common Stock traded on the American Stock Exchange
(“Amex”), under the symbol “DIO.” Set forth below is a line graph comparing the
yearly percentage change in the cumulative total stockholder return of the
Company’s Common Stock against the cumulative total return of the Nasdaq
Composite and the Nasdaq Industrial Index for the five calendar years ending
December 31, 2005. The graph is not necessarily indicative of future price
performance.
The
graph shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such
Acts.
Total
Return Analysis (1)
|
|
2000
|
|
2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
Diodes
Incorporated
|
|
$
|
100
|
|
$
|
64.10
|
|
$
|
92.63
|
|
$
|
274.70
|
|
$
|
327.18
|
|
$
|
673.37
|
|
Nasdaq
Industrial Index
|
|
|
100
|
|
|
93.67
|
|
|
69.43
|
|
|
108.14
|
|
|
125.27
|
|
|
125.41
|
|
Nasdaq
Composite Index
|
|
|
100
|
|
|
78.95
|
|
|
54.06
|
|
|
81.09
|
|
|
88.06
|
|
|
89.27
|
|
Source:
CTA Public Relations. Data from BRIDGE Information Systems, Inc.
(1) |
The
graph assumes $100 invested on December 31, 2000 in the Common Stock
of
the Company, the stock of the companies in the Nasdaq Composite Index
and
the Nasdaq Industrial Index, and that all dividends received within
a
quarter, if any, were reinvested in that
quarter.
|
Certain
Relationships and Related Transactions
The
Company conducts business with two related party companies, LSC (and its
subsidiaries and affiliates) and Keylink International (formerly Xing
International) (and its subsidiaries). LSC, a 22.9% shareholder at December
31,
2005, is the Company’s largest shareholder, and Keylink International is owned
by the Company’s 5% joint venture partner in Diodes-China and
Diodes-Shanghai.
In
connection with our 2005 follow-on public offering, LSC sold 750,000 shares
(1,125,000 split-adjusted shares at December 1, 2005), reducing its holdings
of
our Common Stock to 5,777,187 shares (split adjusted). We did not receive any
of
the proceeds from their sale of our Common Stock.
The
Audit
Committee reviews all related party transactions for potential conflict of
interest situations, and approves all such transactions, in accordance with
such
procedures as it may adopt from time to time. The Company believes that all
related party transactions are on terms no less favorable to the Company than
would be obtained from unaffiliated third parties.
In
2005,
we sold silicon wafers to LSC totaling 9.6% (11.1% in 2004) of our sales, making
LSC our largest customer. Also for 2005, 14.7% (17.2% in 2004) of our sales
were
from discrete semiconductor products purchased from LSC for subsequent sale
by
us, making LSC our largest outside supplier. In addition, companies affiliated
with LSC, which we refer to collectively as The Lite-On Group, accounted for
3.3% and 4.2% of our net sales, respectively, in 2004 and 2005. We also rent
warehouse space in Hong Kong from a member of The Lite-On Group, which also
provides us with warehousing services at that location. For 2004 and 2005,
we
reimbursed this entity in aggregate amounts of $190,000 and $288,000,
respectively, for these items. Such transactions are on terms no less favorable
to us than could be obtained from unaffiliated third parties. The Audit
Committee of the Board has approved the arrangements we have with these related
party transactions.
In
December 2000, the Company acquired a wafer foundry, FabTech, Inc., from LSC.
In
connection with the acquisition, LSC entered into a volume purchase agreement
to
purchase wafers from FabTech. In addition, in accordance with the terms of
the
acquisition, the Company had entered into several management incentive
agreements with members of FabTech’s management. The agreements provide members
of FabTech’s management guaranteed annual payments as well as contingent bonuses
based on the annual profitability of FabTech, subject to a maximum annual
amount. Any
portion of the guaranteed and contingent liability paid by FabTech was
reimbursed by LSC. 2004 was the final year of the management incentive
agreements, with final payment made by March 31, 2005.
In
January 2006, the Company acquired Anachip Corporation, a Taiwanese fabless
analog IC company. The all-cash transaction of NT$20 per Anachip share
(approximately US$30 million) closed January 10, 2006. The selling shareholders
included LSC (which owned approximately 60% of Anachip’s outstanding capital
stock), and two Taiwanese venture capital firms (together who owned
approximately 20% of Anachip’s stock), as well as current and former Anachip
employees. Headquartered in the Hsinchu Science Park in Taiwan, Anachip’s main
product focus is Power Management ICs. Anachip’s products are widely used in LCD
monitor/TV’s, wireless 802.11 LAN access points, brushless DC motor fans,
portable DVD players, datacom devices, ADSL modems, TV/satellite set-top boxes,
and power supplies. For the year ended December 31, 2005, revenue from Anachip’s
Power Management ICs was approximately US$35 million, generating approximately
US$2.5 million in net income, and the acquisition is expected to be accretive
to
Diodes’ 2006 earnings.
In
2005,
we sold silicon wafers to companies owned by Keylink International totaling
0.6%
(0.9% in 2004) of our sales. Also for 2005, 3.0% (3.5% in 2004) of our sales
were from discrete semiconductor products purchased from companies owned by
Keylink International. In addition, Diodes-China and Diodes-Shanghai lease
their
manufacturing facilities from, and subcontract a portion of their manufacturing
process (metal plating and environmental services) to, Keylink International.
We
also pay a consulting fee to Keylink International. In 2004 and 2005, we paid
Keylink International an aggregate of $4.8 million and $6.6 million,
respectively, with respect to these items. We believe such transactions are
on
terms no less favorable to us than could be obtained from unaffiliated third
parties. The Audit Committee of the Board of Directors has approved the
contracts associated with these related party transactions.
In
October 2002, Silitek and Taiwan Lite-On merged with Lite-On Technology
Corporation, a publicly traded company on the Taiwan Stock Exchange. Prior
to
this merger, Silitek was affiliated through common ownership and control with
Taiwan Lite-On, and both companies were members of The Lite-On Group and
publicly traded on the Taiwan Stock Exchange.
Raymond
Soong, who became a director and Chairman of the Board of the Company effective
March 1993, is also the Chairman of the Boards of LSC and Lite-On Technology
Corporation (a significant shareholder of LSC), and is the founder of the
Lite-On Group of companies and a board member of Actron Technology.
C.H.
Chen, the Company’s Vice Chairman of the Board, is also Vice-Chairman of LSC,
and a board member of Actron Technology Corporation.
Dr. Shing
Mao, who is a director of the Company, retired in 2000 as Chairman of the Board
of Lite-On Milpitas, a wholly-owned subsidiary of Taiwan Lite-On which merged
with Lite-On Technology Corporation in 2002. Dr. Mao was also a director of
LSC from 1989 to 2000, and since 1996, has been a director of
FabTech.
M.K.
Lu,
who has been a director of the Company since 1995, is also President of LSC
and
acting President of Actron Technology Corporation, both Lite-On Group companies.
From 1983 to 1990, Mr. Lu was General Manager/Vice President of
Silitek.
Michael
Giordano, a director of the Company, is Senior Vice President-Investment
Consulting at the investment-banking firm of UBS, Inc. Along with his son,
James
Giordano, Michael Giordano has, from time to time, assisted directors, executive
officers, and employees of the Company in stock option exercises and subsequent
stock sales of the Company’s Common Stock, as well as provided investment
management services. Mr. Giordano is also the pension consultant for the
Company’s 401(k) plan, which is managed by UBS Fiduciary Trust. In addition,
Mr. Giordano has, from time to time, provided investment management
services for directors and officers of The Lite-On Group. All such services
have
been provided by UBS, Inc. at customary rates and terms.
John
M.
Stich, a director of the Company, is also President and CEO of The Asian
Network. In 2000 and 2001, Mr. Stich had received fees as a marketing
consultant to the Company. In 2002, Mr. Stich ceased performing marketing
consulting services for the Company.
Dr. Keh-Shew
Lu, President and Chief Executive Officer, and a director of the Company,
retired as Senior Vice President of TI and manager of Worldwide Mixed-Signal
Products - Semiconductor Group in 2001. During 2002, Dr. Lu received fees
as an engineering consultant to the Company. Dr. Lu is also a director of
Lite-On Technology Corporation.
Mark
A.
King, the Company’s Vice President of Sales and Marketing, has an approximate
$100,000 investment in one of the Company’s computer software vendors (a
privately-held company). Mr. King’s investment was made subsequent to the
Company’s purchase of the software, which is used for sales quotation and
channel management, and has been approved by the Board. Fees paid to this
software vendor in 2005, including annual software maintenance and consulting
fees, were approximately $122,000.
COMPLIANCE
WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Under
Section 16(a) of the Exchange Act, the Company’s directors, executive
officers and any persons holding ten percent or more of the Common Stock are
required to report their ownership of Common Stock and any changes in that
ownership to the SEC and to furnish the Company with copies of such reports.
Specific due dates for these reports have been established and the Company
is
required to report any failure to file on a timely basis by such persons. Based
solely upon a review of copies of reports filed with the SEC during the fiscal
year ended December 31, 2004, all reporting persons filed reports on a
timely basis except Messrs. Soong, Chen, Giordano, Mao, Stich, M.K. Lu,
Keh-Shew Lu, Liu, King and Wertz who filed Form 4’s on August 31, 2005 for stock
options granted on July 12, 2005. To avoid the inadvertent failure of directors
and executive officers to timely file these reports, the Company periodically
advises such persons of their filing obligations.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE
ELECTION OF THE BOARD OF DIRECTORS’ NOMINEES.
PROPOSAL
TWO - RATIFICATION OF EXECUTIVE STOCK GRANT
At
the
Meting, the Stockholders will be asked to consider and to approve the grant
to
Dr. Keh-Shew Lu of shares of Common Stock.
Terms
of Stock Grants
In
connection with his appointment as the President and Chief Executive Officer,
the Compensation Committee approved the grant to Dr. Lu of 180,000 (270,000
shares as adjusted for the 3-for-2 stock split on December 1, 2005) shares
of
Common Stock under the Incentive Bonus Plan. The Board believes that this grant
of shares was a material inducement to Dr. Lu accepting his appointment,
will assist the Company in retaining Dr. Lu’s services as President and
Chief Executive Officer, and will more closely align the interests of
Dr. Lu to those of the stockholders.
The
grant
of shares to Dr. Lu is subject to the satisfaction of the following
conditions by the First Vesting Date (as defined below):
· |
the
attainment of certain performance
goals;
|
· |
the
approval of the grant by the stockholders of the Company;
and
|
· |
Dr. Lu’s
continued employment by the
Company.
|
Such
performance goals are:
· |
the
completion of a follow-on public offering, the net proceeds of which
to
the Company exceed $50 million;
|
· |
the
increase in the market capitalization of the Company (i.e., number
of
shares outstanding multiplied by the closing sales price of the Company’s
Common Stock) to $1 billion; and
|
· |
attaining
aggregate net sales of analog devices of at least $40 million during
any
four successive fiscal quarters.
|
As
a
result of the 3-for-2 stock split in December 2005, 270,000 shares of Common
Stock will be issued to Dr. Lu upon the approval of this grant by the
Company’s stockholders.
Under
the
Incentive Bonus Plan, 50% of the shares become salable and transferable (“vest”)
on the day following the third anniversary of the grant (the “First Vesting
Date”), and 50% vest on the day following the fourth anniversary of the grant.
If the recipient voluntarily leaves the employment of the Company or is
terminated for cause, he forfeits any stock not yet vested.
For
a
description of the terms of Dr. Lu’s employment, including salary, bonus
and perquisites, see “Proposal One – Election
of
Directors – Employment
Contracts and Termination of Employment and Change in Control
Arrangements.”
