DIODES
INCORPORATED
Notice
of Annual Meeting of Stockholders
To
Be Held May 31, 2007
Notice
is hereby given that the annual meeting (the “Meeting”) of the stockholders of
Diodes Incorporated (the “Company”) will be held at the Marriott
Hotels & Resorts,
located at 14901
Dallas Parkway,
Dallas, Texas 75254, on Thursday, May 31, 2007 at 10:00 a.m. (Central time)
for
the following purposes:
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1.
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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, L.P. Hsu,
Keh-Shew Lu, Shing Mao, Raymond Soong and John M.
Stich.
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2.
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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,
2007.
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3.
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Other
Business.
To
transact such other business as properly may come before the Meeting
or
any continuation, adjournment or postponement
thereof.
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Only
persons who are stockholders of record (the “Stockholders”) at the close of
business on March 29, 2007 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 30, 2007.
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 27th day of April, 2007.
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|
|
|
By
Order of the Board of Directors,
DIODES
INCORPORATED
|
|
|
|
|
|
/s/
Carl C.
Wertz |
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Carl
C. Wertz,
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[This
page left intentionally blank.]
DIODES
INCORPORATED
15660
North Dallas Parkway, Suite 850
Dallas,
Texas 75248
(972)
385-2810
PROXY
STATEMENT
ANNUAL
MEETING:
MAY
31, 2007
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 Thursday, May 31, 2007, at the Marriott
Hotels & Resorts,
located
at 14901
Dallas Parkway,
Dallas,
Texas 75254, at 10:00 a.m. (Central time), and at any adjournment or
postponement thereof. Only stockholders of record (the “Stockholders”) at the
close of business on March 29, 2007 (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 30, 2007.
Matters
to be Considered:
The
matters to be considered and voted upon at the Meeting will be:
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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, L.P. Hsu, Keh-Shew Lu, Shing Mao, Raymond Soong and John
M.
Stich.
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|
2.
|
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,
2007.
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|
3.
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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 appointment of Moss Adams LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2007 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 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) 70,000,000 shares of common
stock, par value $0.66-2/3 per share (“Common Stock”), of which 26,078,004
shares were issued and outstanding on the Record Date and (ii) 1,000,000 shares
of Preferred Stock, $1.00 par value (“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. Each proposal
described in this Proxy Statement, other than the election of directors,
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. 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 22.2%) 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. On the Record Date, an additional 524,281 shares (or approximately
2.0%) were owned by directors and executive officers of the Company. 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 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
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, 2007.
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 estimated cost for the
printing and solicitation of Proxies is approximately $15,000.
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)
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Amount
and
Nature
of
Beneficial
Ownership(2)
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|
Percent
of
Class(3)
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|
Lite-On
Semiconductor Corporation (“LSC”)
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5,777,187
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(4)
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22.2
|
% |
Munder
Capital Management
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1,595,473
|
|
6.1
|
% |
Raymond
Soong
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|
486,650
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(5)
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1.8
|
% |
C.H.
Chen
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|
383,000
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(5)
(6)
|
1.5
|
%
|
Michael
R. Giordano
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|
142,717
|
(5)(7)
|
*
|
|
Keh-Shew
Lu
|
|
493,688
|
(5)
(6)
|
1.9
|
%
|
L.P.
Hsu
|
|
—
|
(5)
|
*
|
|
Shing
Mao
|
|
163,875
|
(5)
|
*
|
|
John
M. Stich
|
|
55,000
|
(5)(8)
|
*
|
|
Joseph
Liu
|
|
374,466
|
(5)
|
1.4
|
% |
Mark
A. King
|
|
164,125
|
(5)
|
*
|
|
Carl
C. Wertz
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|
55,790
|
(5)
|
*
|
|
Richard
D. White (5)
|
|
|
|
|
|
Steven
Ho
|
|
99,687
|
(5)
|
*
|
|
Edmund
Tang (5)
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|
|
|
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|
Francis
Tang (5)
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|
6,250
|
|
*
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|
All
directors, nominees and executive officers as a group (14
persons)
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|
2,474,497
|
(9)
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8.8
|
% |
*
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
15660
North Dallas Parkway, Suite 850, Dallas, Texas
75248.
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(2)
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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. None of the shares in the table above
have
been pledged as a security.
|
(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.
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(4)
|
LSC
is a public company listed on the Taiwan Stock Exchange Corporation
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.
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(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 or restricted stock
units:
|
Named
Individual
|
|
Shares
|
|
Raymond
Soong
|
|
|
437,375
|
|
C.H.
Chen
|
|
|
323,000
|
|
Michael
R. Giordano
|
|
|
136,688
|
|
L.P.
Hsu
|
|
|
—
|
|
Keh-Shew
Lu
|
|
|
163,688
|
|
Shing
Mao
|
|
|
152,625
|
|
John
M. Stich
|
|
|
52,750
|
|
Joseph
Liu
|
|
|
325,716
|
|
Mark
A. King
|
|
|
164,125
|
|
Carl
C. Wertz
|
|
|
55,375
|
|
Richard
D. White
|
|
|
—
|
|
Steven
Ho
|
|
|
83,375
|
|
Edmund
Tang
|
|
|
—
|
|
Francis
Tang
|
|
|
6,250
|
|
(6)
|
Includes
330,000 and 60,000 shares of restricted stock granted to Dr. Lu and
Mr.
Chen, respectively, 50% of which shares become saleable and transferable
(“vest”) on the day following the third anniversary of the grant, and 50%
of which shares 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.
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(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
LLC.
|
(9)
|
Includes
1,950,216 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 or restricted stock units, but excludes an additional
530,500 shares that the directors and executive officers will have
the
right to acquire upon the exercise of stock options or restricted
stock
units which will become exercisable in installments more than 60
days
after the
Record Date.
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PROPOSAL
ONE - ELECTION OF DIRECTORS
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 nominated 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
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|
Age
|
|
Position
with the Company
|
|
Director
Since
|
|
Raymond
Soong (1)
|
|
|
65
|
|
|
Chairman
of the Board
|
|
|
1993
|
|
C.H.
Chen (2)
|
|
|
64
|
|
|
Vice
Chairman of the Board
|
|
|
2000
|
|
Keh-Shew
Lu (3)
|
|
|
60
|
|
|
President,
Chief Executive Officer, and Director
|
|
|
2001
|
|
Michael
R. Giordano (4)
|
|
|
60
|
|
|
Director
|
|
|
1990
|
|
L.P.
Hsu (5)
|
|
|
67
|
|
|
Director
Nominee
|
|
|
—
|
|
Shing
Mao (6)
|
|
|
71
|
|
|
Director
|
|
|
1990
|
|
John
M. Stich (7)
|
|
|
65
|
|
|
Director
|
|
|
2000
|
|
Joseph
Liu (8)
|
|
|
65
|
|
|
Senior
Vice President, Operations
|
|
|
—
|
|
Mark
A. King (9)
|
|
|
48
|
|
|
Senior
Vice President, Sales and Marketing
|
|
|
—
|
|
Carl
C. Wertz (10)
|
|
|
52
|
|
|
Chief
Financial Officer, Secretary and Treasurer
|
|
|
—
|
|
Richard
D. White (11)
|
|
|
59
|
|
|
Senior
Vice President, Finance
|
|
|
—
|
|
Steven
Ho (12)
|
|
|
51
|
|
|
Vice
President, Asia Sales
|
|
|
—
|
|
Edmund
Tang (13)
|
|
|
59
|
|
|
Vice
President, Corporate Administration
|
|
|
—
|
|
Francis
Tang (14)
|
|
|
52
|
|
|
Vice
President, Product Development
|
|
|
—
|
|
(1)
|
Raymond
Soong has been the Chairman of the Boards of LSC and Lite-On Technology
Corporation, a Lite-On Group company, since 1992. Mr. Soong also
serves on
the board of Actron Technology Corporation, a Lite-On Group company.
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, LSC and the Company. 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 Company's
Nominating Committee.
|
(2)
|
C.H.
Chen was appointed Vice Chairman of the Board of Directors in June
2005.
Mr. Chen previously served as the Company's President and Chief Executive
Officer from 2000 until 2005. 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, a Lite-On Group company
and the
world's leading supplier of contact image sensors (CISs), which merged
with LSC in December 2000. Mr. Chen is currently the Vice Chairman
of LSC,
Vice Chairman of Dynacard Corporation, Supervisor of Lite-On Technology
Corporation, Chairman of Co-Tech Copper Foil Corporation, a board
member
of Actron Technology Corporation, Chairman of the Company's Compensation
and Stock Options Committee, an ex
officio member
of the Nominating Committee and a member of the Strategic Planning
Committee.
|
(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. 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 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
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 Company's Strategic Planning
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 a member of the Compensation and Stock
Options Committee and the Strategic Planning
Committee.
|
(5) |
Lu-Pao
Hsu is currently serving as Chairman of Philips Taiwan Quality Foundation,
a position he has held since 2002. Previously, he served as Supervisor
of
the Board at Delta Electronics (2000-2003); Vice Chairman, (1998-2000)
and
CEO (2001) of HannStar Display; a director of TSMC (1991-2000); and
Executive Vice President of Philips Taiwan (1989-1998). He also has
served
on the Board of Directors of Winbond Electronics Corporation since
1999,
Vanguard International Semiconductor Corporation since 2003, ZyXEL
Communications Corporation since 2006,
and as an independent director of Lite-On Technology Corporation
since
2004. Mr. Hsu has completed the International Executive Program at
IMD,
the Advanced Management Program at Harvard Business School, and holds
a
Bachelor of Science degree in Physics from National Cheng Kung University
in Taiwan. In addition, since 1998, Mr. Hsu has been an Esteemed
Chair
Lecturer at the College of Management at National Chiao Tung University
in
Taiwan, where he served as Associate Professor from 1971 to
1972.
|
(6) |
In
2000, Dr. Shing Mao retired as Chairman of the Board of 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 between Taiwan Lite-On 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.
Before
joining Taiwan 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
Committee and Nominating Committee.
|
(Footnotes
continued on following page)
(Footnotes
continued from previous page)
(7)
|
John
M. Stich was appointed as the Honorary Consul General of Japan at
Dallas
in 2004. From 2000 to 2006, he was the President and Chief Executive
Officer of The Asian Network, a consulting business that helped
high-technology companies to establish and expand their business
in Asia.
Prior to this position, Mr. Stich was the Chief Marketing Officer
for TI
in Japan from 1994 to 1999, and Vice President - Semiconductors for
TI
Asia from 1991 to 1994. 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 a director of Spansion Inc., a Nasdaq listed
company that designs, develops and manufactures flash memory products
and
systems, and of Stonestreet One, Inc., a leading provider of short
distance wireless technologies. He serves numerous non-profit
organizations, including Vice Dean 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)
|
Joseph
Liu was appointed as the Company's Senior Vice-President, Operations
in
2000. Mr. Liu previously served as the Company's Vice President,
Far East
Operations from 1998 to 2000, Vice President, Operations from 1994
to
1998, Chief Financial Officer, Secretary and Treasurer from 1990
to 1998,
and 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 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
of Diodes-China, Diodes-Shanghai, and 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 the Company's Senior Vice President, Sales
and
Marketing in 2005. He previously served as the Company's Vice President,
Sales and Marketing from 1998 to 2005, and Vice President, Sales
from 1991
to 1998. Prior to joining the Company, Mr. King served for nine years
in
various sales management positions at Taiwan
Lite-On.
|
(10)
|
Carl
C. Wertz was appointed the Company's Chief Financial Officer, Secretary
and Treasurer in 1998. Mr. Wertz previously served as the Company's
Controller from 1993 to 1998. Prior to joining the Company, Mr. Wertz
served in various financial management and accounting positions.