The
compensation expense related to this grant of $4,671,000 is being expensed
by
the Company over the 4-year vesting period.
Certain
Effects of the Proposal
Unless
this grant of shares complies with the provisions of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
promulgated thereunder (as discussed below), the Company may be denied a
deduction for compensation attributable to these shares to the extent that
such
compensation exceeds $1 million in a given year. Pursuant to the provisions
of
Section 162(m), this grant must be disclosed to and approved by the Company’s
stockholders. If the stockholders do not approve this grant before the shares
vest under the terms of the Incentive Bonus Plan, this grant will be rescinded.
The Company believes that it is in the best interests of the Company and its
stockholders for the Stockholders to approve this grant at the Meeting so that
the Company will be able to claim a compensation deduction attributable
thereto.
Section
162(m) Limitations
The
following is intended only as a brief summary Section 162(m) and the regulations
promulgated thereunder.
Section
162(m) of the Code generally disallows the deduction of compensation income
in
excess of $1,000,000 paid to the Chief Executive Officer or one of the other
four most highly compensated employees of the Company whose compensation is
required to be disclosed under the Securities Exchange Act of 1934. If
Dr. Lu were to receive more than $1,000,000 in compensation in any tax
year, the Company would not be allowed to deduct that portion of such officer’s
otherwise deductible compensation that exceeded $1,000,000.
Section
162(m) of the Code does not apply, however, to compensation that meets the
following four criteria: (1) the compensation is payable solely on the
attainment of performance goals; (2) the performance goals are determined by
a
compensation committee of the Board of Directors comprised solely of two or
more
“outside directors” (as defined); (3) the material terms of the compensation are
disclosed to the stockholders and approved by the stockholders; and (4) the
compensation committee certifies that the performance goals have been
met.
Vote
Required
The
proposal to ratify this grant of shares to Dr. Lu requires the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
present, in person or by proxy, and entitled to vote on the proposal at the
Meeting.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE
EXECUTIVE STOCK GRANT.
PROPOSAL
THREE –AMENDMENT
OF CERTIFICATE OF INCORPORATION
The
Board
has approved, declared advisable and recommends that the stockholders consider
and approve an amendment (the "Amendment") to Article Four of the Company's
Certificate of Incorporation (the "Certificate"), pursuant to which the
authorized number of shares of Common Stock would be increased from 30,000,000
shares to 70,000,000. The Certificate also currently authorizes the issuance
of
up to 1,000,000 shares of Preferred Stock, of which no shares are issued and
outstanding. The Amendment would not alter the authorized number of shares
of
Class A Preferred Stock.
Purpose
and Effects of the Amendment
At
December 31, 2005, there were 25,258,119 shares of Common Stock issued and
outstanding. In addition, there were 4,095,113 shares of Common Stock issuable
upon the exercise of outstanding stock options, and 161,137 shares were reserved
in the aggregate for issuance pursuant to the Company's 2001 Omnibus Equity
Incentive Plan and Incentive Bonus Plan.
The
Board
believes that the flexibility provided by the Amendment to permit the Company
to
issue or reserve additional Common Stock, in the discretion of the Board,
without the delay or expense of a special meeting of stockholders, is in the
best interest of the Company and its stockholders. The Company has no present
plans, arrangements, commitments or understandings with respect to the issuance
of any additional shares of Common Stock authorized by the Amendment. Shares
of
Common Stock may be used for general corporate purposes, including, but not
limited to, stock splits and stock dividends, acquisitions, public offerings,
stock option and other employee benefit plans.
Pursuant
to the Certificate, stockholders of the Company have no preemptive rights with
respect to the additional shares of Common Stock authorized by the Amendment.
The Certificate does not require further approval of stockholders prior to
the
issuance of any additional shares of Common Stock. In certain circumstances
(generally relating to the number of shares to be issued, the manner of offering
and the identity of the recipients), the rules of The Nasdaq Stock Market
("Nasdaq") may require specific authorization in connection with the issuance
of
such additional shares. The Company does not anticipate that it will seek
authorization from stockholders for issuance of additional shares of Common
Stock unless required by the applicable rules of Nasdaq.
The
issuance of any additional shares of Common Stock may have the effect of
diluting the percentage of stock ownership, book value per share and voting
rights of the present holders of the Common Stock. The Amendment also may have
the effect of discouraging attempts to take over control of the Company, as
additional shares of Common Stock could be issued to dilute the stock ownership
and voting power of, or increase the cost to, a party seeking to obtain control
of the Company. The Amendment is not being proposed in response to any known
effort or threat to acquire control of the Company and is not part of a plan
by
management to adopt a series of amendments to the Certificate or By-laws having
an anti-takeover effect.
Resolution
The
following resolution will be submitted to stockholders at the Meeting for their
approval:
RESOLVED:
That the first sentence of ARTICLE FOUR of the Restated Certificate of
Incorporation of this corporation be amended to read in its entirety as follows:
"FOURTH:
The Company is authorized to issue a total of seventy-one million (71,000,000)
shares of all classes of stock. Of such total number of authorized shares of
stock, seventy million (70,000,000) shares are Common Stock, each of which
shares of Common Stock has a par value of Sixty-Six and Two-Thirds Cents
($.66-2/3), and one million (1,000,000) shares are Preferred Stock, each of
which shares of Preferred Stock has a par value of One Dollar
($1.00)."
Vote
Required
In
accordance with Delaware law, the affirmative vote of the holders of a majority
of the outstanding shares of Common Stock is required to approve the Amendment.
Accordingly, abstentions will have the same effect as votes "AGAINST" approval
of the Amendment, while broker non-votes will not be counted as votes cast
for
or against the Amendment. If the Amendment is approved, the Company intends
to
file the Amendment with the Secretary of State of the State of Delaware as
soon
as practicable thereafter. The Amendment will be effective immediately upon
acceptance. The Board reserves the right to abandon or delay the Amendment
even
if it is approved by the Stockholders.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED
AMENDMENT
OF THE CERTIFICATE OF INCORPORATION.
PROPOSAL
FOUR –
AMENDMENT OF 2001 OMNIBUS EQUITY INCENTIVE PLAN
General
In
April
2001, the 2001 Omnibus Equity Incentive Plan (the "2001 Incentive Plan") became
effective. Under the 2001 Incentive Plan, employees, non-employee directors
and
consultants of the Company and its subsidiaries are eligible to receive shares
of Common Stock of the Company or other securities or benefits with a value
derived from the value of the Common Stock of the Company. The purpose of the
2001 Incentive Plan is to enable the Company to attract, retain and motivate
employees, non-employee directors and consultants by providing for or increasing
their proprietary interests in the Company and, thereby, further align their
interests with those of the Company's stockholders.
As
of the
Record Date, the maximum number of shares of Common Stock that may be issued
pursuant to awards granted under the 2001 Incentive Plan may not exceed the
sum
of (i) 3,383,217 shares and (ii) on each January 1, an additional
number of shares equal to 1% of the total number of shares of Common Stock
outstanding on the immediately preceding December 31. The “evergreen” feature
will be removed if the proposed amendment is approved by stockholders as
described below.
Purpose
and Effect of the Amendment
The
Stockholders will be asked at the Meeting to consider and vote upon a proposal
to amend the 2001 Incentive Plan to:
|
·
|
Increase
the number of shares of Common Stock that may be issued pursuant
to awards granted thereunder by 2,200,000
shares.
|
|
·
|
Delete
the provision thereof that automatically increases, by 1% of the
outstanding shares on each January 1, the maximum number of shares
of
Common Stock that may be issued
thereunder.
|
|
·
|
Provide
that stock options and stock appreciation rights will not be repriced
without the approval of the
stockholders.
|
|
·
|
Provide
that the exercise price per share of Common Stock purchasable under
a
stock option be not less than 100% of the fair market value of the
Common
Stock on the date of grant of such stock
option.
|
|
·
|
Provide
for the "cashless" (or "net") exercise of stock
options.
|
|
·
|
Provide
that each share of Common Stock subject to issuance under any award,
other
than options or stock
appreciation rights,
shall be counted against the maximum number of shares of Common Stock
that
may be issued under the 2001 Incentive Plan as 1.52
shares.
|
|
·
|
Provide
that, to the extent a stock appreciation right is settled for shares
of
Common Stock, the number of shares used for determining the benefit
under
such stock appreciation right shall be counted against the maximum
number
of shares of Common Stock that may be issued under the 2001 Incentive
Plan, regardless of the number of shares used to settle the stock
appreciation right upon such
exercise.
|
|
·
|
Provide
that, to the extent a stock option is exercised on a "cashless" (or
"net")
basis, the number of shares of Common Stock issued upon exercise,
plus the
number of shares retained by the Company, shall be counted against
the
maximum number of shares of Common Stock that may be issued under
the 2001
Incentive Plan.
|
|
·
|
Specify
certain performance criteria, the achievement of which may be required
in
order for performance awards to
vest.
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT OF THE 2001
OMNIBUS EQUITY INCENTIVE PLAN
Option
Grants and Exercises
As
of the
Record Date, 334,178 shares have been issued pursuant to awards granted under
the 2001 Incentive Plan, 2,721,778 shares were subject to awards outstanding
under the 2001 Incentive Plan, and 327,261 shares were available for
issuance
under
awards that may be granted under the 2001 Incentive Plan. For information
concerning the grant of awards during fiscal 2005 to the Named Executives,
the
exercise of stock options during fiscal 2005 by the Named Executives, and
unexercised stock options held by the Named Executives as of December 31, 2005,
see "ELECTION OF DIRECTORS—Stock Option Grants" and "ELECTION OF DIRECTORS—Stock
Option Exercises and Holdings."
Vote
Required
The
affirmative vote of a majority of the outstanding shares of Common Stock
present, in person or by proxy, and entitled to vote on the amendment at the
Meeting is required to approve the amendment. Abstentions will be included
in
the number of votes cast on the amendment and, accordingly, will have the effect
of a vote "AGAINST" the amendment. However, broker non-votes will not be
included in the number of shares counted as being present for the purposes
of
voting on the amendment and, accordingly, will have the effect of reducing
the
number of affirmative votes required to approve the amendment).
Summary
of the Plan
The
following summary of the 2001 Incentive Plan does not purport to be a complete
description of the Plan and is qualified in its entirety by reference to its
full text, a copy of which is attached to this Proxy Statement as Appendix
A.
General.
The
purpose of the 2001 Incentive Plan is to encourage ownership in the Company
by
key personnel whose long-term employment is considered essential to the
Company's continued progress and, thereby, align participants' and stockholders'
interests. Stock options and stock awards, including stock units and cash
awards, may be granted under the 2001 Incentive Plan. Options granted under
the
2001 Incentive Plan may be either "incentive stock options," as defined in
Section 422 of the Code, or non-qualified stock options.
Administration.
The
2001 Incentive Plan is administered by the Compensation and Stock Options
Committee of the Board of Directors (the "Committee"). Subject to the provisions
of the 2001 Incentive Plan, the Committee has a wide degree of flexibility
in
determining the terms and conditions of awards and the number of shares to
be
issued pursuant thereto, including conditioning the receipt or vesting of awards
upon the achievement by the Company of specified performance criteria. The
expenses of administering the 2001 Incentive Plan are borne by the
Company.
Terms
of Awards.
The
2001 Incentive Plan authorizes the Committee to enter into any type of
arrangement with an eligible recipient that, by its terms, involves or might
involve the issuance of Common Stock or any other security or benefit with
a
value derived from the value of Common Stock. Awards are not restricted to
any
specified form or structure and may include, without limitation, sales or
bonuses of stock, restricted stock, stock options, reload options, stock
appreciation rights, phantom stock, dividend equivalents, performance units
or
performance shares. An award may consist of one such security or benefit or
two
or more of them in tandem or in the alternative.
An
award
granted under the 2001 Incentive Plan may include a provision accelerating
the
receipt of benefits upon the occurrence of specified events, such as a change
of
control of the Company or a dissolution, liquidation, merger, reclassification,
sale of substantially all of the property and assets of the Company or other
significant corporate transactions. The Committee may grant options that either
are intended to be "incentive stock options" as defined under Section 422 of
the
Code, or are not intended to be incentive options ("non-qualified stock
options"). Incentive stock options may be granted only to
employees.
No
incentive stock option may be granted under the 2001 Incentive Plan to any
person who, at the time of the grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of the Company
or
any affiliate of the Company, unless the option exercise price is at least
110%
of the fair market value of the stock subject to the option on the date of
the
grant and the term of the option does not exceed five years from the date of
the
grant. In addition, the aggregate fair market value, determined at the time
of
the grant, of the shares of Common Stock with respect to which incentive stock
options are exercisable for the first time by an optionee during any calendar
year (under all such plans of the Company and its subsidiaries) may not exceed
$100,000. As a result of enactment of Section 162(m) of the Code, and to provide
the Committee flexibility in structuring awards, the 2001 Incentive Plan states
that in the case of stock options and stock appreciation rights, no person
may
receive in any year a stock option to purchase more than 100,000 shares or
a
stock appreciation right measured by more than 100,000 shares.
If
awards
granted under the 2001 Incentive Plan expire, are canceled or otherwise
terminate without being exercised, the Common Stock not purchased pursuant
to
the award again becomes available for issuance under the 2001 Incentive Plan.
Awards may not be granted under the 2001 Incentive Plan on or after the tenth
anniversary of the adoption of the 2001 Incentive Plan.
Eligibility.
All
employees and consultants of the Company and all non-employee directors of
the
Company will be eligible to participate in the Plan. As of December 31, 2005,
there were approximately 1,621 employees of the Company, including five current
executive officers and six non-employee directors of the Company who would
be
eligible to participate in the Plan.
Payment
of Exercise Price.
An
award may permit the recipient to pay all or part of the purchase price of
the
shares or other property issuable pursuant thereto, or to pay all or part of
such recipient's tax withholding obligation with respect to such issuance,
by
(i) delivering previously owned shares of capital stock of the Company or
other property or (ii) reducing the amount of shares or other property
otherwise issuable pursuant to the award or (iii) delivering a promissory
note, the terms and conditions of which will be determined by the Committee.
The
exercise price and any withholding taxes are payable in cash by consultants
and
non-employee directors, although the Committee at its discretion may permit
such
payment by delivery of shares of Common Stock, or by delivery of broker
instructions authorizing a loan secured by the shares acquired upon exercise
or
payment of proceeds from the sale of such shares.
Amendment.
Subject
to limitations imposed by law, the Board may amend or terminate the 2001
Incentive Plan at any time and in any manner. However, no such amendment or
termination may deprive the recipient of any award previously granted under
the
2001 Incentive Plan or any rights thereunder without the recipient's
consent.
Section
16(b).
Pursuant to Section 16(b) of the Exchange Act, directors, certain officers
and
10% shareholders of the Company are generally liable to the Company for
repayment of any "short-swing" profits realized from any non-exempt purchase
and
sale of Common Stock occurring within a six-month period. Rule 16b-3,
promulgated under the Exchange Act, provides an exemption from Section 16(b)
liability for certain transactions by an officer or director pursuant to an
employee benefit plan that complies with such Rule. Specifically, the grant
of
an option under an employee benefit plan that complies with Rule 16b-3 will
not
be deemed a purchase of a security for purposes of Section 16(b). The 2001
Incentive Plan is designed to comply with Rule 16b-3.
Term.
Awards
may not be granted under the 2001 Incentive Plan on or after the tenth
anniversary of the adoption of the 2001 Incentive Plan. Although any award
that
was duly granted on or prior to such date may thereafter be exercised or settled
in accordance with its terms, no shares of Common Stock may be issued pursuant
to any award on or after the twentieth anniversary of the adoption of the 2001
Incentive Plan.
Performance
Goals.
The
business criteria on which performance goals are based under the 2001 Incentive
Plan will be determined on a case-by-case basis, except that with respect to
stock options and stock appreciation rights compensation is based on increases
in the value of the Common Stock after the date of grant of award. Similarly,
the maximum amount of compensation that could be paid to any participant or
the
formula used to calculate the amount of compensation to be paid to the
participant if a performance goal is obtained will be determined on a
case-by-case basis, except that in the case of stock options the maximum
possible compensation will be calculated as the difference between the exercise
price of the option and the fair market value of the Common Stock on the date
of
option exercise, times the maximum number of shares for which grants may be
made
to any participant. The Committee may use any one or more of the following
performance criteria: (i) cash flow, (ii) earnings (including gross
margin, earnings before interest and taxes, earnings before taxes, and net
earnings), (iii) earnings per share, (iv) growth in earnings or
earnings per share, (v) stock price, (vi) return on equity or average
shareholders’ equity, (vii) total shareholder return, (viii) return on
capital, (ix) return on assets or net assets, (x) return on
investment, (xi) revenue, (xii) income or net income, (xiii) operating
income or net operating income, (xiv) operating profit or net operating profit,
(xv) operating margin, (xvi) return on operating revenue,
(xvii) market share, (xviii) contract awards or backlog,
(xix) overhead or other expense reduction, (xx) growth in shareholder
value relative to the moving average of the S&P 500 Index or a peer group
index, (xxi) credit rating, (xxii) strategic plan development and
implementation, (xxiii) improvement in workforce diversity or productivity,
(xxiv) EBITDA, (xxv) market capitalization, (xxvi), capital raised in
follow-on or debt offerings, (xxvii) quality or yield improvements, (xxviii)
acquisitions, and (xxix) any other similar criteria.
Adjustments.
If
there is any change in the stock subject to the 2001 Incentive Plan or subject
to any award made under the 2001 Incentive Plan (through merger, consolidation,
reorganization, re-capitalization, stock dividend, dividend in kind, stock
split, liquidating dividend, combination or exchange of shares, change in
corporate structure or otherwise), the 2001 Incentive Plan and shares
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to the 2001 Incentive Plan and the class,
number of shares and price per share of stock subject to such outstanding
options as determined by the Committee to be fair and equitable to the holders,
the Company and the shareholders. In addition, the Committee may also make
adjustments in the number of shares covered by, and the price or other value
of
any outstanding awards under the 2001 Incentive Plan in the event of a spin
off
or other distribution (other than normal cash dividends) of Company assets
to
stockholders.
Section
162(m) Limitations. Section
162(m) of the Code generally disallows a tax deduction to public companies
for
compensation in excess of $1 million paid to the Company's Chief Executive
Officer or any of the four other most highly compensated officers. Certain
performance-based compensation is specifically exempt from the deduction limit
if it otherwise meets the requirements of Section 162(m). One of the
requirements for equity compensation plans is that there must be a limit to
the
number of shares granted to any one individual under the plan. Accordingly,
the
2001 Incentive Plan provides that no employee may be granted more than 100,000
shares in any calendar year.
Federal
Income Tax Consequences
Incentive
Stock Options.
An
optionee who is granted an incentive stock option does not recognize taxable
income at the time the option is granted or upon its exercise, although the
exercise is an adjustment item for alternative minimum tax purposes and may
subject the optionee to the alternative minimum tax. Upon a disposition of
the
shares more than two years after grant of the option and one year after exercise
of the option, the optionee will recognize long-term capital gain or loss equal
to the difference between the sale price and the exercise price. If the holding
periods are not satisfied, then: (1) if the sale price exceeds the exercise
price, the optionee will recognize capital gain equal to the excess, if any,
of
the sale price over the fair market value of the shares on the date of exercise
and will recognize ordinary income equal to the difference, if any, between
the
lesser of the sale price or the fair market value of the shares on the exercise
date and the exercise price; or (2) if the sale price is less than the exercise
price, the optionee will recognize a capital loss equal to the difference
between the exercise price and the sale price. Unless limited by Section 162(m)
of the Code, the Company is entitled to a deduction in the same amount as and
at
the time the optionee recognizes ordinary income.
Non-Qualified
Stock Options.
An
optionee does not recognize any taxable income at the time a non-qualified
stock
option is granted. Upon exercise, the optionee recognizes taxable income
generally measured by the excess of the then fair market value of the shares
over the exercise price. Any taxable income recognized in connection with an
option exercise by an employee of the Company is subject to tax withholding
by
the Company. Unless limited by Section 162(m) of the Code, the Company is
entitled to a deduction in the same amount as and at the time the optionee
recognizes ordinary income. Upon a disposition of such shares by the optionee,
any difference between the sale price and the exercise price, to the extent
not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period.
Stock
Awards.
Stock
awards will generally be taxed in the same manner as non-qualified stock
options. However, a restricted stock award is subject to a “substantial risk of
forfeiture” within the meaning of Section 83 of the Code to the extent the
award will be forfeited in the event that the employee ceases to provide
services to the Company. As a result of this substantial risk of forfeiture,
the
employee will not recognize ordinary income at the time of award. Instead,
the
employee will recognize ordinary income on the dates when the stock is no longer
subject to a substantial risk of forfeiture, or when the stock becomes
transferable, if earlier. The employee’s ordinary income is measured as the
difference between the amount paid for the stock, if any, and the fair market
value of the stock on the date the stock is no longer subject to forfeiture.
The
employee may accelerate his or her recognition of ordinary income, if any,
and
begin his or her capital gains holding period by timely filing (i.e., within
thirty days of the award) an election pursuant to Section 83(b) of the Code.
In
such event, the ordinary income recognized, if any, is measured as the
difference between the amount paid for the stock, if any, and the fair market
value of the stock on the date of award, and the capital gain holding period
commences on such date. The ordinary income recognized by an employee will
be
subject to tax withholding by the Company. Unless limited by Section 162(m)
of
the Code, the Company is entitled to a deduction in the same amount as and
at
the time the employee recognizes ordinary income.
Stock
Appreciation Rights.
An
awardee does not recognize any taxable income at the time a stock appreciation
right is granted. Upon exercise, the awardee recognizes taxable income generally
measured by the excess of the then fair market value of the shares over the
exercise price.
The
foregoing is only a summary of the effect of U.S. federal income taxation upon
recipients and the Company with respect to the grant and exercise of awards
under the 2001 Incentive Plan. It does not purport to be complete and does
not
discuss the tax consequences arising in the context of the employee’s death or
the income tax laws of any municipality, state or foreign country in which
the
employee’s income or gain may be taxable.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT OF THE
2001
OMNIBUS EQUITY INCENTIVE PLAN.
PROPOSAL
FIVE - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The
firm
of Moss Adams LLP has been the Company's independent registered public
accounting firm since 1993 and has been selected by the Board, upon
recommendation of the Audit Committee to serve as its independent registered
public accounting firm for the calendar year ending December 31, 2006.
Professional services rendered by Moss Adams LLP for 2005 consisted of an audit
of the Company's annual financial statements (including services incurred with
rendering an opinion under Section 404 of Sarbanes-Oxley Act of 2002) and review
of quarterly financial statements, consultation on interim financial statements,
services related to filings with the SEC, meetings with the Company's Audit
Committee and consultation on various matters relating to accounting and
financial reporting. All professional services rendered by Moss Adams LLP during
2005 were furnished at customary rates and terms. Representatives of Moss Adams
LLP are expected to be present at the Meeting. They will have the opportunity
to
make a statement, if they so desire, and respond to appropriate questions from
Stockholders.