Mr.
Wertz, a licensed CPA, has over 22 years of manufacturing and distribution
experience, and began his accounting career with Deloitte & Touche
LLP.
|
(11)
|
Richard
D. White was appointed the Company's Senior Vice President of Finance
in
2006. Mr. White has 30 years of senior level finance experience,
including
25 years at TI, where he served as Vice President of Finance and
Production Planning for MOS memory, Controller for TI's Asia Pacific
Division in Singapore, and various other financial positions in U.S.,
France and Germany. From 1999 to 2005, he served as CFO for Optisoft,
Inc., and from 2005 to 2006, he served as a Partner for Tatum, LLC.
Mr.
White, a certified public accountant, holds a Bachelor of Science
degree
in electrical engineering from Oklahoma State University and an MBA
from
the University of Michigan.
|
(12) |
Steven
Ho was appointed the Company's Vice President, Asia Sales in 2005.
Mr. Ho
previously served as the Company's General Manager, Diodes Taiwan
from
1991 to 2005. 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 TI Taiwan.
|
(Footnotes
continued on following page)
(Footnotes
continued from previous page)
(13)
|
Edmund
Tang was appointed the Company's Vice President of Administration
in 2006.
He has 30 years of managerial and engineering experience, including
25
years at TI, where he served as Vice President and global memory
quality
manager of the world-wide MOS memory operation, and Vice President
and
General Manager of Asia memory operations. From 2002 to 2006, Mr.
Tang
served as the Asia President of FSI International Inc., a global
supplier
of wafer cleaning and processing technology, responsible for FSI's
business in Taiwan, Singapore, South Korea, and China. Mr. Tang holds
a
Bachelor of Science degree in electrical engineering from the National
Cheng Kung University in Taiwan and a master's degree in electrical
engineering from Southern Methodist
University.
|
(14)
|
Francis
Tang was appointed the Company's Vice President of Product Development
in
May 2006. He previously served as the Company's Global Product Manager
from 2005 until 2006. Prior to joining the Company, Mr. Tang served
as
general manager of T2 Microelectronics in Shanghai, China where he
managed
complex mixed-signal SOC product development. From 1996 to 2001,
Mr. Tang
was the senior strategic marketing director for Acer Labs, Inc. USA,
and
prior to this, he was employed by National Semiconductor Corp. for
17
years, where he held various management positions in analog and
mixed-signal circuit design, applications and strategic marketing.
Mr.
Tang holds a master's degree in electrical engineering from University
of
Missouri-Rolla.
|
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)
|
|
|
|
|
|
Chair
|
|
|
C.
H. Chen
|
|
|
|
Chair
|
|
Ex
officio
member (1)
|
|
Member
|
Keh-Shew
Lu
|
|
|
|
|
|
|
|
Chair
|
Michael
R. Giordano (2)
|
|
Chair
(3)
|
|
Member
|
|
|
|
Member
|
Shing
Mao (2)
|
|
Member
|
|
|
|
Member
|
|
|
John
M. Stich (2)
|
|
Member
|
|
Member
|
|
Member
|
|
Member
|
(1)
- Mr.
Chen is not entitled to vote and may attend meetings only at the invitation
of
the committee.
(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. Therefore, 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.
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. In addition, Mr. Chen may
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. Therefore, 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 attached to this Proxy Statement as Annex
A, B
and C, respectively, and are available on the Company's website at
www.diodes.com.
Meetings
of the Board and Committees
The
following table represents the number of meetings of the Board and Committees
in
2006.
Title
|
|
Meetings
Held
|
|
Action
by Written Consent
|
|
Board
|
|
|
3
|
|
|
10
|
|
Audit
Committee
|
|
|
4
|
|
|
9
|
|
Compensation
and Stock Options Committee
|
|
|
6
|
|
|
10
|
|
Nominating
Committee
|
|
|
1
|
|
|
1
|
|
Strategic
Planning Committee
|
|
|
1
|
|
|
—
|
|
Independent
Board Members
|
|
|
1
|
|
|
—
|
|
All
of
the persons who were directors of the Company or members of committees were
present for at least 75% of the meetings during 2006, except for Dr. Mao who
attended five out of seven meetings of the Board and Audit
Committee.
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 2006 annual
meeting of stockholders except Raymond Soong and M.K. Lu.
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 2008 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
DISCUSSION AND ANALYSIS
The
Compensation Committee
Committee
Members
The
Compensation and Stock Options Committee (the “Committee”) consists of three
directors, C.H. Chen (Chairman), Michael R. Giordano and John M. Stich. 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. Therefore, 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 meets as often as necessary to perform its duties
and
responsibilities. The Committee held eight meetings during fiscal 2006, each
of
which included an executive session without management.
Role
of Committee
The
Committee operates under a written charter approved by the Board. A copy of
the
charter is attached hereto as Annex B and is available at www.diodes.com
under
“Investors - Corporate Governance.” The Committee's purpose is to:
· |
review
and approve corporate goals and objectives relevant to compensation
of the
executive officers;
|
· |
evaluate
the performance of the executive officers in light of those goals
and
objectives;
|
· |
determine
and approve the compensation level of the executive officers based
on this
evaluation; and
|
· |
make
recommendations to the Board with respect to incentive compensation
plans
and equity-based plans.
|
Compensation
Committee Process
Annual
Evaluation
The
Committee meets in executive session to (i) evaluate the performance of the
Named Executive Officers during the prior fiscal year; (ii) determine their
annual bonuses, if any, for the prior fiscal year; (iii) establish their
performance goals and objectives for the current fiscal year; (iv) set their
base salaries for the current fiscal year; and (v) consider and approve any
grants to them of equity incentive compensation. In establishing the performance
goals and objectives for the current fiscal year, the Committee discusses with
the Chief Executive Officer the Company's strategic objectives and performance
targets.
Management's
Role in Determining Executive Compensation
The
Committee determines the compensation for all the executive officers, including
the Named Executive Officers. Dr. Keh-Shew Lu, the Chief Executive Officer
plays
a role in determining executive compensation since he evaluates employee
performance, recommends performance goals and objectives and recommends salary
levels and option awards. Dr. Lu also participates in Committee meetings, at
the
Committee's request, and provides evaluations and compensation recommendations
as to senior executive officers, other than himself.
Compensation
Consultant
The
Committee's charter enables the Committee to retain and terminate any consulting
firm used to assist in the evaluation of Chief Executive Officer or senior
executive compensation, and provides the Committee with the sole authority
to
approve the consulting firm's fees and other retention terms. In the first
quarter of fiscal 2006, the Committee retained Lipis Consulting to provide
the
Committee with current information concerning the compensation practices of
companies of comparable size in the Company's industry.
Peer
Group
Lipis
Consulting had prepared a compensation survey which included approximately
40
companies in the same industry as the Company and with annual revenues between
$200 million and $700 million (the “Peer Group”), covering the compensation paid
to the Chief Executive Officer, Chief Financial Officer, Senior Vice President,
Operations, and Senior Vice President, Sales and Marketing of companies in
the
Peer Group. Based on the results of the survey, the Company relies more heavily
than the Peer Group generally on variable compensation and share-based
compensation and less on base salary. In addition, generally the Company's
base
salaries are below the median base salaries paid to officers with comparable
duties in the Peer Group. However, the total compensation (base salary, variable
compensation and share-based compensation) is comparable to the companies in
the
Peer Group with the same level of performance as the Company.
Compensation
Philosophy for Executive Officers
The
Company's compensation philosophy for executive officers is that compensation
programs should be designed to attract, retain and motivate executives critical
to the Company's long-term growth and profitability, and
that
the focus should be on total compensation, including base salary, cash bonus,
and equity awards, rather than focusing on individual compensation
items.
In
support of this philosophy, the Committee believes that:
· |
the
total compensation package for executives should be competitive with
the
total compensation paid to executives with comparable duties by other
companies in the Company's industry that are of similar size and
performance;
|
· |
base
salaries should only be a portion of the total compensation package,
and
may generally be lower than the median base salaries paid to executives
with comparable duties by other companies in the Company's industry
that
are of similar size and performance;
and
|
· |
cash
bonus programs, equity incentive plans, and long-term incentive awards
should motivate the executive to achieve specific strategic and
performance objectives established by the Board to align the executive's
interests with those of the Company's
stockholders.
|
Elements
of Executive Compensation
Base
Salaries
In
line
with the Committee's policy to incentivize executive officers to achieve
pre-established performance goals and objectives through bonus programs and
equity incentive plans, executive officers receive a relatively small portion
of
their total compensation as base salary. The following table shows each
compensation element as a percentage of total compensation for the Named
Executive Officers for fiscal 2006:
Name
|
|
Title
|
|
Base
Salaries (%)
|
|
Bonus
(%)
|
|
Other
Compensation (%)
|
|
Equity
Awards (1) (%)
|
Keh-Shew
Lu
|
|
President
and Chief Executive Officer
|
|
9.4
|
|
24.8
|
|
1.3
|
|
64.5
|
Carl
C. Wertz
|
|
Chief
Financial Officer, Secretary and Treasurer
|
|
23.2
|
|
40.0
|
|
5.6
|
|
31.2
|
Joseph
Liu
|
|
Senior
Vice President, Operations
|
|
22.3
|
|
40.5
|
|
3.9
|
|
33.3
|
Mark
A. King
|
|
Senior
Vice President, Sales and Marketing
|
|
21.3
|
|
41.8
|
|
5.0
|
|
31.9
|
Steven
Ho
|
|
Vice
President, Asia Sales
|
|
22.0
|
|
39.3
|
|
3.3
|
|
35.4
|
(1)
|
The
value of the equity awards is calculated in accordance with the amount
recognized for financial statement reporting purposes for the fiscal
year
ended December 31, 2006, in accordance with the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 123
(revised 2004), “Share-Based Payment” (“SFAS 123(R)”). The amounts are
determined using the Black Scholes option valuation model. This model
was
developed to estimate the fair value of traded options, which have
different characteristics than employee stock options, and changes
to the
subjective assumptions used in the model can result in materially
different fair value estimates. This hypothetical value is based
on the
following assumptions: an exercise price equal to the market value
on date
of grant; expected volatility of 56.03%; risk-free interest rate
of 4.81%;
expected term of 6.57 years; and estimated dividend yield of 0%.
See Note
13 to the Company's audited financial statements for the fiscal year
ended
December 31, 2006, included in the Company's Annual Report on Form
10-K
filed with the Securities and Exchange Commission on March 1, 2007,
for a
further discussion of the relevant assumptions used in calculating
grant
date fair value pursuant to SFAS
123(R).
|
In
determining base salaries, the Committee considers the executive's scope of
responsibility, level of experience, individual performance, and past and
potential contribution to the Company's business. To ensure that the base
salaries are competitive, the Committee also periodically reviews an independent
survey of executive compensation and compares the base salaries to those paid
to
executives with comparable duties by other companies in the Company's industry
that are of similar size and performance. For fiscal 2006, the Committee
considered the results of the survey prepared by Lipis Consulting. Generally,
the Company's base salaries are below the median base salaries paid to officers
with comparable duties by companies in the Company's industry that are of a
similar size and similar performance. To the extent that a Named Executive
Officer has an employment agreement, such executive's employment agreement
specifies a minimum level of base salary for the executive. Base salaries are
reviewed annually, and adjusted from time to time to increase salaries to
industry levels after taking into account individual responsibilities,
experience, performance and potential contributions.