Audit
Fees, Tax Fees, and All Other Fees
For
the
fiscal years ended December 31, 2004 and 2005, fees for services provided by
Moss Adams LLP were approximately as follows:
Description
|
|
2004
(1)
|
|
2005
|
|
Audit
Fees,
including fees for professional services necessary to perform an
audit or
review in accordance with the standards of the Public Company Accounting
Oversight Board, including services rendered for the audit of the
Company's financial statements (including services incurred with
rendering
an opinion under Section 404 of the Sarbanes-Oxley Act of 2002) included
in the Annual Report on Form 10-K and review of financial statements
included in the Quarterly Reports on Form 10-Q.
|
|
$
|
426,000
|
|
$
|
572,000
|
|
Audit-related
Fees,
including assurance related fees, accounting consultation including
the
S-3 filing (in 2005) and related services
|
|
$
|
31,000
|
|
$
|
206,000
|
|
Tax
Fees,
professional services for income tax return preparation, tax advice
and
tax planning
|
|
$
|
105,000
|
|
$
|
110,000
|
|
All
Other Fees, not
included in above
|
|
$
|
19,000
|
|
$
|
21,000
|
|
Total
|
|
$
|
581,000
|
|
$
|
909,000
|
|
(1)
-
Prior year figures conform to current-year presentation.
The
Audit
Committee administers the Company's engagement of Moss Adams LLP and
pre-approves all audit and permissible non-audit services on a case-by-case
basis. In approving non-audit services, the Audit Committee considers whether
the engagement could compromise the independence of Moss Adams LLP, and whether
for reasons of efficiency or convenience it is in the best interest of the
Company to engage its independent registered public accounting firm to perform
the services.
Moss
Adams LLP has advised the Company that neither the firm, nor any member of
the
firm, has any financial interest, direct or indirect, in any capacity in the
Company or its subsidiaries. The Audit Committee, in reliance on the independent
registered public accounting firm, determined that the provision of these
services is compatible with maintaining the independence of Moss Adams
LLP.
Prior
to
engagement, the Audit Committee pre-approves all independent registered public
accounting firm services. The fees are budgeted and the Audit Committee requires
the independent registered public accounting firm and management to report
actual fees versus the budget periodically throughout the year by category
of
service. During the year, circumstances may arise when it may become necessary
to engage the independent registered public accounting firm for additional
services not contemplated in the original pre-approval categories. In those
instances, the Audit Committee requires specific pre-approval before engaging
the independent registered public accounting firm.
The
Audit
Committee may delegate pre-approval authority to one or more of its members.
The
member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
Although
this appointment is not required to be submitted to a vote of Stockholders,
the
Audit Committee believes it is appropriate as a matter of policy to request
that
the Stockholders ratify the appointment. If the Stockholders do not ratify
the
appointment, which requires the affirmative vote of a majority of the
outstanding shares of Common Stock present, in person or by proxy, and entitled
to vote at the Meeting, the Board will consider the selection of another
independent registered public accounting firm.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
PROPOSALS
OF STOCKHOLDERS AND STOCKHOLDER NOMINATIONS FOR 2007 ANNUAL
MEETING
Under
certain circumstances, stockholders are entitled to present proposals at
stockholder meetings. Currently, the 2007 annual meeting of stockholders is
expected to be held on or about May 17, 2007.
SEC
rules
provide that any stockholder proposal to be included in the proxy statement
for
the Company's 2007 annual meeting must be received by the Secretary of the
Company at the Company's office at 3050 East Hillcrest Drive, Westlake Village,
California 91362 prior to December 14, 2006, in a form that complies with
applicable regulations. If the date of the 2007 annual meeting is advanced
or
delayed more than 30 days from the date of the 2006 annual meeting, stockholder
proposals intended to be included in the proxy statement for the 2007 annual
meeting must be received by us within a reasonable time before the Company
begins to print and mail the proxy statement for the 2007 annual meeting. Upon
any determination that the date of the 2007 annual meeting will be advanced
or
delayed by more than 30 days from the date of the 2006 annual meeting, the
Company will disclose the change in the earliest practicable Quarterly Report
on
Form 10-Q.
SEC
rules
also govern a company's ability to use discretionary proxy authority with
respect to stockholder proposals that were not submitted by the stockholders
in
time to be included in the proxy statement. In the event a stockholder proposal
is not submitted to the Company prior to February 28, 2007, the proxies
solicited by the Board for the 2007 annual meeting of stockholders will confer
authority on the proxyholders to vote the shares in accordance with the
recommendations of the Board if the proposal is presented at the 2007 annual
meeting of stockholders without any discussion of the proposal in the proxy
statement for such meeting. If the date of the 2007 annual meeting is advanced
or delayed more than 30 days from the date of the 2006 annual meeting, then
the
stockholder proposal must not have been submitted to the Company within a
reasonable time before the Company mails the proxy statement for the 2007 annual
meeting.
Stockholders
may nominate candidates for the Board at an annual meeting. Stockholders who
wish to request that the Nominating Committee consider a candidate for the
2007
annual meeting should submit information about the candidate to the Nominating
Committee a reasonable time before the Company begins to print and mail the
proxy statement for the 2007 annual meeting. The requesting stockholder should
provide sufficient biographical information about the proposed candidate to
satisfy the requirements of the Securities and Exchange Commission for inclusion
in the proxy statement and to permit the Nominating Committee to evaluate the
proposed candidate in light of the criteria described under the caption
“Nominating Procedures and Criteria.” The request should also provide the full
name, address and telephone number of the requesting stockholder and sufficient
information to verify that the requesting shareholder is eligible to vote at
the
2007 annual meeting. Additional information and certifications by the requesting
stockholder and the proposed candidate may be required before the Nominating
Committee can make its evaluation.
ANNUAL
REPORT AND FORM 10-K
The
Company's annual report to stockholders for the year ended December 31, 2005
accompanies or has preceded this Proxy Statement. The annual report contains
consolidated financial statements of the Company and its subsidiaries and the
report thereon of Moss Adams LLP, the Company's independent
registered public accounting firm,
for the
calendar years ended December 31, 2003, 2004 and 2005.
STOCKHOLDERS
MAY OBTAIN, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K,
INCLUDING FINANCIAL STATEMENTS REQUIRED TO BE FILED WITH THE SEC PURSUANT TO
THE
EXCHANGE ACT, FOR THE YEAR ENDED DECEMBER 31, 2005, BY WRITING TO THE COMPANY;
ATTN: INVESTOR RELATIONS, 3050 EAST HILLCREST DRIVE, WESTLAKE VILLAGE,
CALIFORNIA 91362, OR EMAIL THE REQUEST TO [email protected].
THE
INFORMATION IS ALSO AVAILABLE ON THE COMPANY’S WEBSITE AT WWW.DIODES.COM
AND THE
SEC’S WEBSITE AT WWW.SEC.GOV.
Dated
at
Westlake Village, California, this fourth
day of
April 2006.
By
Order
of the Board of Directors,
DIODES
INCORPORATED
/s/
Carl
C. Wertz
Carl
C.
Wertz,
Secretary
Appendix
A
DIODES
INCORPORATED
2001
OMNIBUS EQUITY INCENTIVE PLAN
(As
Amended May 17, 2006)
Diodes
Incorporated, a Delaware corporation (the “Company”), by action of its Board of
Directors, hereby adopt the Diodes Incorporated 2001 Omnibus Equity Incentive
Plan (the “Plan”) with the following provisions:
|
1.
|
Purpose.
The purpose of the Plan is to promote and advance the interests of
the
Company and its stockholders by enabling the Company and its Subsidiaries
to attract, retain and motivate officers, directors, employees and
independent contractors by providing for performance-based benefits,
and
to strengthen the mutuality of interests between such persons and
the
Company’s stockholders. The Plan is designed to meet this intent by
offering performance-based stock and cash incentives and other
equity-based incentive awards, thereby providing a proprietary interest
in
pursuing the long-term growth, profitability and financial success
of the
Company.
|
|
2.
|
Definitions.
For
purposes of this Plan, the following terms shall have the meanings
set
forth below:
|
“Affiliate”
shall mean any parent or subsidiary (as defined in Sections 424(e) and (f)
of
the Code) of the Company.
“Award”
means an award or grant made to a Participant under Sections 6 through 10,
inclusive, of the Plan.
“Board”
means the Board of Directors of the Company.
“Change
in Control” means the occurrence of any one (or more) of the following
events:
|
(i)
|
Any
person, including a group as defined in Section 13(d)(3) of the
Exchange Act, becomes the beneficial owner of stock of the Company
with
respect to which twenty-five percent (25%) or more of the total number
of
votes for the election of the Board may be
cast;
|
|
(ii)
|
As
a result of, or in connection with, any cash tender offer, exchange
offer,
merger or other business combination, sale of assets or contested
election, or combination of the foregoing, persons who were directors
of
the Company just prior to such event shall cease to constitute a
majority
of the Board;
|
|
(iii)
|
The
stockholders of the Company shall approve an agreement providing
either
for a transaction in which the Company will cease to be an independent
publicly owned corporation or for a sale or other disposition of
all or
substantially all the assets of the Company;
or
|
|
(iv)
|
A
tender offer or exchange offer is made for the shares of the Common
Stock
(other than one made by the Company) and the shares of the Common
Stock
are acquired thereunder.
|
Notwithstanding
the foregoing, the formation of a holding company for the Company in which
the
stockholdings of the holding company after its formation are substantially
the
same as for the Company prior to the holding company formation does not
constitute a Change in Control for purposes of this Plan.
“Code”
means the Internal Revenue Code of 1986, as amended and in effect from time
to
time, or any successor thereto, together with rules, regulations and
authoritative interpretations promulgated thereunder.
“Committee”
means the committee of the Board that is provided for in Section 3 of the
Plan.
“Common
Stock” means the common stock of the Company or any security of the Company
issued in substitution, exchange or lieu thereof.
“Company”
means Diodes Incorporated, a Delaware corporation.
“Consultant”
means any natural person who performs bona fide services for the Company or
an
Affiliate as a consultant or advisor, excluding Employees and Non-Employee
Directors.
“Date
of
Grant” means the date the Committee (or the Board, as the case may be) takes
formal action designating that a Participant shall receive an Award,
notwithstanding the date the Participant accepts the Award, the date the Company
and the Participant enter into a written agreement with respect to the Award,
or
any other date.
“Disability”
means total and permanent disability as defined in Section 22(e)(3) of the
Code.
“Employee” means
any
individual who is a common-law employee of the Company or an
Affiliate.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended and in effect from
time to time, or any successor thereto.
“Fair
Market Value” means on any given date, the closing price for the Common Stock on
such date, or, if the Common Stock was not traded on such date, on the next
preceding day on which the Common Stock was traded, determined in accordance
with the following rules:
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(i)
|
If
the Common Stock is admitted to trading or listing on a national
securities exchange registered under the Exchange Act, the closing
price
for any day shall be the last reported sale price, or in the case
no such
reported sale takes place on such date, the average of the last reported
bid and ask prices, in either case on the principal national securities
exchange on which the Common Stock is admitted to trading or
listed;
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|
(ii)
|
If
not listed or admitted to trading on any national securities exchange,
the
last sale price of the Common Stock on the National Association of
Securities Dealers Automated Quotation National Market System (“NMS”) or,
in the case no such reported sale takes place, the average of the
closing
bid and ask prices on such date;
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|
(iii)
|
If
not quoted on the NMS, the average of the closing bid and ask prices
of
the Common Stock on the National Association of Securities Dealers
Automated Quotation System (“NASDAQ”) or any comparable system;
or
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|
(iv)
|
If
the Common Stock is not listed on NASDAQ or any comparable system,
the
closing bid and ask prices as furnished by any member of the National
Association of Securities Dealers, Inc., selected from time to time
by the
Committee for that purpose.
|
“Incentive
Stock Option” means any Stock Option granted pursuant to the provisions of
Section 6 of the Plan that is intended to be and is specifically designated
as an “incentive stock option” within the meaning of Section 422 of the
Code.
“Non-Employee
Director” means a non-Employee member of the Board.
“Non-Qualified
Stock Option” means any Stock Option granted pursuant to the provisions of
Section 6 of the Plan that is not an Incentive Stock Option.
“Optioned
Stock” means the shares of Common Stock that are subject to a Stock
Option.
“Participant”
means an Employee, Non-Employee Director, or Consultant of the Company or a
Subsidiary who is granted an Award under the Plan.
“Performance
Award” means an Award granted pursuant to the provisions of Section 9 of
the Plan, the vesting of which is contingent on the attainment of specified
performance criteria.
“Performance
Share Grant” means an Award of units representing shares of Common Stock granted
pursuant to the provisions of Section 9 of the Plan.
“Performance
Unit Grant” means an Award of monetary units granted pursuant to the provisions
of Section 9 of the Plan.
“Plan”
means this Diodes Incorporated 2001 Omnibus Equity Incentive Plan, as set forth
herein and as it may be hereafter amended and from time to time in
effect.
“Qualified
Note” means a recourse note, with a fixed market rate of interest, that may, at
the discretion of the Committee, be secured by the Optioned Stock or
otherwise.
“Restricted
Award” means an Award granted pursuant to the provisions of Section 8 of
the Plan.
“Restricted
Stock Grant” means an Award of shares of Common Stock granted pursuant to the
provisions of Section 8 of the Plan.
“Restricted
Unit Grant” means an Award of units representing shares of Common Stock granted
pursuant to the provisions of Section 8 of the Plan.
“Service” means
the
performance of services for the Company (or any Affiliate) by an Employee,
Non-Employee Director, or Consultant, as determined by the Committee in its
sole
discretion. Service shall not be considered interrupted in the case of
(i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company and any Affiliate,
or
any successor. A leave of absence approved by the Company shall include sick
leave, military leave, or any other personal leave approved by an authorized
representative of the Company. For purposes of Incentive Stock Options, no
such
leave may exceed 90 days, unless reemployment upon expiration of such leave
is
guaranteed by statute or contract, including Company policies. If reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 91st day of such leave any Incentive Stock Option held by
the
Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Non-Qualified Stock Option.
“Stock
Appreciation Right” means an Award to benefit from the appreciation of Common
Stock granted pursuant to the provisions of Section 7 of the
Plan.
“Stock
Option” means an Award to purchase shares of Common Stock granted pursuant to
the provisions of Section 6 of the Plan.
“Subsidiary”
means any corporation or entity which is a subsidiary of the Company within
the
meaning of Section 424(f) of the Code.
“Ten
Percent Stockholder” means a person who owns stock (after taking into account
the constructive ownership rules of Section 424(d) of the Code) possessing
more than ten percent (10%) of the total combined voting power of all classes
of
stock of the Company (or any Affiliate).
“Termination
Date” means the date on which a Participant’s Service terminates, as determined
by the Committee in its sole discretion.
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(a)
|
The
Plan shall be administered by a committee appointed by the Board.
The
Committee shall be comprised solely of not less than two persons
who are
“outside directors” within the meaning of Section 162(m)(4)(C) of the
Code and “non-employee directors” within the meaning of Rule 16b-3 of
the Exchange Act. Members of the Committee shall serve at the pleasure
of
the Board and the Board may from time to time remove members from,
or add
members to, the Committee. No person who is not an “outside director”
within the meaning of Section 162(m)(4)(C) of the Code and a
“non-employee director” within the meaning of Rule 16b-3 of the
Exchange Act may serve on the Committee. Appointment to the Committee
of
any person who is not an “outside director” and a “non-employee director”
shall automatically be null and void, and any person on the Committee
who
ceases to be an “outside director” and a “non-employee director” shall
automatically and without further action cease to be a member of
the
Committee.
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|
(b)
|
A
majority of the members of the Committee shall constitute a quorum
for the
transaction of business. Action approved in writing by a majority
of the
members of the Committee then serving shall be as effective as if
the
action had been taken by unanimous vote at a meeting duly called
and
held.
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|
(c)
|
The
Committee is authorized to construe and interpret the Plan, to promulgate,
amend, and rescind rules and procedures relating to the implementation
of
the Plan, and to make all other determinations necessary or advisable
for
the administration of the Plan. Any determination, decision, or action
of
the Committee in connection with the construction, interpretation,
administration, or application of the Plan shall be binding upon
all
Participants and any person claiming under or through any Participant.
Although the Committee is anticipated to make certain Awards that
constitute “performance-based compensation” within the meaning of
Section 162(m)(4)(C) of the Code, the Committee is also expressly
authorized to make Awards that do not constitute “performance-based
compensation” within the meaning of that provision. By way of example, and
not by way of limitation, the Committee, in its sole and absolute
discretion, may issue an Award that is not based on a performance
goal, as
set forth in (i) below, but is based solely on continued service
to the
Company.
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|
(d)
|
The
Committee may employ or retain persons other than members of the
Committee
to assist the Committee to carry out its responsibilities under such
conditions and limitations as it may prescribe, except that the Committee
may not delegate its authority with regard to selection for participation
of and the granting of Awards to persons subject to Section 16 of
the
Exchange Act or with regard to any of its duties under Section 162(m)
of the Code necessary for awards under this Plan to qualify as
“performance-based compensation” for purposes of Section 162(m)(4)(C)
of the Code.
|
|
(e)
|
The
Committee is expressly authorized to make such modifications to the
Plan
as are necessary to effectuate the intent of the Plan as a result
of any
changes in the income tax, accounting, or securities law treatment
of
Participants and the Plan.
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|
(f)
|
The
Company shall effect the granting of Awards under the Plan in accordance
with the determinations made by the Committee, by execution of instruments
in writing in such form as approved by the
Committee.
|
|
(g)
|
The
Committee may not increase an Award once granted, although it may
grant
additional Awards to the same
Participant.
|
|
(h)
|
The
Committee shall keep the Board informed as to its actions and make
available to the Board its books and records. Although the Committee
has
the authority to establish and administer the Plan, the Board reserves
the
right at any time to abolish the Committee and administer the Plan
itself.
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|
(i)
|
In
the case of an Award that is intended to qualify as “performance-based
compensation” for purposes of Code Section 162(m)(4)(C), the
Committee shall establish in writing at the time of making the Award
the
business criterion or criteria that must be satisfied for payment
pursuant
to the Award and the amount payable upon satisfaction of those standards.
Those standards are also referred to herein as performance goals.
Such
criterion or criteria shall be established prior to the Participant
rendering the services to which they relate and while the outcome
is
substantially uncertain or at such other time permitted under Treasury
Regulations Section 1.162-27(e)(2). In carrying out these duties,
the
Committee shall use objective written standards for establishing
both the
performance goal and the amount of compensation such that a third
party
with knowledge of the relevant facts would be able to determine whether
and to what extent the goal has been satisfied and the amount of
compensation payable. The Committee shall provide a copy the document
setting forth such standards to the affected Participant and shall
retain
such written material in its permanent books and
records.
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|
(j)
|
In
the case of remuneration that is intended to qualify as “performance-based
compensation” for purposes of Code Section 162(m)(4)(C), other than
Performance Awards granted pursuant to Section 9 of the Plan, the
Committee and the Board shall disclose to the stockholders of the
Company
the material terms under which such remuneration is to be paid under
the
Plan, and shall seek approval of the stockholders by a majority vote
in a
separate stockholder vote before payment of such remuneration. For
these
purposes, the material terms include the individuals (or class of
individuals) eligible to receive such compensation, a description
of the
business criterion or criteria on which the performance goal is based,
either the maximum amount of the compensation to be paid thereunder
or the
formula used to calculate the amount of compensation if the performance
goal is attained, and such other terms as required under Code
Section 162(m)(4)(C) and the Treasury Regulations thereunder
determined from time to time. The foregoing actions shall be undertaken
in
conformity with the rules of Code Section 162(m)(4)(C)(ii) and
Treasury Regulations promulgated thereunder. Such remuneration shall
not
be payable under this Plan in the absence of such an approving stockholder
vote. In the case of remuneration that is not intended to qualify
as
performance-based compensation under Code Section 162(m)(4)(C), the
Committee and the Board shall make such disclosures to and seek such
approval from the stockholders of the Company as they reasonably
determine
are required by law.
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|
(k)
|
To
the extent required under Code Section 162(m)(4)(C), before any
payment of remuneration under this Plan, the Committee must certify
in
writing that the performance goals and any other material terms of
the
Award were in fact satisfied. Such certification shall be kept with
the
permanent books and records of the Committee, and the Committee shall
provide the affected Participant with a copy of such
certification.
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|
(l)
|
The
Committee shall use its good faith best efforts to comply with the
requirements of Section 162(m)(4)(C) of the Code for Awards that are
intended to qualify under that section as “performance-based
compensation,” but shall have no liability to the Company or any recipient
in the event one or more Awards do not so
qualify.
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|
4.
|
Duration
of and Common Stock Subject to the
Plan.
|
|
(a)
|
Term.
The Plan shall become effective as of June 11, 2001, the date of
its
adoption by the Board, subject to ratification by the stockholders
of the
Company within twelve (12) months after the effective date. In the
event
that the stockholders of the Company do not ratify the Plan within
twelve
(12) months after the effective date, any Awards granted pursuant
to the
Plan shall be rescinded automatically. Unless sooner terminated by
the
Board, the Plan shall continue until June 11, 2011, one day prior
to the
tenth (10th) anniversary of the Plan’s effective date, when it shall
terminate and no Awards may be granted under the Plan thereafter.
The
termination of the Plan shall not affect the Awards that are outstanding
on the termination date.
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|
(b)
|
Shares
of Common Stock Subject to the Plan.
The maximum total number of shares of Common Stock with respect to
which
aggregate stock Awards may be granted under the Plan shall be five
million
eight hundred eighty-three thousand two hundred seventeen (5,883,217).
Notwithstanding the foregoing, the maximum number of shares of Common
Stock which may be issued pursuant to Incentive Stock Options under
this
Plan may not exceed five million eight hundred eighty-three thousand
two
hundred seventeen (5,883,217).
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|
(i)
|
All
of the amounts stated in this Paragraph (b) are subject to adjustment
as
provided in Section 15 below.
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|
(ii)
|
For
the purpose of computing the total number of shares of Common Stock
available for Awards under the Plan, there shall be counted against
the
foregoing limitations the number of shares of Common Stock subject
to
issuance upon exercise or used for payment or settlement of Awards,
subject to clauses (iv), (v) and (vi) of this Paragraph
(b).
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|
(iii)
|
If
any Awards are forfeited, terminated, expire unexercised, settled
or paid
in cash in lieu of stock or exchanged for other Awards, the shares
of
Common Stock which were theretofore subject to such Awards shall
again be
available for Awards under the Plan to the extent of such forfeiture
or
expiration of such Awards.
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|
(iv)
|
Each
share of Common Stock subject to issuance under any award, other
than
options or SARs, shall be counted against the foregoing limitations
as
1.52 shares.
|
|
(v)
|
To
the extent a SAR is settled for shares of Common Stock, the number
of
shares used for determining the benefit under such SAR, to the extent
exercised, shall be counted against the foregoing limitations, regardless
of the number of shares used to settle the SAR upon such
exercise.
|
|
(vi)
|
To
the extent a Stock Option is exercised on a cashless basis, the number
of
shares of Common Stock issued upon such exercise, plus the number
of
shares of Common Stock retained by the Company, shall be counted
against
the foregoing limitations.
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|
(c)
|
Source
of Common Stock.