Bonuses
The
Company's bonus program for the executive officers is tied in part to the
Company's achievement of specific performance goals and objectives established
by the Committee at the beginning of each fiscal year. The aggregate amount
of
the bonus pool depends upon the amount by which (i) the Company's revenue growth
exceeds that of the Company's industry (in 2006, the percentage increase was
based on a weighted average to which the market for discrete products was
weighted 80% and the market for analog products was weighted 20%), and (ii)
the
Company's net income exceeds that of the prior year indexed to the industry
revenue growth. After the end of the fiscal year, the Committee allocates the
bonus pool among the executive officers based on the contribution made by each
officer to the achievement of the performance criteria, as well as in proportion
and compared to the prior-year bonus amounts. No bonus is paid if the Company
does not achieve 80% of the bonus formula.
The
Company has achieved the performance goals and objectives in each of the last
five years. The average approximate payout of bonuses as a percentage of base
salaries for the Named Executive Officers (excluding Dr. Lu) over the past
five
years has been 146.3 %. The average approximate payout of bonuses as a
percentage of base salary for Dr. Lu since his appointment as Chief Executive
Officer in 2005 has been 253.8%. Generally, the Committee sets the performance
goals and objectives such that the relative difficulty of achieving them is
consistent from year to year.
Equity
Incentives
In
keeping with the Committee's compensation philosophy, the Committee believes
that equity incentive awards serve to align executive's interests with those
of
the Company's stockholders and motivate the executive to achieve the specific
performance goals and objectives established by the Board. Under the Company's
2001 Omnibus Equity Incentive Plan (the “2001 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, stock
appreciation rights and restricted stock units (“RSUs”).
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 and RSUs annually,
which generally vest in four equal annual installments on the first four
anniversary dates of the date of grant, 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.
Post-Termination
and Change in Control Payments
Messrs.
Lu, Wertz, Liu and King have current employment agreements entered into with
the
Company on August 29, 2005. In the event employment is terminated by the Company
without “cause” (as defined), the executive either may (a) commence a one-year
paid leave of absence, or (b) forego such leave of absence and the benefits
associated therewith. If the executive chooses to commence the leave of absence,
the executive will, during that one year, continue as a full-time employee,
entitled to receive all the benefits provided under the employment agreement.
At
the end of the leave of absence, the executive will continue to receive his
base
salary for one year, and all share-based compensation previously granted will
continue to vest. The executives are subject to non-competition and
non-solicitation provisions during the leave of absence and for one year after
the end of the leave of absence. Upon a change in control, all share-based
compensation granted to the executive shall vest immediately and be exercisable
for the full term thereof. If the executive chooses to forego such leave of
absence, the vesting of any options or restricted stock awards awarded to the
executive and his ability to exercise them, upon termination will be governed
by
the terms of the 2001 Incentive Plan and his stock option agreements. As no
other officers have employment agreements with the Company, upon termination
or
a change in control, the vesting of their stock options and ability to exercise
such options will be governed by the terms of the 2001 Incentive Plan and their
stock option agreements. The 2001 Incentive Plan generally provides, that upon
a
change in control, all stock awards then outstanding shall vest immediately.
For
a further description of these arrangements, see “Potential Payments Upon
Termination or Change in Control.”
The
Committee has not provided for a lump sum payment upon termination of the
executives, as the Committee believes that by providing the executives with
an
option to commence a one-year leave of absence upon termination, the Company
has
the ability to work with the executive to transition his duties and
responsibilities in a productive manner. The Committee believes that these
post-termination and change in control arrangements are an important part of
overall compensation for our Named Executive Officers because they help to
secure the continued employment and dedication of our Named Executive Officers,
notwithstanding any concern that they might have regarding their own continued
employment prior to or following a change in control.
Deferred
Compensation Plan
We
adopted a deferred compensation plan effective January 1, 2007, which allows
certain employees, including the Named Executive Officers, and directors to
defer receipt of a portion of their salary, bonus, equity or other specified
compensation. The purpose of the deferred compensation plan is to attract and
retain key employees by providing them with greater flexibility in structuring
the timing of their compensation payments.
Additional
Benefits
Pursuant
to their employment agreements, executive officers are also entitled to
reimbursement for all reasonable and documented business expenses, paid vacation
in accordance with the Company's vacation policy for employees generally,
participation in all plans provided to employees in general, a life insurance
policy in the amount in effect on the date of the employment agreement, and
a
disability policy in the maximum insurable amount. Certain executive officers
are also entitled to an automobile allowance.
Compensation
Decisions for Fiscal 2006
In
fiscal
2006, the Committee continued to apply the compensation philosophy described
above in determining the compensation of the Named Executive
Officers.
The
Committee increased the base salary for Dr. Lu to $315,000, compared to $300,000
in fiscal 2005. In addition, Dr. Lu was provided with an automobile allowance
of
$1,300 per month and was entitled to all other perquisites and compensation
to
which he was entitled in 2005 (other than restricted stock awards) in the same
amounts, including, but not limited to, health insurance, participation in
any
retirement plans and life insurance. Dr. Lu also received a bonus of $827,000
and a grant of options exercisable for 78,750 shares (the SFAS 123R value equals
$355,314 and is amortized over a four-year period). Overall, for fiscal 2006,
Dr. Lu received a 5.0% increase in base salary and a 12.7% increase in annual
cash bonuses (pro-rated), compared to fiscal 2005. Dr. Lu 's bonus for fiscal
2005 was pro-rated since he had joined the Company on June 1, 2005. On an actual
cash basis, the increase in his annual bonus was 72.3%.
In
determining Dr. Lu's total compensation package, the Committee considered the
following:
· |
Company
performance: The
59.9% increase in the Company's net sales, compared to an approximately
18% increase in the serviceable area market in which the Company
participates, and the 44.4% increase in the Company's net income;
and the
performance goals and objectives for the Company in 2006 established
by
the Board.
|
· |
Individual
performance: Dr.
Lu's progress in integrating the acquisitions of Anachip Corporation,
which the Company acquired in January 2006, and APD Semiconductor,
Inc.,
which the Company acquired in November 2006, and the completion of
a $230
million convertible note offering.
|
· |
Allocation
between cash and non-cash component: The
increase in the value of the share-based compensation granted to
Dr. Lu in
2006; each element of Dr. Lu's compensation for 2005 compared to
2006; and
the reasons the Committee had established the amount of each element
of
compensation.
|
· |
Internal
pay equity: The
relationship between each element of Dr. Lu's compensation compared
to the
compensation of each of the Company's other executive officers; and
the
relationship between the aggregate value of Dr. Lu's compensation,
compared to the median compensation of the Company's executive officers
generally, on the other hand.
|
· |
Other
factors: The
deductibility of the compensation; the results of the survey conducted
by
Lipis Consulting; and the terms of Dr. Lu's employment
agreement.
|
In
2006,
the Committee adjusted the base salary for the other Named Executive Officers
as
follows:
|
· |
Carl
C. Wertz, Chief Financial Officer, to $164,000 from $156,000 in fiscal
2005;
|
|
· |
Joseph Liu, Senior Vice President,
Operations,
to $229,000 from $218,000 in fiscal 2005; |
|
· |
Mark A. King, Senior Vice President,
Sales and
Marketing, to $197,000 from $187,000 in fiscal 2005;
and |
|
· |
Steven Ho, Vice President, Asia Sales,
to
$130,000 from $124,000 in fiscal 2005. |
In
keeping with the Committee's compensation philosophy that each executive
officer's bonus and equity incentives should be designed to motivate that
executive to achieve the performance
goals and objectives established by the Board and to align the interests of
the
executive officers with those of stockholders, for fiscal 2006, the Committee
awarded the following bonuses and equity awards:
|
· |
Mr.
Wertz; cash bonus of $283,000, options exercisable for 12,000 shares,
and
3,000 restricted stock units (“RSUs”);
|
|
· |
Mr. Liu; cash bonus of $416,000,
options
exercisable for 20,000 shares, and 4,000 RSUs; |
|
· |
Mr. King; cash bonus of $387,000,
options
exercisable for 18,000 shares, and 3,500 RSUs; and
|
|
· |
Mr. Ho; cash bonus of $230,000, options
exercisable for 10,000 shares, and 2,500
RSUs. |
Overall,
for fiscal 2006, the other Named Executive Officers received a 5.1% increase
in
base salary, and a 1.8% increase in total annual bonuses (including cash,
options and RSUs), from fiscal 2005.
In
determining each of the other Named Executive Officers total compensation
package, the Committee considered the following:
· |
Company
performance: The
59.9% increase in the Company's net sales, compared to an approximately
18% increase in the serviceable area market in which the Company
participates, and the 44.4% increase in the Company's net income;
and the
performance goals and objectives for the Company in 2006 established
by
the Board.
|
· |
Individual
performance: The
contribution of each executive officer; the expertise of each executive
officer; and the performance goals and objectives to be performed
by each
executive officer in 2006.
|
· |
Allocation
between cash and non-cash component: The
number and vesting of outstanding options and restricted stock awards;
the
value of share-based compensation granted to each executive officer
in
prior years; each element of the compensation of each executive officer
for fiscal 2005 compared to 2006; the reasons the Committee had
established the amount of each element of such compensation; and
the
allocation of bonuses for services rendered in
2006.
|
· |
Other
factors: The
deductibility of the compensation; the results of the survey conducted
by
Lipis Consulting; and the terms of the officers' employment
agreements.
|
Tax
and Accounting Implications
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). To qualify
for
deductibility under Section 162(m), the performance goals must be established
no
later than 90 days from the beginning of the performance period. The Company
did
not establish such performance goals within 90 days from the beginning of fiscal
2006. However, under Section 162(m), all but $142,000 of the compensation was
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 that would not comply with Section 162(m)
if
it concludes that this is in the Company's best interests.
Nonqualified
Deferred Compensation
On
October 22, 2004, the American Jobs Creation Act of 2004 was signed into law,
changing the tax rules applicable to nonqualified deferred compensation
arrangements. Under the employment agreements for Messrs. Lu, Wertz, Liu and
King, in the event employment is terminated by the Company, the executive may
commence a one-year paid leave of absence. During the leave of absence, the
executive's options remain exercisable. At the end of the leave of absence,
all
share-based compensation previously granted shall continue to vest and shall
remain exercisable for the full term thereof. The final rules on Section 409A
of
the Code were issued on April 10, 2007, and we are currently evaluating if
this
provision of the employment agreements is in compliance with Section 409A and
the final rules thereunder. The Company intends to amend or rescind this
provision of the employment agreements, if necessary, to comply with Section
409A and the final rules adopted thereunder. A more detailed discussion of
the
Company's nonqualified deferred compensation arrangements is provided under
the
heading “Nonqualified Deferred Compensation.”
Accounting
for Share-Based Compensation
Beginning
on January 1, 2006, the Company began accounting for share-based compensation
in
accordance with the requirements of SFAS 123(R).
Conclusion
The
Committee believes that the Company's compensation policies support the
Committee's compensation philosophy that compensation should be designed to
attract, retain and motivate executives critical to the Company's long-term
growth and profitability. The Committee believes that for fiscal 2006, the
total
compensation package for each of the Named Executive Officers is competitive
with the total compensation paid to executives with comparable duties by other
companies in the Company's industry that are of similar size and performance.
In
addition, the Committee believes that the bonus and equity incentives help
motivate the executive to achieve specific performance goals and objectives
established by the Board and align the executive's interests with those of
the
Company's stockholders.
COMPENSATION
COMMITTEE REPORT
The
Report of the Compensation and Stock Options 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.
The
Compensation and Stock Options Committee (the “Committee”) of the Company has
reviewed and discussed the Compensation Discussion and Analysis with management,
and based on such review and discussions, the Committee recommended to the
Board
that the Compensation Discussion and Analysis be included in this Proxy
Statement.
Dated: March 31, 2007 |
|
THE COMPENSATION AND STOCK OPTIONS
COMMITTEE |
|
|
|
|
|
C.H. Chen, Chairman
Michael R. Giordano
John M. Stich
|
SUMMARY
COMPENSATION TABLE
The
table
below summarizes the total compensation paid or earned by each of the Named
Executive Officers (“NEO”) for the fiscal year ended December 31, 2006. The
Named Executive Officers are the Company's Chief Executive Officer, Chief
Financial Officer, and three other most highly compensated executive officers
ranked by their total compensation in the table below (reduced by the amount
in
column (h)).
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
|
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
(2)
|
|
Change
in Pension
Value
and Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All
Other
Compensation
($)
(3)
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keh-Shew
Lu
|
|
|
2006
|
|
|
315,000
|
|
|
-
|
|
|
1,167,750
|
|
|
979,182
|
|
|
827,000
|
|
|
-
|
|
|
44,832
|
|
|
3,333,764
|
|
President
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl
C. Wertz
|
|
|
2006
|
|
|
164,000
|
|
|
-
|
|
|
15,652
|
|
|
204,692
|
|
|
283,000
|
|
|
-
|
|
|
39,722
|
|
|
707,066
|
|
Chief
Financial Officer,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secretary
and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
Liu
|
|
|
2006
|
|
|
229,000
|
|
|
-
|
|
|
20,869
|
|
|
320,008
|
|
|
416,000
|
|
|
-
|
|
|
40,137
|
|
|
1,026,013
|
|
Sr.
Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. King
|
|
|
2006
|
|
|
197,000
|
|
|
-
|
|
|
18,260
|
|
|
278,122
|
|
|
387,000
|
|
|
-
|
|
|
46,064
|
|
|
926,446
|
|
Sr.
Vice President, Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Ho
|
|
|
2006
|
|
|
129,769
|
|
|
-
|
|
|
13,043
|
|
|
195,264
|
|
|
231,427
|
|
|
-
|
|
|
19,153
|
|
|
588,655
|
|
Vice
President, Asia Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
amounts in column (e) and (f) reflect the dollar amount recognized
for
financial statement reporting purposes for the fiscal year ended
December
31, 2006, in accordance with SFAS 123(R). The amounts are determined
using
the Black Scholes option valuation model. This model was developed
to
estimate the fair value of traded options, which have different
characteristics than employee stock options, and changes to the subjective
assumptions used in the model can result in materially different
fair
value estimates. This hypothetical value is based on the following
assumptions: an exercise price equal to the market value on date
of grant;
expected volatility of 56.03%; risk-free interest rate of 4.81%;
expected
term of 6.57 years; and estimated dividend yield of 0%. See Note
13 to the
Company's audited financial statements for the fiscal year ended
December
31, 2006, included in the Company's Annual Report on Form 10-K filed
with
the Securities and Exchange Commission on March 1, 2007, for a further
discussion of the relevant assumptions used in calculating grant
date fair
value pursuant to SFAS 123(R).
|
The
following table details the amounts in column (e) and (f) of the previous table
and represents the SFAS 123(R) expense in 2006 for each of the equity
awards:
|
|
2006
RSU
|
|
2005
RSA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
($)
|
|
($)
|
|
(e)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
(f)
|
|
Keh-Shew
Lu
|
|
|
-
|
|
|
1,167,750
|
|
|
1,167,750
|
|
|
729,844
|
|
|
249,338
|
|
|
-
|
|
|
-
|
|
|
979,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl
C. Wertz
|
|
|
15,652
|
|
|
-
|
|
|
15,652
|
|
|
37,538
|
|
|
98,328
|
|
|
49,042
|
|
|
19,784
|
|
|
204,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
Liu
|
|
|
20,869
|
|
|
-
|
|
|
20,869
|
|
|
62,563
|
|
|
142,735
|
|
|
81,736
|
|
|
32,974
|
|
|
320,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
A. King
|
|
|
18,260
|
|
|
-
|
|
|
18,260
|
|
|
56,306
|
|
|
130,047
|
|
|
65,389
|
|
|
26,379
|
|
|
278,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Ho
|
|
|
13,043
|
|
|
-
|
|
|
13,043
|
|
|
31,281
|
|
|
95,157
|
|
|
49,042
|
|
|
19,784
|
|
|
195,264
|
|
Stock
options granted in 2003, 2004, and 2005 vest in three equal annual installments,
while stock options granted in 2006 and all other equity awards vest in four
equal annual installments.
(2)
|
Amounts
earned in 2006 based on the Company’s 2006 executive bonus
plan.
|
(3)
|
Certain
of the Company's executive officers receive personal benefits in
addition
to salary and cash bonuses, including, but not limited to, automobile
expense, life insurance payable at the direction of the employee,
contributions under the Company's retirement plans, and group health
insurance. The amount shown in column (i) for “All Other Compensation”
consists of the following:
|
|
|
Year
|
|
Dr.
Lu
($)
|
|
Mr.
Wertz
($)
|
|
Mr.
Liu ($)
|
|
Mr.
King ($)
|
|
Mr.
Ho ($)
|
|
Automobile
Expense
|
|
|
2006
|
|
|
15,600
|
|
|
11,600
|
|
|
10,130
|
|
|
11,600
|
|
|
9,513
|
|
Health
Insurance
|
|
|
2006
|
|
|
4,212
|
|
|
3,534
|
|
|
4,251
|
|
|
9,792
|
|
|
2,496
|
|
Contributions
under Retirement Plans
|
|
|
2006
|
|
|
22,000
|
|
|
22,000
|
|
|
22,928
|
|
|
22,000
|
|
|
5,953
|
|
Life
Insurance
|
|
|
2006
|
|
|
3,020
|
|
|
2,588
|
|
|
2,828
|
|
|
2,672
|
|
|
1,191
|
|
Total
Other Compensation
|
|
|
|
|
|
44,832
|
|
|
39,722
|
|
|
40,137
|
|
|
46,064
|
|
|
19,153
|
|
GRANTS
OF PLAN-BASED AWARDS
The
following table sets forth certain information with respect to grants of awards
to the Named Executive Officers under our non-equity and equity incentive plans
during 2006.
|
|
|
|
Estimated
Future Payouts Under
Non-Equity
Incentive Plan Awards
|
|
Estimated
Future Payouts Under
Equity
Incentive
Plan Awards
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
|
|
Target
($)
|
|
|
|
|
|
Target
(#)
|
|
|
|
All
Other
Stock
Awards
Number
of
Shares
of
Stock
Units
(#)
|
|
All
Other
Option
Awards
Number
of
Securities
Underlying
Options
(#)
|
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
|
|
Grant
Date
Fair
Value of
Stock
and
Option
Awards
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
(k)
|
|
(l)
|
|
|
|
|
5/22/2006
|
|
|
|
|
|
661,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
78,750
|
|
|
-
|
|
|
2,629,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/22/2006
|
|
|
|
|
|
226,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
12,000
|
|
|
33.39
|
|
|
460,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
Liu
|
|
|
5/22/2006
|
|
|
|
|
|
332,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
20,000
|
|
|
33.39
|
|
|
747,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/22/2006
|
|
|
|
|
|
309,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,500
|
|
|
18,000
|
|
|
33.39
|
|
|
671,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Ho
|
|
|
5/22/2006
|
|
|
|
|
|
185,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
10,000
|
|
|
33.39
|
|
|
383,950
|
|
|
Under
the executive cash bonus plan, no bonus is paid if the Company does
not
achieve 80% of the bonus formula. The amounts in column (d) assume
80% of
2006 bonus amount.
|
|
Grant
date fair value (column (l)) of stock options is calculated in accordance
with SFAS 123(R). The amounts are determined using the Black Scholes
option valuation model. This model was developed to estimate the
fair
value of traded options, which have different characteristics than
employee stock options, and changes to the subjective assumptions
used in
the model can result in materially different fair value estimates.
This
hypothetical value is based on the following assumptions: an exercise
price equal to the market value on date of grant; expected volatility
of
56.03%; risk-free interest rate of 4.81%; expected term of 6.57 years;
and
estimated dividend yield of 0%. Grant date fair value of stock awards
is
calculated by multiplying the number of stock units by the price
of the
Company’s Common Stock on the grant
date.
|
Restricted
stock awards and stock options granted in 2006 vest in four equal annual
installments.
Narrative
to Summary Compensation Table and Plan-Based Awards Table
Employment
Agreements
On
August
29, 2005, the Company entered into employment agreements with Messrs. Lu, Liu,
King and Wertz, pursuant to which they are entitled to (i) 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, (ii)
participate in any executive bonus plan, (iii) receive reimbursement for all
reasonable and documented business expenses, (iv) paid vacation in accordance
with the vacation policy for employees generally, (v) participate in all plans
provided to employees in general, (vi) receive a life insurance policy in the
amount in effect on the date of the agreement, and (vii) 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 under
“Post-Termination and Change in Control payments” if his employment is
terminated without “cause” (as defined), and acknowledges that all tangible
items related to the Company are its exclusive property. The employment
agreements also provide for payments upon termination and change in control,
as
described further under “Potential Payments Upon Termination or Change in
Control.”
Employee
Benefit 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, 3,024,618 shares have been issued on the exercise of options
granted, and 518,530 shares were subject to options outstanding, 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, 2,807,200 shares have been issued on the exercise of options granted,
and
332,750 shares were subject to options outstanding, 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
General.
The
purpose of the 2001 Omnibus Equity Incentive Plan (“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, or are not intended to be incentive options (“non-qualified stock
options”). As of the Record Date, 582,710 shares have been issued on the
exercise of options granted, and 2,812,629 shares were subject to awards
outstanding, under the 2001 Incentive Plan, and 2,034,912 shares were available
for issuance under awards that may be granted in the future. At the 2006 annual
meeting of stockholders, the 2001 Incentive Plan was amended 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; and
|
· |
specify
certain performance criteria, the achievement of which may be required
in
order for performance awards to
vest.
|
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 or 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, stock appreciation rights, and stock awards
no person may receive in any year a stock option to purchase more than 100,000
shares or a stock appreciation right or stock award 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, directors and consultants will be eligible to participate in the
Plan. As of December 31, 2006, there were approximately 2,268 employees of
the
Company, including eight current executive officers, who are eligible to
participate in the Plan. In addition, the seven directors are 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 (xix) 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.
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, 330,000 shares
were outstanding and 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) retirement plan (the Plan) for the benefit of
qualified employees at its North American locations. Employees who participate
may elect to make salary deferral contributions to the 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 $2
contributed by the participant up to 6% (3% maximum matching) of the
participant’s eligible payroll. In addition, the Company may make a
discretionary contribution to the entire qualified employee pool, in accordance
with the Plan.
As
stipulated by the regulations of the People’s Republic of China, the Company
maintains a retirement plan pursuant to the local Municipal Government for
the
eligible employees in China. The Company is required to make contributions
to
the retirement plan at a rate of 22.5% of the employee’s eligible
payroll.
Pursuant
to the Taiwan Labor Standard Law and Factory Law, the Company maintains a
retirement plan for the eligible employees in Taiwan. The Company makes
contributions at a rate of 6% of the employee’s eligible payroll.
Salary
and Bonus in Proportion to Total Compensation
As
discussed under “Compensation Discussion and Analysis,” we believe that in line
with the Compensation and Stock Option Committee's policy to incentivize
executive officers to achieve pre-established performance goals and objectives
through bonus programs and equity incentive plans, executive officers receive
a
relatively smaller portion of their total compensation as base salary. See
“Compensation Discussion and Analysis” for the breakdown between fixed pay
through the executives' base salaries and variable performance-based pay for
fiscal 2006.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The
following table sets forth certain information regarding equity-based awards
held by each of the Named Executive Officers as of December 31,
2006.