Common Stock which may be issued under the Plan may be either authorized
and unissued stock or issued stock which have been reacquired
by the Company. No fractional shares of Common Stock shall be issued
under
the Plan.
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|
5.
|
Eligibility.
Incentive Stock Options may only be granted to Employees of the Company
or
a Subsidiary. Employees, Non-Employee Directors, and Consultants
of the
Company or a Subsidiary are eligible to receive Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Awards, Performance
Awards
and other Awards under the
Plan.
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|
6.
|
Stock
Options.
Stock options granted under the Plan may be in the form of Incentive
Stock
Options or Non-Qualified Stock Options (collectively referred to
as “Stock
Options”). Stock Options shall be subject to the terms and conditions set
forth below. Each written Stock Option agreement shall contain such
additional terms and conditions, not inconsistent with the express
provisions of the Plan, as the Committee shall deem
desirable.
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|
(a)
|
Grant.
Stock Options shall be granted under the Plan on such terms and conditions
not inconsistent with the provisions of the Plan and pursuant to
written
agreements with the Participant in such form as the Committee may
from
time to time approve in its sole and absolute discretion. The terms
of
individual Stock Option agreements need not be identical. Each Stock
Option agreement shall state specifically whether it is intended
to be an
Incentive Stock Option agreement or a Non-Qualified Stock Option
agreement. Stock Options may be granted alone or in addition to other
Awards under the Plan. No person may be granted (in any calendar
year)
options to purchase more than one-hundred thousand (100,000) shares
of
Common Stock (subject to adjustment pursuant to Section 15 below).
The foregoing sentence is an annual limitation on grants and not
a
cumulative limitation.
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|
(b)
|
Exercise
Price.
Except as otherwise provided for in Paragraph (f) below, the exercise
price per share of Common Stock purchasable under a Stock Option
shall be
determined by the Committee at the time of grant; provided, however,
that
the exercise price per share may not be less than one hundred percent
(100%) of the Fair Market Value of the Common Stock on the Date of
Grant
of such Stock Option.
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|
(c)
|
Option
Term.
The term of each Stock Option shall be fixed by the Committee. However,
the term of any Stock Option shall not exceed ten (10) years after
the
Date of Grant of such Stock Option.
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|
(d)
|
Exercisability.
A
Stock Option shall be exercisable at such time or times and subject
to
such terms and conditions as shall be determined by the Committee
at the
Date of Grant and set forth in the written Stock Option agreement.
A
written Stock Option agreement may, if permitted pursuant to its
terms,
become exercisable in full upon the occurrence of events selected
by the
Committee that are beyond the control of the Participant (including,
but
not limited to, a Change in
Control).
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|
(e)
|
Method
of Exercise.
A
Stock Option may be exercised, in whole or in part, by giving written
notice of exercise to the Committee specifying the number of shares
of
Common Stock to be purchased. Such notice shall be accompanied by
payment
in full of the exercise price (i) in cash or (ii) if acceptable
to the Committee, in shares of Common Stock or a Qualified Note.
The
Committee may also permit Participants, either on a selective or
aggregate
basis, to simultaneously exercise Stock Options and sell the shares
of
Common Stock thereby acquired, pursuant to a brokerage or similar
arrangement, approved in advance by the Committee, and use the proceeds
from such sale as payment of part or all of the exercise price of
such
shares; provided, however, that such payment of the exercise price
would
not cause the Company to recognize compensation expense for financial
reporting purposes. The Committee may also permit a cashless exercise,
subject to any conditions or limitations that the Committee may
establish.
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|
(f)
|
Special
Rules for Incentive Stock Options.
The terms specified below shall be applicable to all Incentive Stock
Options. Stock Options which are specifically designated as Non-Qualified
Stock Options when issued under the Plan shall not be subject to
the terms
of this Paragraph.
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|
(i)
|
Ten
Percent Stockholder.
If any Employee to whom an Incentive Stock Option is granted is a
Ten
Percent Stockholder, then the exercise price of the Incentive Stock
Option
shall not be less than one hundred and ten percent (110%) of the
Fair
Market Value of the Common Stock on the Date of Grant of such Incentive
Stock Option, and the term of the Incentive Stock Option shall not
exceed
five (5) years measured from the Date of Grant of such
option.
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|
(ii)
|
Dollar
Limitation.
In the case of an Incentive Stock Option, the aggregate Fair Market
Value
of the Optioned Stock (determined as of the Date of Grant of each
Stock
Option) with respect to Stock Options granted to any Employee under
the
Plan (or any other option plan of the Company or any Affiliate) that
may
for the first time become exercisable as Incentive Stock Options
during
any one calendar year shall not exceed the sum of one hundred thousand
dollars ($100,000). To the extent the Employee holds two or more
such
Stock Options which become exercisable for the first time in the
same
calendar year, the foregoing limitation on the exercisability of
such
Stock Options as Incentive Stock Options shall be applied on the
basis of
the order in which such Stock Options are granted. Any Stock Options
in
excess of such limitation shall automatically be treated as Non-Qualified
Stock Options.
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|
(g)
|
Without
the approval of the stockholders of the Company, Stock Options and
SARs
granted
under the Plan will not be repriced, replaced or regranted through
cancellation, or by lowering the exercise price of a previously granted
Award.
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|
7.
|
Stock
Appreciation Rights.
The grant of Stock Appreciation Rights under the Plan shall be
subject
to the following terms and conditions. Furthermore, the Stock Appreciation
Rights shall contain such additional terms and conditions, not
inconsistent with the express terms of the Plan, as the Committee
shall
deem desirable. The terms of each Stock Appreciation Right granted
shall
be set forth in a written agreement between the Company and the
Participant receiving such grant. The terms of such agreements need
not be
identical.
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|
(a)
|
Stock
Appreciation Rights.
A
Stock Appreciation Right is an Award determined by the Committee
entitling
a Participant to receive an amount equal to the excess of the Fair
Market
Value of a share of Common Stock on a fixed date, which shall be
the date
concluding a measuring period set by the Committee upon granting
the Stock
Appreciation Right, over the Fair Market Value of a share of Common
Stock
on the Date of Grant of the Stock Appreciation Right, multiplied
by the
number of shares of Common Stock subject to the Stock Appreciation
Right.
No Stock Appreciation Rights granted in any calendar year to any
person
may be measured by an amount of shares of Common Stock in excess
of one
hundred thousand (100,000) shares, subject to adjustment under
Section 15 below. The foregoing sentence is an annual limitation on
grants and not a cumulative limitation.
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|
(b)
|
Grant.
A
Stock Appreciation Right may be granted in addition to or completely
independent of any other Award under the Plan. Upon grant of a Stock
Appreciation Right, the Committee shall select and inform the Participant
regarding the number of shares of Common Stock subject to the Stock
Appreciation Right and the date that constitutes the close of the
measuring period.
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|
(c)
|
Measuring
Period.
A
Stock Appreciation Right shall accrue in value from the Date of Grant
over
a time period established by the Committee. In the written Stock
Appreciation Right agreement, the Committee may also provide (but
is not
required to provide) that a Stock Appreciation Right shall be
automatically payable on one or more specified dates prior to the
normal
end of the measuring period upon the occurrence of events selected
by the
Committee (including, but not limited to, a Change in Control) that
are
beyond the control of the Participant. The Committee may provide
(but is
not required to provide) in the Stock Appreciation Right agreement
that in
the case of a cash payment such acceleration in payment shall also
be
subject to discounting of the payment to reasonably reflect the time
value
of money using any reasonable discount rate selected by the Committee
in
accordance with Treasury Regulations under Code
Section 162(m).
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|
(d)
|
Form
of Payment.
Payment pursuant to a Stock Appreciation Right may be made (i) in
cash, (ii) in shares of Common Stock, (iii) a promissory note or
(iv) in any combination of the above, as the Committee shall
determine in its sole and absolute discretion. The Committee may
elect to
make this determination either at the time the Stock Appreciation
Right is
granted, at the time of payment or at any time in between such dates.
However, any Stock Appreciation
Right paid upon or subsequent to the occurrence of a Change in Control
shall be paid in cash.
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|
8.
|
Restricted
Awards.
Restricted Awards granted under the Plan may be in the form of either
Restricted
Stock Grants or Restricted Unit Grants. Restricted Awards shall be
subject
to the following terms and conditions. Furthermore, the Restricted
Awards
shall be pursuant to a written agreement executed both by the Company
and
the Participant, which agreement shall contain such additional terms
and
conditions, not inconsistent with the express provisions of the Plan,
as
the Committee shall deem desirable in its sole and absolute discretion.
The terms of such written agreements need not be
identical.
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|
(a)
|
Restricted
Stock Grants.
A
Restricted Stock Grant is an Award of shares of Common Stock transferred
to a Participant subject to such terms and conditions as the Committee
deems appropriate, as set forth in Paragraph (d)
below.
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|
(b)
|
Restricted
Unit Grants.
A
Restricted Unit Grant is an Award of units (with each unit having
a value
equivalent to one share of Common Stock) granted to a Participant
subject
to such terms and conditions as the Committee deems appropriate,
including, without limitation, the requirement that the Participant
forfeit all or a portion of such units upon termination of Service
for
specified reasons within a specified period of time, and restrictions
on
the sale, assignment, transfer or other disposition of such
units.
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|
(c)
|
Grants
of Awards.
Restricted Awards may be granted under the Plan in such form and
on such
terms and conditions as the Committee may from time to time approve.
Restricted Awards may be granted alone or in addition to other Awards
under the Plan. Subject to the terms of the Plan, the Committee shall
determine the number of Restricted Awards to be granted to a Participant
and the Committee may impose different terms and conditions (including
performance goals) on any particular Restricted Award made to any
Participant. Each Participant receiving a Restricted Stock Grant
shall be
issued a stock certificate in respect of such shares of Common Stock.
Such
certificate shall be registered in the name of such Participant,
shall be
accompanied by a stock power duly executed by such Participant, and
shall
bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Award. The certificate evidencing
the
shares shall be held in custody by the Company until the restrictions
imposed thereon shall have lapsed or been removed. No person may
be
granted (in any calendar year) Restricted Awards that are intended
to
constitute “performance-based compensation” within the meaning of Section
162(m)(4)(C) of the Code, totaling or measured by more than one-hundred
thousand (100,000) shares of Common Stock (subject to adjustment
pursuant
to Section 15 below). The foregoing sentence is an annual limitation
on
grants and not a cumulative
limitation.
|
|
(d)
|
Restriction
Period.
Restricted Awards shall provide that in order for a Participant to
vest in
such Awards, the Participant must continuously provide Services,
subject
to relief for specified reasons, for such period as the Committee
may
designate at the time of the Award (“Restriction Period”). If the
Committee so provides in the written agreement with the Participant,
a
Restricted Award may also be subject to satisfaction of such performance
goals as are set forth in such agreement. During the Restriction
Period, a
Participant may not sell, assign, transfer, pledge, encumber, or
otherwise
dispose of shares of Common Stock received under a Restricted Stock
Grant.
The Committee, in its sole discretion, may provide for the lapse
of
restrictions during the Restriction Period upon the occurrence of
events
selected by the Committee that are beyond the control of the Participant
(including, but not limited to, a Change in Control). The Committee
may
provide (but is not required to provide) in the written agreement
with the
recipient that in the case of a cash payment such acceleration in
payment
shall also be subject to discounting of the payment to reasonably
reflect
the time value of money using any reasonable discount rate selected
by the
Committee in accordance with Treasury Regulations under Code
Section 162(m). Upon expiration of the applicable Restriction Period
(or lapse of restrictions during the Restriction Period where the
restrictions lapse in installments or by action of the Committee),
the
Participant shall be entitled to receive his or her Restricted Award
or
portion thereof, as the case may
be.
|
|
(e)
|
Payment
of Awards.
A
Participant who receives a Restricted Stock Grant shall be paid solely
by
release of the restricted stock at the termination of the Restriction
Period (whether in one payment, in installments or otherwise). A
Participant shall be entitled to receive payment for a Restricted
Unit
Grant (or portion thereof) in an amount equal to the aggregate Fair
Market
Value of the shares of Common Stock covered by such Award upon the
expiration of the applicable Restriction Period. Payment in settlement
of
a Restricted Unit Grant shall be made as soon as practicable following
the
conclusion of the specified Restriction Period (i) in cash,
(ii) in shares of Common Stock equal to the number of units granted
under the Restricted Unit Grant with respect to which such payment
is
made, or (iii) in any combination of the above, as the Committee
shall determine in its sole and absolute discretion. The Committee
may
elect to make this determination either at the time the Award is
granted,
at the time of payment or at any time in between such
dates.
|
|
(f)
|
Rights
as a Stockholder.
A
Participant shall have, with respect to the shares of Common Stock
received under a Restricted Stock Grant, all of the rights of a
stockholder of the Company, including the right to vote the stock,
and the
right to receive any cash dividends. Such cash dividends shall be
withheld, however, until their release upon lapse of the restrictions
under the Restricted Award. Stock dividends issued with respect to
the
shares covered by a Restricted Stock Grant shall be treated as additional
shares under the Restricted Stock Grant and shall be subject to the
same
restrictions and other terms and
conditions that apply to shares under the Restricted Stock Grant
with
respect to which the dividends are
issued.
|
|
9.
|
Performance
Awards.
Performance Awards granted under the Plan may be in the form of either
Performance Share Grants or Performance Unit Grants. Performance
Awards
shall be subject to the terms and conditions set forth below. Furthermore,
the Performance Awards
shall be subject to written agreements which shall contain such additional
terms and conditions, not inconsistent with the express provisions
of the
Plan, as the Committee shall deem desirable in its sole and absolute
discretion. Such agreements need not be
identical.
|
|
(a)
|
Performance
Share Grants.
A
Performance Share Grant is an Award of units (with each unit equivalent
in
value to one share of Common Stock) granted to a Participant subject
to
such terms and conditions as the Committee deems appropriate, including,
without limitation, the requirement that the Participant forfeit
such
units (or a portion of such units) in the event certain performance
criteria are not met within a designated period of
time.
|
|
(b)
|
Performance
Unit Grants.
A
Performance Unit Grant is an Award of units (with each unit representing
such monetary amount as designated by the Committee) granted to a
Participant subject to such terms and conditions as the Committee
deems
appropriate, including, without limitation, the requirement that
the
Participant forfeit such units (or a portion of such units) in the
event
certain performance criteria are not met within a designated period
of
time.
|
|
(c)
|
Grants
of Awards.
Performance Awards shall be granted under the Plan pursuant to written
agreements with the Participant in such form as the Committee may
from
time to time approve. Performance Awards may be granted alone or
in
addition to other Awards under the Plan. Subject to the terms of
the Plan,
the Committee shall determine the number of Performance Awards to
be
granted to a Participant and the Committee may impose different terms
and
conditions on any particular Performance Award made to any Participant.
No
Performance Share Grants granted in any calendar year to any one
person
may be measured by more than [one-hundred thousand (100,000)] shares
of
Common Stock (subject to adjustment pursuant to Section 15 below).
The preceding sentence is an annual limitation on grants and a not
cumulative limitation.
|
|
(d)
|
Performance
Goals and Performance Periods.
Performance Awards shall provide that, in order for a Participant
to vest
in such Awards, the Company must achieve certain performance goals
(“Performance Goals”) over a designated performance period selected by the
Committee (“Performance Period”). The Performance Goals and Performance
Period shall be established by the Committee, in its sole and absolute
discretion. The Committee shall establish Performance Goals for each
Performance Period before the commencement of the Performance Period
and
while the outcome is substantially uncertain or at such other time
permitted under Treasury Regulations Section 1.162-27(e)(2). The
Committee
shall also establish a schedule or schedules for such Performance
Period
setting forth the portion of the Performance Award which will be
earned or
forfeited based on the degree of achievement of the Performance Goals
actually achieved or exceeded. In setting Performance Goals, the
Committee
may use any one or more of the following performance criteria, applied
to
either the Company as a whole or to a business unit, Affiliate, or
business segment, either individually, alternatively, or in any
combination, and measured either annually or cumulatively over a
period of
years, on an absolute basis or relative to a pre-established target,
to
previous years’ results or to a designated comparison group, in each case
as specified by the Committee in the Award: (i) cash flow,
(ii) earnings (including gross margin, earnings before interest and
taxes, earnings before taxes, and net earnings), (iii) earnings per
share, (iv) growth in earnings or earnings per share, (v) stock
price, (vi) return on equity or average shareholders’ equity,
(vii) total shareholder return, (viii) return on capital,
(ix) return on assets or net assets, (x) return on investment,
(xi) revenue, (xii) income or net income, (xiii) operating
income or net operating income, (xiv) operating profit or net operating
profit, (xv) operating margin, (xvi) return on operating
revenue, (xvii) market share, (xviii) contract awards or
backlog, (xix) overhead or other expense reduction, (xx) growth
in shareholder value relative to the moving average of the S&P 500
Index or a peer group index, (xxi) credit rating,
(xxii) strategic plan development and implementation,
(xxiii) improvement in workforce diversity, (xxiv) EBITDA, and
(xxv) any other similar
criteria.
|
|
(e)
|
Payment
of Awards.
In
the case of a Performance Share Grant, the Participant shall be entitled
to receive payment for each unit earned in an amount equal to the
aggregate Fair Market Value of the shares of Common Stock covered
by such
Award as of the end of the Performance Period. In the case of a
Performance Unit Grant, the Participant shall be entitled to receive
payment for each unit earned in an amount equal to the dollar value
of
each unit times the number of units earned. The Committee, pursuant
to the
written agreement with the Participant, may make such Performance
Awards
payable in whole or in part upon the occurrence of events selected
by the
Committee that are beyond the control of the Participant (including,
but
not limited to, a Change in Control). The Committee may provide (but
is
not required to provide) in the written agreement with the recipient
that,
in the case of a cash payment, acceleration in payment of a Performance
Award shall also be subject to discounting to reasonably reflect
the time
value of money using any reasonable discount rate selected by the
Committee in accordance with Treasury Regulations under Code
Section 162(m). Payment in settlement of a Performance Award shall be
made as soon as practicable following the conclusion of the Performance
Period (i) in cash, (ii) in shares of Common Stock, or
(iii) in any combination of the above, as the Committee may determine
in its sole and absolute discretion. The Committee may elect to make
this
determination either at the time the Award is granted, at the time
of
payment, or at any time in between such
dates.
|
|
10.
|
Other
Stock-Based and Combination
Awards.
|
|
(a)
|
The
Committee may grant other Awards under the Plan pursuant to which
Common
Stock is or may in the future be acquired, or Awards denominated
in stock
units, including ones valued using measures other than market value.
Such
other stock-based grants may be granted either alone or in addition
to any
other type of Award granted under the Plan. To the extent that an
Award is
intended to constitute “performance-based compensation” within the meaning
of Section 162(m)(4)(C) of the Code, such Award shall be subject
to
Paragraph (d) of Section 9 of the Plan. No stock-based Award
granted in any calendar year to any one person, to the extent such
Award
is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code, may be denominated by more
than one-hundred thousand (100,000) shares of Common
Stock.
|
|
(b)
|
The
Committee may also grant Awards under the Plan in combination with
other
Awards or in exchange of Awards, or in combination with or as alternatives
to grants or rights under any other employee plan of the Company,
including the plan of any acquired
entity.
|
|
(c)
|
Subject
to the provisions of the Plan, the Committee shall have authority
to
determine the individuals to whom and the time or times at which
the
Awards shall be
made, the number of shares of Common Stock to be granted or covered
pursuant to such Awards, and any and all other conditions and/or
terms of
the Awards.
|
|
11.
|
Deferral
Elections. The Committee may permit a Participant to elect to
defer his or her receipt of the payment of cash or the delivery of
shares
of Common Stock that would otherwise be due to such Participant by
virtue
of the exercise, earn out or vesting of an Award made under the Plan.
If
any such election is permitted, the Committee shall establish rules
and
procedures for such payment deferrals, including the possible
(a) payment or crediting of reasonable interest on such deferred
amounts credited in cash, and (b) the payment or crediting of
dividend equivalents in respect of deferrals credited in units of
Common
Stock. The Company and the Committee shall not be responsible to
any
person in the event that the payment deferral does not result in
deferral
of income for tax purposes. Notwithstanding any part of the foregoing
to
the contrary, it is the Company’s intent that all Awards granted under
this Plan, and any payment deferral permitted under this Plan, shall
not
cause an imposition of the additional taxes provided for in Section
409A(a)(1)(B) of the Code.
|
|
12.
|
Dividend
Equivalents.
Awards of Stock Options, Stock Appreciation Rights, Restricted Unit
Grants, Performance Share Grants, and other stock-based Awards may,
in the
sole and absolute
discretion of the Committee, earn dividend equivalents. In respect
of any
such Award which is outstanding on a dividend record date for Common
Stock, the Participant may be credited with an amount equal to the
amount
of cash or stock dividends that would have been paid on the shares
of
Common Stock covered by such
Award had such shares been issued and outstanding on such dividend
record
date. The Committee shall establish such rules and procedures governing
the crediting of dividend equivalents, including the timing, form
of
payment, and payment contingencies of such dividend equivalents,
as it
deems appropriate or
necessary.
|
|
13.
|
Termination
of Service.
The terms and conditions under which an Award may be exercised after
a
Participant’s termination of Service shall be determined by the Committee
and reflected in the written agreement with the Participant concerning
the
Award.
|
|
14.
|
Non-Transferability
of Awards.
No
Award under the Plan, and no rights or interest therein, shall
be
assignable or transferable by a Participant except by will or the
laws of
descent and distribution. Subject to the foregoing, during the lifetime
of
a Participant, Awards are exercisable only by, and payments in settlement
of Awards will be payable only to, the Participant or his or her
legal
representative if the Participant is
Disabled.
|
|
15.
|
Adjustments
Upon Changes in Capitalization,
Etc.
|
|
(a)
|
The
existence of the Plan and the Awards granted hereunder shall not
affect or
restrict in any way the right or power of the Board or the stockholders
of
the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company’s capital structure or its
business, any merger or consolidation of the Company, any issue of
bonds,
debentures, preferred or prior preference stocks ahead of or affecting
the
Common Stock or the rights thereof, the dissolution or liquidation
of the
Company, or any sale or transfer of all or any part of its assets
or
business, or any other corporate act or
proceeding.
|
|
(b)
|
In
the event of any change in capitalization affecting the Common Stock
after
the effective date of this Plan, such as a stock dividend, stock
split,
recapitalization, merger, consolidation, split-up, combination, exchange
of stock, other form of reorganization, or any other change affecting
the
Common Stock, such proportionate adjustments, if any, as the Committee
in
its discretion may deem appropriate to reflect such change shall
be made
with respect to (i) the aggregate number of shares of Common Stock
for which Awards in respect thereof may be granted under the Plan,
(ii) the maximum number of shares of Common Stock which may be sold
or awarded to any Participant, (iii) the number of shares of Common
Stock covered by each outstanding Award, and (iv) the price per share
in respect of outstanding Awards. The Committee’s determination with
respect to the adjustments shall be final, binding, and
conclusive.
|
|
(c)
|
The
Committee may also make such adjustments in the number of shares
covered
by, and the price or other value of any outstanding Awards in the
event of
a spin-off or other distribution (other than normal cash dividends)
of
Company assets to stockholders.
|
|
(a)
|
Except
as otherwise provided for in Paragraph (b) below, in the event of
a Change
in Control, and except as otherwise provided in Award
agreements:
|
|
(i)
|
All
Stock Options and Stock Appreciation Rights then outstanding shall
become
fully exercisable as of the date of the Change in Control (and shall
terminate at such time as specified in the Award
agreement);
|
|
(ii)
|
All
restrictions and conditions of all Restricted Stock Grants and Restricted
Unit Grants then outstanding shall be deemed satisfied as of the
date of
the Change in Control; and
|
|
(iii)
|
All
Performance Share Grants and Performance Unit Grants shall be deemed
to
have been fully earned as of the date of the Change in
Control.
|
|
(b)
|
In
the event that any payment under this Plan (alone or in conjunction
with
other payments) would otherwise constitute an “excess parachute payment”
under Section 280G of the Code (in the sole judgment of the
Committee), such payment shall be reduced or eliminated to the extent
the
Committee determines necessary to avoid deduction disallowance under
Section 280G of the Code or the imposition of excise tax under
Section 4999 of the Code. The Committee may consult with a
Participant regarding the application of Section 280G
and/or Section 4999 to payments otherwise due to such Participant
under the Plan, but the judgment of the Committee as to applicability
of
those provisions, the degree to which a payment must be reduced to
avoid
those provisions, and which Awards shall be reduced, is
final.
|
|
17.
|
Amendment
and Termination.