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
|
Number
of Securities Underlying Options (#)
Unexercisable
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
|
Option
Exercise Price ($)
|
|
Option
Expiration Date
|
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
|
|
Equity
Inventive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That Have Not Vested (#)
|
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights That
Have
Not Vested ($)
|
|
Keh-Shew
Lu
|
|
|
22,500
24,750
24,750
19,500
26,250
-
|
|
|
-
-
-
9,750
52,500
78,750
|
|
|
-
|
|
|
3.6978
3.7911
8.6933
12.2133
17.3000
33.3900
|
|
|
07/30/11
06/28/12
08/01/13
07/14/14
04/14/15
05/22/16
|
|
|
270,000
|
|
|
9,579,600
|
|
|
-
|
|
|
-
|
|
Carl
C. Wertz
|
|
|
30,375
13,500
7,750
-
|
|
|
-
6,750
15,500
12,000
|
|
|
-
|
|
|
10.6296
12.2133
23.3133
33.3900
|
|
|
06/12/10
07/14/14
07/12/15
05/22/16
|
|
|
3,000
|
|
|
106,440
|
|
|
-
|
|
|
-
|
|
Joseph
Liu
|
|
|
169,716
40,500
27,000
33,750
33,750
33,750
11,250
-
|
|
|
-
-
-
-
-
-
22,500
20,000
|
|
|
-
|
|
|
9.1481
10.6296
3.6978
3.7911
8.6933
12.2133
23.3133
33.3900
|
|
|
06/08/10
06/12/10
07/30/11
06/28/12
08/01/13
07/14/14
07/12/15
05/22/16
|
|
|
4,000
|
|
|
141,920
|
|
|
-
|
|
|
-
|
|
Mark
A. King
|
|
|
40,500
27,000
27,000
27,000
27,000
10,250
-
|
|
|
-
-
-
-
-
20,500
18,000
|
|
|
-
|
|
|
10.6296
3.6978
3.7911
8.6933
12.2133
23.3133
33.3900
|
|
|
06/12/10
07/30/11
06/28/12
08/01/13
07/14/14
07/12/15
05/22/16
|
|
|
3,500
|
|
|
124,180
|
|
|
-
|
|
|
-
|
|
Steven
Ho
|
|
|
30,375
8,625
20,250
13,500
7,500
|
|
|
-
-
-
6,750
15,000
10,000
|
|
|
-
|
|
|
10.6296
3.7911
8.6933
12.2133
23.3133
33.3900
|
|
|
06/12/10
06/28/12
08/01/13
07/14/14
07/12/15
05/22/16
|
|
|
2,500
|
|
|
88,700
|
|
|
-
|
|
|
-
|
|
|
Prior
to May
22, 2006,
equity awards vest in three equal annual installments on the first
three
anniversary dates of the date of grant. Beginning May 22, 2006, equity
awards vest in four equal annual installments on the first four
anniversary dates of the date of
grant.
|
OPTION
EXERCISES AND STOCK VESTED
The
following table sets forth certain information regarding exercises of options
and vesting of restricted stock awards and RSUs held by the Named Executive
Officers during the year ended December 31, 2006.
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number
of Shares
Acquired
on Exercise (#)
|
|
Value
Realized
on Exercise ($)
|
|
Number
of Shares Acquired on Vesting (#)
|
|
Value
Realized on Vesting ($)
|
|
Keh-Shew
Lu
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Carl
C. Wertz
|
|
|
145,125
|
|
|
7,132,513
|
|
|
-
|
|
|
-
|
|
Joseph
Liu
|
|
|
96,534
|
|
|
3,704,010
|
|
|
-
|
|
|
-
|
|
Mark
A. King
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Steven
Ho
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
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,
2006.
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
|
|
|
3,663,909
|
(1)
|
$
|
11.74
|
|
|
2,079,537
|
(2)
|
Equity
Compensation Plans Not Approved by Security Holders
|
|
|
0
|
|
|
N/A
|
|
|
0
|
|
Total
|
|
|
3,663,909
|
|
$
|
11.74
|
|
|
2,079,537
|
|
(1)
|
Shares
issuable pursuant to outstanding options under the 1993 Non-qualified
Stock Option Plan, the 1993 Incentive Stock Option Plan, and the
2001
Incentive Plan as of December 31,
2006.
|
(2)
|
Represents
2,034,912 and 44,625 shares of Common Stock that may be issued pursuant
to
future awards under the 2001 Incentive Plan and the Incentive Bonus
Plan,
respectively.
|
PENSION
BENEFITS
The
table
disclosing the actuarial present value of each Named Executive Officer's
accumulated benefit under defined benefit plans, the number of years of credited
service under each such plan, and the amount of pension benefits paid to each
of
the Named
Executive Officers
during
the year is omitted because the Company does not have a defined benefit plan
for
Named Executive Officers. The only retirement plan available to Named Executive
Officers in 2006 was the Company's qualified 401(k) savings and retirement
plan,
and the retirement plans in PRC and Taiwan, as discussed above under “Employee
Benefit Plans,” which are available to all employees.
NONQUALIFIED
DEFERRED COMPENSATION
Our
Company adopted a non-qualified deferred compensation plan effective January
1,
2007, which permits our Board and eligible employees, including our Named
Executive Officers, to voluntarily elect to defer up to 75% of base salary,
and
up to 100% of other types of compensation, provided that their total deferrals
do not reduce their total compensation below the amount necessary to satisfy
obligations such as employment taxes and benefit plan payments. Amounts deferred
by an executive are credited with earnings or losses based on the executive's
investment allocation among investment options, which may include stocks, bonds
and mutual fund shares. The Company may, from time to time, make contributions
to participants' accounts under our deferred compensation plan. Distributions
are paid in accordance with the participants' elections with regard to the
timing and form of distributions. The table disclosing contributions to
nonqualified defined contributions and other deferred compensation plans, each
executive's withdrawals, earnings and fiscal year ended balances in those plans
is omitted because, in 2006 the Company had no nonqualified deferred
compensation plans or benefits for executive officers or other employees of
the
Company.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The
following sets forth potential payments payable to the Named Executive Officers
upon termination of their employment or a change in control of the
Company.
Payment
Upon Termination Without Cause
Payments
upon termination with “cause” for Messrs. Lu, Wertz, Liu and King are governed
by their current employment agreements entered into with the Company on August
29, 2005. The executive's relationship with the Company is “at will” and may be
terminated at the option of either party, with or without cause.
As
used
in the employment agreements, “cause” means:
· |
the
willful and continued refusal of such executive to substantially
perform
his duties in accordance with his employment agreement, after the
Board
has provided the executive with written demand for substantial performance
and the executive has had reasonable opportunity to remedy
it;
|
· |
the
conviction of, or a plea of nolo contendere by, the executive to
a felony;
or
|
· |
a
charge or indictment of a felony, the defense of which renders the
executive substantially unable to perform his duties under his employment
agreement.
|
In
the
event employment is terminated by the Company without “cause,” the executive
either may (a) commence a one-year paid leave of absence (“LOA”), or (b) forego
such LOA and the benefits associated therewith. If the executive chooses to
commence the LOA, the potential payments to the executive can be divided into
(i) payments during the LOA, and (ii) payments after the LOA.
Payments
during the leave of absence
During
the LOA, the executive will continue as a full-time employee of the Company,
entitled to receive all the benefits provided under his employment agreement,
namely: (1) his annual base salary; (2) participation in any executive bonus
plan of the Company, pro-rated to the beginning of the LOA; (3) reimbursement
for all reasonable and documented business expenses; (4) paid vacation in
accordance with the Company's vacation policy for employees generally; (5)
participation in all plans provided to employees in general; (6) a life
insurance policy in the amount in effect on the date of the employment
agreement; and (7) a disability policy in the maximum insurable
amount.
Payments
after the leave of absence
At
the
end of the LOA, neither the Company nor the executive shall have any further
duties under his employment agreement, except that (1) the Company shall
continue to pay to the executive, or his estate, the annual base salary for
one
year, and (2) all share-based compensation previously granted shall continue
to
vest and shall remain exercisable for the full term thereof, determined without
regard to the termination of employment.
Trade
secrets, non-competition and non-solicitation provisions
During
the LOA, the executive shall not (1) without the prior consent of the Board,
disclose or use any confidential business or technical information or trade
secret of the Company, (2) without the prior consent of the Company, engage
in
any competitive activity in any line of business in which the Company is
engaged, (3) without the prior consent of the Board, remove any tangible items
from the premises of the property, or (4) solicit any employee of the Company.
The executive shall continue to be bound by these provisions of his employment
agreement for one year after the end of the LOA.
Payment
Upon Termination With Cause
If
the
executive chooses to forego such LOA, the vesting of any options, restricted
stock awards or RSUs awarded to the executive and his ability to exercise them,
upon termination will be governed by the terms of the 2001 Incentive Plan and
his stock option agreements. The 2001 Incentive Plan generally provides, that
if
the executive is terminated for any reason other than death or “permanent
disability” (as defined), the option will be exercisable until the earlier of
(1) the expiration date of the option (generally ten years from date of grant),
or (2) for three months after the termination date of the executive. The
employment agreements do not provide for a payment to the executives in the
event of termination with cause.
Payment
Upon Termination Due To Death or Disability
The
2001
Incentive Plan generally provides, that if the executive dies or becomes
“permanently disabled” (as defined), the option will be exercisable by the
executive's successor until the earlier of (1) the expiration date of the option
(generally ten years from date of grant), or (2) for one year after such death
or “permanent disability,” to the extent such option was exercisable on the date
of death or permanent disability. The awards will generally continue to vest
according to the vesting schedule. The Named Executive Officers are also
entitled to receive benefits under the Company's disability plan or payments
under the Company's life insurance plan, as appropriate. The employment
agreements do not provide for a payment to the executives in the event of
termination due to death or disability.
Payment
Upon a Change in Control
Upon
a
change in control, all share-based compensation granted to the executive shall
vest immediately and be exercisable for the full term thereof. A change in
control means the occurrence of any one (or more) of the following:
· |
any
person, including a group as defined in Section 13(d)(3) of the Exchange
Act, as amended, becoming the beneficial owner of stock of the Company
which entitles such holder to cast 25% or more of the total number
of
votes for the election of the
Board;
|
· |
a
cash tender offer, exchange offer, merger or other business combination,
sale of assets or contested election, or combination of the foregoing,
in
which the directors of the Company immediately prior to such event
cease
to be a majority of the Board;
|
· |
the
stockholders of the Company approving an agreement providing for
either
the Company to cease being a public company or for the sale of
substantially all the assets of the Company;
or
|
· |
a
tender offer or exchange offer (other than one made by the Company)
in
which the shares of the Company's stock are
acquired.
|
If
a
holding company is formed but the stockholding in the holding company is
substantially the same as the Company's, such an event is not a change in
control.
Payment
Upon Retirement
The
2001
Incentive Plan and form of option agreement generally provides that upon
retirement, the option will continue to vest according to the vesting schedule.
In addition, upon retirement, the option will be exercisable until the earlier
of (1) the expiration date of the option (generally ten years from date of
grant), or (2) for three months after the termination date of the
executive.
The
following table shows the potential payments upon termination or a change in
control of the Company for each of the Named Executive Officers assuming each
of
the Named Executive Officer's employment was terminated on December 31, 2006,
and assuming that the change in control occurred at December 31, 2006. These
disclosed amounts are estimates only and do not necessarily reflect the actual
amounts that would be paid to the Named Executive Officers, which would only
be
known at the time they become eligible for such payments.
Name
|
|
Voluntary
Termination, or Termination With Cause, or Death, or Disability
(1)
|
|
Termination
Without Cause (1) (2)
|
|
Change
in Control (1) (3)
|
|
Keh-Shew
Lu
|
|
|
—
|
|
|
6,702,741
|
|
|
10,925,488
|
|
Carl
C. Wertz
|
|
|
—
|
|
|
755,608
|
|
|
477,154
|
|
Joseph
Liu
|
|
|
—
|
|
|
848,305
|
|
|
457,471
|
|
Mark
A. King
|
|
|
—
|
|
|
751,935
|
|
|
411,217
|
|
Steven
Ho (4)
|
|
|
—
|
|
|
—
|
|
|
449,151
|
|
(1)
|
Does
not include the following amounts that could be realized upon exercising
vested stock options: Mr. Lu: $3,093,296; Mr. Wertz: $1,163,223;
Mr. Liu:
$9,229,183; Mr. King: $4,196,311; and Mr. Ho: $1,975,929. Amounts
assume
that all vested stock options as of December 31, 2006 are exercised
as of
December 31, 2006, and are calculated by multiplying the number of
vested
stock options by the difference between the exercise price and the
closing
price of our Common Stock on December 29, 2006. Does not include
a
$700,000 benefit for each NEO employed in the U.S. paid by the Company’s
life insurance policy upon death. Does not include the following
one-year,
short- and long-term disability payments paid by disability insurance
policies: Mr. Lu: $122,500; Mr. Wertz: $87,1612; Mr. Liu: $108,826;
and
Mr. King: $98,160.
|
(Footnotes
continued on following page)
(Footnotes
continued from previous page)
(2)
|
The
following table reflects the estimate of the payments and benefits
that
each Named Executive Officer would receive assuming the Named Executive
Officer’s employment was terminated without “cause” on December 31, 2006,
and the Named Executive Officer chose to commence the LOA beginning
on
January 1, 2007. These disclosed amounts are estimates only and do
not
necessarily reflect the actual amounts that would be paid to the
Named
Executive Officers, which would only be known at the time they become
eligible for such payments.
|
Name
|
|
Base
Salary (a)
|
|
Bonus
(b)
|
|
Paid
Vacation
|
|
Medical
Benefits
(c)
|
|
Life
Insurance, Disability, and Death Benefits (d)
|
|
Continued
Vesting of
Share-based
Compensation
(e)
|
|
Total
|
|
Keh-Shew
Lu
|
|
|
630,000
|
|
|
—
|
|
|
12,115
|
|
|
4,212
|
|
|
3,020
|
|
|
10,925,488
|
|
|
11,574,835
|
|
Carl
C. Wertz
|
|
|
328,000
|
|
|
—
|
|
|
10,092
|
|
|
3,534
|
|
|
2,588
|
|
|
477,154
|
|
|
821,368
|
|
Joseph
Liu
|
|
|
458,000
|
|
|
—
|
|
|
17,615
|
|
|
4,251
|
|
|
2,828
|
|
|
457,471
|
|
|
940,165
|
|
Mark
A. King
|
|
|
394,000
|
|
|
—
|
|
|
15,154
|
|
|
9,792
|
|
|
2,672
|
|
|
411,217
|
|
|
832,835
|
|
Steven
Ho
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(a)
|
For
purposes of this analysis the executive would receive his current
base
salary during the LOA and the one-year following the LOA. For the
LOA, the
base salary will be paid over the year, in accordance with the Company's
payroll practices. Payment of the base salary for the one year following
the LOA will be paid in a lump sum.
|
|
(b)
|
Any
bonus amount would be prorated based on days employed in 2007 and
calculated using actual 2007 results per the performance criteria
in
accordance with the Company’s executive bonus
plan.
|
|
(c)
|
Reflects
the estimated lump sum value of premiums to be paid on behalf of
the
executive under the medical benefit plans during the
LOA.
|
|
(d)
|
Reflects
the estimated lump sum value of cost of coverage for life insurance,
disability, and death benefits to be paid on behalf of the executive
during the LOA. Does not include a $700,000 benefit for each NEO
employed
in the U.S. paid by the Company’s life insurance policy upon death. Does
not include the following short- and long-term disability payments
for two
years paid by disability insurance policies: Mr. Lu: $167,500; Mr.
Wertz:
$114,492; Mr. Liu: $146,989; and Mr. King:
$130,990.
|
|
(e)
|
This
amount represents the value of the continued vesting of 236,625 shares
for
Dr. Keh-Shew Lu (101,625 options and 135,000 RSUs), 29,750 shares
for Carl
C. Wertz (28,250 options and 1,500 RSUs), 34,500 shares for Joseph
Liu
(32,500 options and 2,000 RSUs), and 31,250 shares for Mark A. King
(29,500 options and 1,750 RSUs) during the LOA, and the one year
following
the LOA.
|
(3)
|
This
amount represents the value of the accelerated vesting of 141,000
shares
underlying options and 270,000 RSUs for Dr. Keh-Shew Lu, 34,250 shares
underlying options and 3,000 RSUs for Carl C. Wertz, 42,500 shares
underlying options and 4,000 RSUs for Joseph Liu, 38,500 shares underlying
options and 3,500 RSUs for Mark A. King, and 31,750 shares underlying
options, and 2,500 RSUs for Steven Ho, assuming a change in control
occurs
on December 31, 2006.
|
(4)
|
As
Mr. Ho does not have an employment agreement with the
Company.
|
COMPENSATION
OF DIRECTORS
The
following table sets forth the compensation paid to our non-employee directors
for their service in 2006.
Name
(a)
|
|
Fees
Earned or Paid in Cash ($)
(b)
|
|
Stock
Awards ($)
(c)
|
|
Option
Awards ($)
(d)
|
|
Non-Equity
Incentive Plan Compensation ($)
(e)
|
|
Changes
in Pension Value and Nonqualified Deferred Compensation Earnings
($)
(f)
|
|
All
Other Compensation ($)
(g)
|
|
Total
($)
(h)
|
|
Raymond
Soong
|
|
|
2,500
|
|
|
119,995
|
|
|
581,674
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
704,169
|
|
C.H.
Chen
|
|
|
10,250
|
|
|
348,192
|
|
|
178,099
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
536,541
|
|
Michael
R. Giordano
|
|
|
14,000
|
|
|
45,650
|
|
|
225,396
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
285,047
|
|
John
M. Stich
|
|
|
12,750
|
|
|
41,738
|
|
|
191,070
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
245,558
|
|
Shing
Mao
|
|
|
6,750
|
|
|
33,912
|
|
|
140,397
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
181,059
|
|
M.K.
Lu
|
|
|
1,000
|
|
|
15,652
|
|
|
94,687
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
111,339
|
|
(1)
|
The
amounts in column (c) and (d) reflect the dollar amount recognized
for
financial statement reporting purposes for the fiscal year ended
December
31, 2006, in accordance with SFAS 123(R). The table excludes $100,922
of
SFAS 123(R) compensation expense in 2006 related to Dr. Lu’s Board service
for the period of 2003 through his appointment as President and Chief
Executive Officer in 2005. The amounts are determined using the Black
Scholes option valuation model. This model was developed to estimate
the
fair value of traded options, which have different characteristics
than
employee stock options, and changes to the subjective assumptions
used in
the model can result in materially different fair value estimates.
This
hypothetical value is based on the following assumptions: an exercise
price equal to the market value on date of grant; expected volatility
of
56.03%; risk-free interest rate of 4.81%; expected term of 6.57 years;
and
estimated dividend yield of 0%. See Note 13 to the Company's audited
financial statements for the fiscal year ended December 31, 2006,
included
in the Company's Annual Report on Form 10-K filed with the Securities
and
Exchange Commission on March 1, 2007, for a further discussion of
the
relevant assumptions used in calculating grant date fair value pursuant
to
SFAS 123(R).
|
The
following table details the amounts in column (c) and (d) of the previous table
and represents the SFAS 123(R) expense in 2006 for each of the equity
awards:
|
|
2006
RSU
|
|
2005
RSA
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
($)
|
|
($)
|
|
(c)
|
|
($)
|
|
($)
|
|
($)
|
|
($)(d)
|
|
Raymond
Soong
|
|
|
119,995
|
|
|
-
|
|
|
119,995
|
|
|
314,017
|
|
|
190,718
|
|
|
76,939
|
|
|
581,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C.H
Chen
|
|
|
88,692
|
|
|
259,500
|
|
|
348,192
|
|
|
178,099
|
|
|
-
|
|
|
-
|
|
|
178,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
R. Giordano
|
|
|
45,650
|
|
|
-
|
|
|
45,650
|
|
|
120,532
|
|
|
76,287
|
|
|
28,577
|
|
|
225,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
M. Stich
|
|
|
41,738
|
|
|
-
|
|
|
41,738
|
|
|
101,500
|
|
|
65,389
|
|
|
24,181
|
|
|
191,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shing
Mao
|
|
|
33,912
|
|
|
-
|
|
|
33,912
|
|
|
82,469
|
|
|
38,144
|
|
|
19,784
|
|
|
140,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M.K.
Lu
|
|
|
15,652
|
|
|
-
|
|
|
15,652
|
|
|
44,406
|
|
|
32,695
|
|
|
17,586
|
|
|
94,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keh-Shew
Lu
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
76,741
|
|
|
24,181
|
|
|
100,922
|
|
The
table
includes SFAS 123(R) compensation expense in 2006 relating to Dr. Lu’s service
as a Board member prior to his appointment as President and Chief Executive
Officer in 2005.
Each
non-employee director of the Company receives $1,500 for each meeting of the
Board or committee meeting attended in person, and $1,000 for each meeting
in
which such director participates by telephone.
In
addition, the following annual, non-qualified stock options, or awards of shares
of Common Stock, are granted to 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 or award vests in four equal annual installments
commencing on the first anniversary of the date of grant:
· |
The
Chairman of the Board receives an award of 23,000 shares of the Company's
Common Stock.
|
· |
The
Vice Chairman of the Board receives an award of 17,000 shares of
the
Company's Common Stock.
|
· |
All
other independent directors each receive an award of 3,500 shares
of the
Company's Common Stock.
|
· |
All
other directors each receive an award of 3,000 shares of the Company's
Common Stock.
|
· |
In
addition, the Audit Committee members each receive an award of 2,250
shares of the Company's Common Stock, with the Audit Committee chairman
receiving an additional award of 1,500
shares.
|
· |
All
other committee members receive an award of 750 shares of the Company's
Common Stock for each committee on which they
serve.
|
The
Board
may modify such compensation in the future.
COMPENSATION
AND STOCK OPTIONS COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The
Compensation and Stock Options Committee consists of three directors, C.H.
Chen
(Chairman), Michael R. Giordano and John M. Stich. 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 2006, 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.
AUDIT
COMMITTEE REPORT
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 2006;
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 2006
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 four meetings during fiscal 2006, and took action by written consent on
four occasions.
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, 2006 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, 2007.
Dated: March 31, 2007 |
|
THE AUDIT COMMITTEE |
|
|
|
|
|
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 persons
performing similar functions of the Company. The Code of Ethics is available
on
the Company's 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 four business days following
the date of such amendment or waiver.