Without further approval of the stockholders, the Board may at any
time
terminate the Plan, or may amend it from time to time in such respects
as
the Board may deem advisable. However, the Board may not, without
approval
of the stockholders, make any amendment which would (a) increase the
aggregate number of
shares of Common Stock which may be issued under the Plan (except
for
adjustments pursuant to Section 15 above), (b) materially modify the
requirements as to eligibility for participation in the Plan, or
(c) materially increase the benefits accruing to Participants under
the Plan. Notwithstanding the above, the Board may amend the Plan
to take
into account changes in applicable securities laws, federal income
tax
laws and other applicable laws. Further, should the provisions of
Rule 16b-3, or any successor rule, under the Exchange Act be amended,
the Board may amend the Plan in accordance with any modifications
to that
rule without the need for stockholder approval. Notwithstanding the
foregoing, the Plan may not be amended more than once every six months
other than to comply with the changes in the
Code.
|
|
18.
|
Miscellaneous
Matters.
|
|
(i)
|
The
Company’s obligation to deliver Common Stock and/or pay any amount under
the Plan shall be subject to the satisfaction of all applicable federal,
state, local, and foreign tax withholding
requirements.
|
|
(ii)
|
The
Committee may, in its discretion, provide the Participants or their
successors with the right to use previously vested Common Stock in
satisfaction of all or part of the taxes incurred by such Participants
in
connection with the Plan; provided, however, that this form of payment
shall be limited to the withholding amount calculated using the minimum
statutory rates. Such right may be provided to any such holder in
either
or both of the following formats.
|
|
1.
|
Stock
Withholding:
The election to have the Company withhold, from the Common Stock
otherwise
issuable under the Plan, a portion of the Common Stock with an aggregate
Fair Market Value equal to the taxes calculated using the minimum
statutory rates.
|
|
2.
|
Stock
Delivery:
The election to deliver to the Company, at the time the taxes are
required
to be withheld, one or more shares of Common Stock previously acquired
by
the Participant or his or her successor with an aggregate Fair Market
Value equal to the taxes calculated using the minimum statutory
rates.
|
|
(b)
|
Not
an Employment or Service Contract.
Neither the adoption of the Plan nor the granting of any Award shall
confer upon any Participant any right to continue in the Service
of the
Company or an Affiliate, as the case may be, nor shall it interfere
in any
way with the right of the Company or an Affiliate to terminate the
Services of any of its Employees, Non-Employee Directors, or Consultants
at any time, with or without cause.
|
|
(c)
|
Unfunded
Plan.
The Plan shall be unfunded and the Company shall not be required
to
segregate any assets that may at any time be represented by Awards
under
the Plan. Any liability of the Company to any person with respect
to any
Award under the Plan shall be based solely upon any written contractual
obligations that may be effected pursuant to the Plan. No such obligation
of the Company shall be deemed to be secured by any pledge of, or
other
encumbrance on, any property of the
Company.
|
|
(d)
|
Annulment
of Awards.
The grant of any Award under the Plan payable in cash is provisional
until
cash is paid in settlement thereof. The grant of any Award payable
in
Common Stock is provisional until the Participant becomes entitled
to the
certificate in settlement thereof. Payment under any Awards granted
pursuant to the Plan is wholly contingent upon stockholder approval
of the
Plan. Where approval for an Award sought pursuant to
Section 162(m)(4)(C)(ii) is not granted by the Company’s
stockholders, the Award shall be annulled automatically. In the event
the
Service of a Participant is terminated for cause (as defined below),
any
Award which is provisional shall be annulled as of the date of such
termination for cause. For purposes of the Plan, the term “terminated for
cause” means any discharge because of personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, continuing
intentional or habitual failure to perform stated duties, violation
of any
law (other than minor traffic violations or similar misdemeanor offenses
not involving moral turpitude), or material breach of any provision
of an
employment or independent contractor agreement with the
Company.
|
|
(e)
|
Other
Company Benefit and Compensation Programs.
Payments and other benefits received by a Participant under an Award
made
pursuant to the Plan shall not be deemed a part of a Participant’s
regular, recurring compensation for purposes of the termination indemnity
or severance pay law of any state. Furthermore, such benefits shall
not be
included in, nor have any effect on, the determination of benefits
under
any other employee benefit plan or similar arrangement provided by
the
Company or a Subsidiary unless expressly so provided by such other
plan or
arrangement, or except where the Committee expressly determines that
inclusion of an Award or portion of an Award should be included.
Awards
under the Plan may be made in combination with or in addition to,
or as
alternatives to, grants, awards or payments under any other Company
or
Subsidiary plans. The Company or any Subsidiary may adopt such other
compensation programs and additional compensation arrangements (in
addition to this Plan) as it deems necessary to attract, retain,
and
motivate officers, directors, employees or independent contractors
for
their service with the Company and its
Subsidiaries.
|
|
(f)
|
Securities
Law Restrictions.
No
shares of Common Stock shall be issued under the Plan unless counsel
for
the Company shall be satisfied that such issuance will be in compliance
with applicable federal and state securities laws. Certificates for
shares
of Common Stock delivered under the Plan may be subject to such
stock-transfer orders and other restrictions as the Committee may
deem
advisable under the rules, regulations, and other requirements of
the
Securities and Exchange Commission, any stock exchange upon which
the
Common Stock is then listed, and any applicable federal or state
securities law. The Committee may cause a legend or legends to be
put on
any such certificates to make appropriate reference to such
restrictions.
|
|
(g)
|
Award
Agreement.
Each Participant receiving an Award under the Plan shall enter into
a
written agreement with the Company in a form specified by the Committee
agreeing to the terms and conditions of the Award and such related
matters
as the Committee shall, in its sole and absolute discretion,
determine.
|
|
(h)
|
Costs
of Plan.
The costs and expenses of administering the Plan shall be borne by
the
Company.
|
|
(i)
|
Governing
Law.
The Plan and all actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of
Delaware.
|
|
(j)
|
Section
409A.
Notwithstanding anything in the Plan to the contrary, it is the Company’s
intent that the Plan shall be administered so that the additional
taxes
provided for in Section 409A(a)(1)(B) of the Code are not
imposed.
|
REVOCABLE
PROXY |
|
REVOCABLE
PROXY
|
DIODES
INCORPORATED
Annual
Meeting of Stockholders – May 17,
2006
This
Proxy Is Solicited by the Board of Directors
The
undersigned stockholder(s) of Diodes Incorporated (the “Company”) hereby
nominates, constitutes and appoints Keh-Shew Lu and Carl C. Wertz, the
attorneys, agents and proxies of the undersigned, with full power of
substitution, to vote all stock of the Company which the undersigned is entitled
to vote at the annual meeting of stockholders of the Company (the “Meeting”) to
be held on
Wednesday, May 17, 2006, at
the
Renaissance
Hotel, 30100 Agoura Road, Agoura Hills, California 91301, at 9:00 a.m.
(California time),
and any
adjournments thereof, as fully and with the same force and effect as the
undersigned might or could do if personally thereat, as follows:
1. ELECTION
OF DIRECTORS
[
] FOR
all
nominees listed below [
] WITHHOLD AUTHORITY
(except
as marked to the contrary below) to
vote
for all nominees listed below
Discretionary
authority to cumulate votes is granted
Nominees:
C.H.
Chen, Michael
R. Giordano, Keh-Shew Lu, M.K. Lu, Shing Mao, Raymond Soong, and
John
M. Stich.
(Instructions:
To withhold authority to vote for any one or more nominees, write that nominee's
or nominees' name(s) in the space provided)________________________________________________________________________
2.
|
TO approve
the restricted grant to Dr. Keh-Shew Lu of 180,000 shares (270,000
shares
split adjusted on December 1, 2005) of Common
Stock
|
FOR
[ ] AGAINST
[ ] ABSTAIN
[ ]
3.
|
TO approve
a proposed amendment of the Company's Certificate of Incorporation
to
increase the authorized number of shares of Common Stock from 30,000,000
to 70,000,000
|
FOR
[ ] AGAINST
[ ] ABSTAIN
[ ]
4.
|
TO approve
various proposed amendments of the 2001 Omnibus Equity Incentive
Plan,
including the increase by 2,200,000 in the number of shares of Common
Stock which may be subject to awards granted
thereunder.
|
FOR
[ ] AGAINST
[ ] ABSTAIN
[ ]
5.
|
TO
ratify the appointment of Moss Adams LLP as the Company’s independent
registered public accounting firm
for the year ending December 31,
2006.
|
FOR
[ ] AGAINST
[ ] ABSTAIN
[ ]
Please
Sign and Date on Reverse Side
REVOCABLE
PROXY |
|
REVOCABLE
PROXY
|
ALL
PROPOSALS TO BE ACTED UPON ARE PROPOSALS OF THE BOARD. IF ANY OTHER BUSINESS
IS
PROPERLY PRESENTED AT THE MEETING, INCLUDING, AMONG OTHER THINGS, CONSIDERATION
OF A MOTION TO ADJOURN THE MEETING TO ANOTHER TIME OR PLACE IN ORDER TO SOLICIT
ADDITIONAL PROXIES IN FAVOR OF THE RECOMMENDATIONS OF THE BOARD, THIS PROXY
SHALL BE VOTED BY THE PROXYHOLDERS IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE
BOARD.
The
undersigned hereby ratifies and confirms all that said attorneys and
Proxyholders, or either of them, or their substitutes, shall lawfully do or
cause to be done by virtue hereof, and hereby revokes any and all proxies
heretofore given by the undersigned to vote at the Meeting. The undersigned
hereby acknowledges receipt of the Notice of Annual Meeting and the Proxy
Statement accompanying said notice.
Date:____________________
____________
___________
(Name
of
Stockholder, Printed)
_______________________
(Signature
of Stockholder)
_______________________
(Name
of
Stockholder, Printed)
_______________________
(Signature
of Stockholder)
(Please
date this Proxy and sign your name as it appears
on your stock certificate(s). Executors, administrators, trustees, etc. should
give their full
titles. If the signer is a corporation, please sign full corporate name by
duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person. All joint owners should
sign.)
Unless
“AGAINST” or “ABSTAIN” is indicated, the Proxy will be voted “FOR” proposals 1,
2, 3, 4, and 5.
PLEASE
SIGN, DATE AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE PREPAID
ENVELOPE PROVIDED.