Certain
Relationships and Related Transactions
Policy
Regarding Related Person Transactions
The
Board
has adopted a written policy which requires the Audit Committee to review and
approve or ratify any transaction (a “related person transaction”) in which the
Company was, or is to be, a participant and in which any director, executive
officer, nominee for director or beneficial owner of more than 5% of the
outstanding shares of Common Stock of the Company, or any immediate family
member of any such person, has a direct or indirect material interest. The
policy requires the following:
· |
the
Audit Committee shall review any proposed agreement or arrangement
relating to a related person transaction or series of related person
transactions, and any proposed amendment to any such agreement or
arrangement;
|
· |
the
Audit Committee shall establish standards for determining whether
the
transactions covered by such proposed agreement or arrangement, are
on
terms no less favorable to the Company than could be obtained from
an
unrelated third party (“fair to the
Company”);
|
· |
before
the Company enters into any such proposed agreement or arrangement,
and at
least annually thereafter, the Company's internal audit department
shall
report to the Audit Committee whether the transactions covered by
such
agreement or arrangement are fair to the Company under the standards
established by the Audit Committee;
|
· |
the
Audit Committee shall not pre-approve, and shall make all reasonable
efforts (taking into account the cost thereof to the Company) to
cancel or
cause to be renegotiated, any such agreement or arrangement which
is not
so determined to be fair to the Company;
and
|
· |
the
Company will disclose any related person transactions required to
be
disclosed by the rules promulgated by the SEC, in the manner so
required.
|
Relationships
and Transactions
The
Company conducts business with one related party, LSC (and its subsidiaries
and
affiliates), and one significant party, Keylink International (formerly Xing
International) (and its subsidiaries). LSC, a 22.2% shareholder at December
31,
2006, 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.
The
Audit
Committee reviews and approves or ratifies all related party transactions in
accordance with the procedures set forth above, as the same may be amended
from
time to time. The Company believes that all related party transactions currently
are on terms no less favorable to the Company than could be obtained from an
unaffiliated third party.
In
2006,
we sold silicon wafers to LSC totaling 6.5% (9.6% in 2005 and 11.1% in 2004)
of
our sales, making LSC our largest customer. Also for 2006, 13.0% (14.7% in
2005
and 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%, 4.2% and 2.3% of our
net
sales, respectively, in 2004, 2005 and 2006. We also rent warehouse space in
Hong Kong from a member of The Lite-On Group, which also provides us with
warehousing and logistics services at that location. For 2004, 2005 and 2006,
we
reimbursed this entity in aggregate amounts of $190,000, $288,000 and $474,000,
respectively, for these items. Such transactions are on terms no less favorable
to us than could be obtained from an unaffiliated third party. The Audit
Committee of the Board has approved the arrangements associated with these
related person transactions.
In
December 2000, the Company acquired a wafer foundry, FabTech, Inc., from LSC
for
approximately $6.0 million in cash plus $19.0 million in assumed debt due
primarily to 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 management
incentive agreements with several members of FabTech's management. The
agreements provide members of FabTech's management with guaranteed annual
payments as well as contingent bonuses based on the annual profitability of
FabTech, subject to a maximum annual amount. LSC reimbursed us for any portion
of the guaranteed and contingent liability paid by FabTech. The final year
of
the management incentive agreements was 2004, with final payment made by March
31, 2005. LSC reimbursed us $375,000 in each of 2003, 2004 and 2005 for amounts
paid by us under these management incentive agreements.
In
2006,
we sold silicon wafers to companies owned by Keylink International totaling
0.4%
(0.6% in 2005 and 0.9% in 2004) of our net sales. Also for 2006, 2.3% (3.0%
in
2005 and 3.5% in 2004) of our net 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 waste services) to, Keylink International. We also pay a
consulting fee to Keylink International. In 2004, 2005 and 2006, we paid Keylink
International an aggregate of $4.8 million, $6.6 million and $7.9
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
agreements associated with these related person transactions.
On
December 20, 2005, we entered into a definitive stock purchase agreement to
acquire Anachip Corporation, a Taiwanese fabless analog IC company headquartered
in the Hsinchu Science Park in Taiwan. The selling shareholders included LSC
(which owned approximately 60% of Anachip's outstanding capital sock), and
two
Taiwanese venture capital firms (together owning approximately 20% of Anachip's
outstanding capital stock), as well as current and former Anachip employees.
At
December 31, 2005, we had purchased an aggregate of 9,433,613 shares (or
approximately 18.9%) of the 50,000,000 outstanding shares of the capital stock
of Anachip. On January 10, 2006 (the closing date of the acquisition), we
purchased an additional 40,470,212 shares and, therefore, we now hold
approximately 99.81% of Anachip's outstanding capital stock.
Concurrent
with the acquisition, Anachip entered into a wafer purchase agreement with
LSC,
pursuant to which LSC will sell to Anachip, according to Anachip's requirements,
during the two year period ending on December 31, 2007, wafers of the same
or
similar type, and meeting the same specifications, as those wafers purchased
from LSC by Anachip at the time of the acquisition. Anachip will purchase such
wafers on terms (including purchase price, delivery schedule, and payment terms)
no less favorable to Anachip than those terms on which Anachip purchased such
wafers from LSC at the time of the acquisition; provided, however, that the
purchase price will be the lower of the current price or the most favorable
customer pricing. If the price of raw wafers increases by more than 20% within
any six-month period, Anachip and LSC will renegotiate in good faith the price
of wafers to reflect the cost increase.
Raymond
Soong, who became a director and Chairman of the Board of the Company in 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 Corporation, a Lite-On Group
company.
C.H.
Chen, the Company's Vice Chairman of the Board, is also Vice Chairman of LSC,
Supervisor of Lite-On Technology Corporation, 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 a wholly-owned subsidiary of Taiwan Lite-On, a Lite-On Group company, which
merged with Lite-On Technology Corporation in 2002. Dr. Mao was also a
director of LSC from 1989 to 2000.
Lu-Pao
Hsu,
a
director nominee, is an independent director of Lite-On Technology Corporation
since 2004.
Michael
Giordano, a director of the Company, is a Senior Vice President-Investments
with
UBS Financial Services, Inc. From time to time, Mr. Giordano and his son, James
Giordano, have provided brokerage services to directors, executive officers
and
employees of the Company. In 2006, Michael Giordano and James Giordano
received $15,279 and $7,275, respectively, in commissions as a result of such
services. In addition, UBS Fiduciary Trust Company acts as a directed trustee
of
the Company's 401(k) plan, and in 2006, Michael Giordano and James Giordano
were
the brokers of record to that plan. In 2006, Michael Giordano did not
participate in rendering such services, and James Giordano participated only
to
the extent of conducting employee enrollment meetings and providing brokerage
services, for which they each received $24,746. Effective April 1, 2007, Michael
Giordano and James Giordano will no longer be broker of record to such plan
and,
therefore, will not receive any such fees. The services rendered by UBS
Fiduciary Trust Company are provided at customary rates and terms.
Notwithstanding
such relationships and transactions, the Board has determined that each of
Messrs. Soong, Stich, Mao, Hsu and Giordano is independent under the rules
of
the Nasdaq Stock Market and the SEC.
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, 2006, all reporting persons filed reports on a
timely basis except Messrs. Edmund Tang, Francis Tang and Steven Ho who filed
Form 5’s on January 8, 2007 for stock options granted on May 22, 2006. 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 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, 2007.
Professional services rendered by Moss Adams LLP for 2006 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
2006 were furnished at customary rates and terms. Representatives of Moss Adams
LLP are expected to be present at the Meeting and 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, 2005 and 2006, fees for services provided by
Moss Adams LLP were approximately as follows:
Description
|
|
2005
(1)
|
|
2006
|
|
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.
|
|
$
|
572,000
|
|
$
|
600,000
|
|
Audit-related
Fees,
including assurance related fees, accounting consultation including
the
S-3 filings (in 2005 and 2006) and related services
|
|
$
|
206,000
|
|
$
|
200,000
|
|
Tax-related
Fees,
professional services for income tax return preparation, tax advice
and
tax planning
|
|
$
|
110,000
|
|
$
|
163,000
|
|
All
Other Fees, not
included in above
|
|
$
|
21,000
|
|
$
|
68,000
|
|
Total
|
|
$
|
909,000
|
|
$
|
1,151,000
|
|
(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 2008 ANNUAL
MEETING
Under
certain circumstances, stockholders are entitled to present proposals at
stockholder meetings. Currently, the 2008 annual meeting of stockholders is
expected to be held on or about May 30, 2008.
SEC
rules
provide that any stockholder proposal to be included in the proxy statement
for
the Company's 2008 annual meeting must be received by the Secretary of the
Company at the Company's office at 15660 North Dallas Parkway, Suite 850,
Dallas, Texas 75248 prior to December 31, 2007, in a form that complies with
applicable regulations. If the date of the 2008 annual meeting is advanced
or
delayed more than 30 days from the date of the 2007 annual meeting, stockholder
proposals intended to be included in the proxy statement for the 2008 annual
meeting must be received by us within a reasonable time before the Company
begins to print and mail the proxy statement for the 2008 annual meeting. Upon
any determination that the date of the 2008 annual meeting will be advanced
or
delayed by more than 30 days from the date of the 2007 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 March 16, 2008, the proxies solicited
by the Board for the 2008 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 2008 annual meeting of
stockholders without any discussion of the proposal in the proxy statement
for
such meeting. If the date of the 2008 annual meeting is advanced or delayed
more
than 30 days from the date of the 2007 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 2008 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
2008
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 2008 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
2008 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, 2006
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, 2004, 2005 and
2006.
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, 2006 BY WRITING TO THE COMPANY;
ATTN: INVESTOR RELATIONS, 15600 NORTH DALLAS PARKWAY, SUITE 850, DALLAS,
TEXAS 75248, 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 27th day of April, 2007.
|
|
|
|
By
Order of the Board of Directors,
DIODES
INCORPORATED
|
|
|
|
|
|
/s/ Carl C. Wertz |
|
Carl
C. Wertz,
|
Annex
A
AUDIT
COMMITTEE CHARTER
The
Audit
Committee is appointed by the Board to assist the Board in monitoring (1) the
integrity of the financial statements of the Company, (2) the compliance by
the
Company with legal and regulatory requirements and (3) the independence and
performance of the Company’s internal and external auditors.
The
members of the Audit Committee shall meet the independence and audit committee
policy of the Nasdaq Stock Exchange. The members of the Audit Committee shall
be
appointed by the Board.
The
Audit
Committee shall have the authority to retain special legal, accounting or other
consultants to advise the Committee. The Audit Committee may request any officer
or employee of the Company or the Company’s outside counsel or independent
auditor to attend a meeting of the Committee or to meet with any members of,
or
consultants to, the Committee.
The
Audit
Committee shall make regular reports to the Board.
The
Audit
Committee shall:
1. |
Review
and reassess the adequacy of this Charter annually and recommend
any
proposed changes to the Board for
approval.
|
2. |
Review
the annual audited financial statements with management, including
major
issues regarding accounting and auditing principles and practices
as well
as the adequacy of internal controls that could significantly affect
the
Company’s financial statements.
|
3. |
Review
an analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company’s financial
statements.
|
4. |
Review
with management and the independent auditor the Company’s annual and
quarterly financial statements prior to the filing of its Form 10-K
and
10-Q.
|
5. |
Meet
periodically with management to review the Company’s major financial risk
exposures and the steps management has taken to monitor and control
such
exposures.
|
6. |
Review
major changes to the Company’s auditing and accounting principles and
practices as suggested by the independent auditor, internal auditors
or
management.
|
7. |
Recommend
to the Board the appointment of the independent auditor, which firm
is
ultimately accountable to the Audit Committee and the
Board.
|
8. |
Has
the authority and responsibility for appointment, compensation, retention,
and oversight of the work of independent auditors, including resolution
of
disagreements between management and the auditors regarding financial
reporting.
|
9. |
Pre-approve
all audit and permitted non-audit services to be performed by the
independent auditors.
|
10. |
Receive
periodic reports from the independent auditor regarding the auditor’s
independence consistent with Independence Standards Board Standard
1,
discuss such reports with the auditor, and if so determined by the
Audit
Committee, take or recommend that the Board take appropriate action
to
oversee the independence of the
auditor.
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11. |
Evaluate
together with the Board the performance of the independent auditor
and, if
so determined by the Audit Committee, recommend that the Board replace
the
independent auditor.
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12. |
Review
the appointment and replacement of the senior internal auditing
executive.
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13. |
Review
any significant reports to management prepared by the internal auditing
department and management’s
responses.
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14. |
Meet
with the independent auditor prior to the audit to review the planning
and
staffing of the audit.
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15. |
Obtain
from the independent auditor assurance that Section 10A of the Securities
Exchange Act of 1934 has not been
implicated.
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16. |
Obtain
reports from management, the Company’s senior internal auditing executive
and the independent auditor that the Company’s subsidiary/foreign
affiliated entities are in conformity with applicable legal requirements
and the Company’s code of conduct.
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17. |
Discuss
with the independent auditor the matters required to be discussed
by
Statement on Auditing Standards No. 61 and the requirement of Section
204
of Sarbanes-Oxley Act of 2002 relating to the conduct of the audit
before
the reports issuance of auditors.
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18. |
Review
with the independent auditor any problems or difficulties the auditor
may
have encountered and any management letter provided by the auditor
and the
Company’s response to that letter. Such review should
include:
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a. |
Any
difficulties encountered in the course of the audit work, including
any
restrictions on the scope of activities or access to required
information.
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b. |
Any
changes required in the planned scope of the
audit.
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c. |
The
responsibilities, budget and staffing of the internal audit department,
if
any.
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19. |
Supervise
preparation of the report required by the rules of the Securities
and
Exchange Commission to be included in the Company’s annual proxy
statement.
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20. |
Advise
the Board from time to time with respect to the Company’s policies and
procedures regarding compliance with applicable laws and regulations
and
with the Company’s code of conduct.
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21. |
Meet
with the Company’s legal counsel to review legal matters that may have a
material impact on the financial statements, the Company’s compliance
policies and any material reports or inquiries received from regulators
or
governmental agencies.
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22. |
Meet
at least annually with the Chief Financial Officer, the senior internal
auditing executive and the independent auditor in separate executive
sessions.
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23. |
Conduct
an appropriate review of all related party transactions for potential
conflict of interest situations on an ongoing basis, and approve
all such
transactions, all in accordance with such procedures as the Audit
Committee may adopt from time to
time.
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24. |
Establish
procedures, under confidential and anonymous submission, for the
receipt,
retention and treatment of complaints received by the Company regarding
accounting, internal accounting control or auditing
matters.
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25. |
While
the Audit Committee has the responsibilities and powers set forth
in this
Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company’s financial statements are
complete and accurate and are in accordance with generally accepted
accounting principles. This is the responsibility of management and
the
independent auditor.
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Annex
B
CHARTER
OF THE
COMPENSATION
COMMITTEE OF
DIODES
INCORPORATED
The
purpose of the Compensation Committee (the “Committee”) of Diodes Incorporated
(the “Company”) is to help to ensure that the executive officers of the Company
and its subsidiaries are compensated in a manner consistent with the
compensation strategy of the Company determined by the Board of Directors (the
“Board”), treatment of all executive officers in an equitable and consistent
manner, the Company's need to compete in recruiting and retaining qualified
executive officers, and the requirements of the appropriate regulatory bodies.
The Committee shall also communicate to the stockholders the compensation
policies of the Company and the method for establishing compensation for the
Chief Executive Officer (“CEO”) and the other executive officers of the Company.
To carry out this purpose, the Committee shall:
(1) Review
and approve corporate goals and objectives relevant to compensation of the
executive officers.
(2) Evaluate
the performance of the executive officers in light of those goals and
objectives.
(3) Determine
and approve the compensation level of the executive officers based on this
evaluation.
(4) Make
recommendations to the Board with respect to incentive-compensation plans and
equity-based plans.
II. COMMITTEE
MEMBERSHIP AND ORGANIZATION
The
Committee shall be comprised of no fewer than three members. Each member of
the
Committee shall be “independent” as defined by the rules of the Nasdaq Stock
Market (“Nasdaq”). In addition, each member shall be a “Non-employee Director”
for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and shall
satisfy the requirements of an “outside director” for purposes of Section 162(m)
of the Internal Revenue Code. Each member shall be free of any relationship
that, in the opinion of the Board, would interfere with his or her individual
exercise of independent judgment. The members of the Committee shall be
appointed and replaced by the Board. The Board shall appoint one of the members
as Chair.
This
Committee shall communicate with and work closely with the Board. To foster
such
communication, the Chairman of the Board and the CEO of the Company may be
invited to attend meetings on a non-voting basis, provided the CEO may not
be
present during voting or discussion of his or her compensation.
III. COMMITTEE
RESPONSIBILITIES AND AUTHORITY
To
carry
out its purposes expressed in Paragraph 1 above, the Committee shall have the
following responsibilities and authority. Delegation by the Board of
responsibilities to the Committee shall not preclude the Board from taking
any
action permitted to be taken under governing law, rules or regulations
applicable to the Company.
(1) Review
from time to time and approve the Company's compensation strategy to ensure
that
management is rewarded appropriately for its contributions to Company growth
and
profitability and that the executive compensation strategy supports Company
objectives and stockholder interests.
(2) Determine
all elements of compensation for the executive officers. The CEO may not be
present during voting on or discussion of his compensation.
(3) Determine
the long-term incentive component of compensation for the executive officers
based on the considerations adopted by the Board.
(4) Annually
review the performance of the CEO and the executive officers of the Company,
and
report on the Committee's review to the Board and the CEO.
(5) Produce
the annual Compensation Committee Report to Stockholders on the factors and
criteria on which the compensation for the CEO and other executive officers
in
the last year was based, to be included in the Company's proxy statement for
its
annual meeting or Annual Report on Form 10-K filed with the SEC.
(6) Develop
the Company's incentive compensation strategy with respect to the total number
of incentive awards to be granted, the relative participation of senior
management and other employees, and the types of awards to be granted.
(7) Recommend
and approve, subject to submission to stockholders when appropriate, all new
equity-related incentive plans
(8) Determine
eligibility for awards under the Company's incentive compensation plans and
the
terms under which awards are granted.
(9) Allocate
awards under the Company's incentive compensation plans, provided that the
Committee may delegate to the CEO or another executive officer the authority
to
allocate stock options among employees who are not executive officers, subject
to applicable law and the limits and guidelines established by the
Committee.
(10) Assure
that the Company's executive incentive compensation program, including the
annual and long-term incentive plans, is administered in a manner consistent
with the Company's incentive compensation strategy.
(11) Approve
annual retainer and meeting fees for directors and members of Board committees,
including expense reimbursement limits and per diem allowances, and fix the
terms and awards of stock compensation for members of the Board.
(12) Review
with the CEO matters relating to management succession.
(13) Review
the Company's employee 401(k) and pension plans and approve changes subject,
where appropriate, to stockholder or Board approval.
(14) Obtain
advice, assistance, reports or opinions from internal or external legal,
accounting or other advisors, including consulting firms, to assist in the
evaluation of director, CEO or senior executive compensation.
(15) Form
and
delegate authority to subcommittees, or delegate authority to members, when
appropriate, provided that such subcommittees will be composed exclusively
of
members of this Committee and will operate pursuant to a written charter.
(16) Review
and re-examine this Charter at least annually and make recommendations to the
Board with respect to any proposed changes.
(17) Annually
report to the full Board regarding its own performance against the
responsibilities outlined in this Charter and as otherwise established by the
Board.
(18) Retain
and terminate any consulting firm used to assist in the evaluation of director,
CEO or senior executive compensation, including sole authority to approve the
consulting firm's fees and other retention terms.
(19) Such
other duties and responsibilities as may be assigned to the Committee, from
time
to time, by the Board or the Chairman, or as designated in compensation plan
documents.
IV. MEETING
AND MINUTES
(1) The
Committee will meet at least twice annually and will also meet, as required,
in
response to the needs of the Board and as necessary to fulfill their
responsibilities.
(2) The
Committee will maintain written minutes of its meetings, which minutes will
be
filed with the minutes of the meetings of the Board.
Annex
C
CHARTER
OF THE
NOMINATING
COMMITTEE OF
DIODES
INCORPORATED
1. PURPOSE
The
purpose of the Nominating Committee (the “Committee”) of Diodes Incorporated
(the “Company”) is to help to ensure that the Board of Directors (the “Board”)
is appropriately constituted to meet its fiduciary obligations to stockholders
and the Company. To carry out this purpose, the Committee shall:
(1) Identify
individuals qualified to become Board members, consistent with criteria approved
by the Board.
(2) Recommend
the director nominees to be selected by the Board for the next annual meeting
of
stockholders.
2. COMMITTEE
MEMBERSHIP AND ORGANIZATION
The
Committee shall be comprised of no fewer than three members. Each member of
the
Committee shall be “independent” as defined by the rules of the National
Association of Securities Dealers (“NASD”) and the Securities and Exchange
Commission (“SEC”). Each member shall be free of any relationship that, in the
opinion of the Board, would interfere with his or her individual exercise of
independent judgment. The members of the Committee shall be appointed and
replaced by the Board. The Board shall appoint one of the members as
Chair.
The
Committee shall communicate with and work closely with the Board. To foster
this
communication, the Chief Executive Officer of the Company shall be a non-voting
ex
officio
member
of the Committee.
3. COMMITTEE
RESPONSIBILITIES AND AUTHORITY
To
carry
out its purposes expressed in Paragraph 1 above, the Committee shall have the
following responsibilities and authority. Delegation by the Board of
responsibilities to the Committee shall not preclude the Board from taking
any
action permitted to be taken under governing law, rules or regulations
applicable to the Company.
(1) Evaluate
the current composition, organization, size and governance of the Board and
its
committees; determine future requirements and make recommendations to the Board
concerning the appointment of directors.
(2) Determine
the desired qualifications, expertise and characteristics for potential
directors and conduct searches for director candidates that have corresponding
attributes. Evaluate, propose and approve nominees for election to the Board,
and consider and evaluate stockholder nominees for election to the
Board.
(3) Form
and
delegate authority to subcommittees, or delegate authority to members, when
appropriate, provided that such subcommittees will be composed exclusively
of
members of this Committee and will operate pursuant to a published
charter.
(4) Evaluate
and recommend termination of service of individual members of the Board as
appropriate, in accordance with the Board’s governance principles, for cause or
for other proper reasons.
(5) Review
and re-examine this Charter at least annually and make recommendations to the
Board with respect to any proposed changes.
4. MEETING
AND MINUTES
(1) The
Committee will meet annually and will also meet as required, in response to
the
needs of the Board and as necessary to fulfill its
responsibilities.
(2) The
Committee will maintain written minutes of its meetings, which minutes will
be
filed with the minutes of the meetings of the Board.
REVOCABLE PROXY |
REVOCABLE
PROXY
|
DIODES
INCORPORATED
Annual
Meeting of Stockholders - May 31, 2007
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 Thursday, May 31, 2007, at the Marriott
Hotels & Resorts,
located
at 14901
Dallas Parkway,
Dallas,
Texas 75254, at 10:00 a.m. (Central 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 |
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[ ]
FOR
all nominees listed below |
[ ] WITHHOLD
AUTHORITY |
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(except
as marked to the contrary below)
Discretionary
authority to cumulate votes is granted
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to vote for all nominees
listed
below |
Nominees:
C.H. Chen, Michael R. Giordano, L.P. Hsu, Keh-Shew 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
ratify the appointment of Moss Adams LLP as the Company's independent
registered public accounting firm for the year ending December 31,
2007. |
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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.
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Date:____________________
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(Name
of Stockholder, Printed)
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(Signature
of Stockholder)
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(Name
of Stockholder, Printed)
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(Signature
of Stockholder)
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(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
and 2.
PLEASE
SIGN, DATE AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE PREPAID
ENVELOPE PROVIDED.