DIODES INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 1, 2005
NOTICE IS HEREBY GIVEN THAT THE ANNUAL MEETING (THE "MEETING")
OF THE STOCKHOLDERS OF DIODES INCORPORATED (THE "COMPANY") WILL BE HELD AT
DOUBLETREE GUEST SUITES, TIMES SQUARE ROOM, 1568 BROADWAY, NEW YORK, NEW YORK
10036, ON WEDNESDAY, JUNE 1, 2005 AT 9:00 A.M. (NEW YORK TIME) FOR THE FOLLOWING
PURPOSES:
1. ELECTION OF DIRECTORS. To elect seven persons to the Board of
Directors of the Company, each to serve until the next annual
meeting of stockholders and until their respective successors have
been elected and qualified. The Board of Directors' nominees are:
C.H. Chen, Michael R. Giordano, Keh-Shew Lu, M.K. Lu, Shing Mao,
Raymond Soong and John M. Stich.
2. RATIFICATION OF 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, 2005.
3. OTHER BUSINESS. To transact such other business as properly may
come before the Meeting or any continuation, adjournment or
postponement thereof.
Only persons who are stockholders of record (the
"Stockholders") at the close of business on April 8, 2005 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 29, 2005.
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 eighteenth day of
April 2005.
By Order of the Board of Directors,
DIODES INCORPORATED
/s/ Carl C. Wertz
Carl C. Wertz,
Secretary
1
DIODES INCORPORATED
3050 EAST HILLCREST DRIVE
WESTLAKE VILLAGE, CALIFORNIA 91362
(805) 446-4800
PROXY STATEMENT
ANNUAL MEETING: JUNE 1, 2005
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Diodes Incorporated (the
"Company") for use at the annual meeting (the Meeting") of the stockholders of
the Company to be held on Wednesday, June 1, 2005, at DoubleTree Guest Suites,
Times Square Room, 1568 Broadway, New York, New York 10036, at 9:00 a.m. (New
York time), and at any adjournment or postponement thereof. Only stockholders of
record (the "Stockholders") at the close of business on April 8, 2005 (the
"Record Date") are entitled to notice of and to vote, in person or by proxy, at
the Meeting or any continuation, adjournment or postponement thereof. The Notice
of Annual Meeting, this Proxy Statement and the enclosed proxy card first will
be mailed to Stockholders on or about April 29, 2005.
MATTERS TO BE CONSIDERED
The matters to be considered and voted upon at the Meeting
will be:
1. ELECTION OF DIRECTORS. To elect seven persons to the Board of
Directors of the Company, each to serve until the next annual
meeting of stockholders and until their respective successors have
been elected and qualified. The Board of Directors' nominees are:
C.H. Chen, Michael R. Giordano, Keh-Shew Lu, M.K. Lu, Shing Mao,
Raymond Soong and John M. Stich.
2. RATIFICATION OF 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, 2005.
3. 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. C.H. Chen 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
of Directors' nominees, "FOR" ratification of the appointment of Moss Adams LLP
as our independent registered public accounting firm for the fiscal year ending
December 31, 2005 and in accordance with the recommendations of the Board of
Directors as to any other matter that may properly be brought before the Meeting
or any continuation, adjournment or postponement thereof.
2
REVOCATION OF PROXIES
You may revoke a Proxy at any time before it is exercised by
filing a written revocation, or a duly executed proxy bearing a later date, with
the Company's Secretary at our principal executive offices located at 3050 East
Hillcrest Drive, Westlake Village, California 91362 prior to the commencement of
the Meeting. You may also revoke a Proxy by attending the Meeting and voting in
person. Stockholders whose shares are held in "street name" should consult with
their broker or nominee concerning the method for revoking their Proxy.
VOTING RIGHTS
The authorized capital of the Company consists of (i)
30,000,000 shares of common stock, par value $0.66-2/3 per share ("Common
Stock"), of which 14,300,883 shares were issued and outstanding on the Record
Date (with an additional 1,613,508 shares held as treasury stock) and (ii)
1,000,000 shares of Class A Preferred Stock, $1.00 par value ("Class A Preferred
Stock"), none of which were issued and outstanding on the Record Date. The
Common Stock and the Class A Preferred Stock are collectively referred to as the
"Stock."
A majority of the shares of Common Stock issued and
outstanding and entitled to vote at the meeting, present either in person or by
Proxy, constitutes a quorum for the conduct of business at the Meeting. Votes
withheld, abstentions and "broker non-votes" (as defined below) will be counted
for the purpose of determining the presence of a quorum.
Each Stockholder is entitled to one vote, in person or by
proxy, for each share of Common Stock standing in his or her name on the books
of the Company at the close of business on the Record Date on any matter
submitted to the Stockholders, except that in connection with the election of
directors, each Stockholder has the right to cumulate votes, provided that the
candidates' names have been properly placed in nomination prior to commencement
of voting and a Stockholder has given notice prior to commencement of voting of
his or her intention to cumulate votes. If a Stockholder has given such notice,
all Stockholders may cumulate their votes for all nominated candidates.
Cumulative voting entitles a Stockholder to give one candidate a number of votes
equal to the number of directors to be elected multiplied by the number of
shares of Common Stock owned by such Stockholder, or to distribute such
Stockholder's votes on the same principle among as many candidates as the
Stockholder shall think fit. The candidates receiving the highest number of
votes, up to the number of directors to be elected, shall be elected.
Discretionary authority to cumulate votes is hereby solicited by the Board of
Directors and the return of the Proxy shall grant such authority.
Each proposal described in this Proxy Statement, other than
the election of directors, 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. Abstentions on any proposal submitted to the
Stockholders, other than the election of directors, will be included in the
number of votes cast on that proposal and, accordingly, will have the effect of
a vote "AGAINST" the proposal. However, broker non-votes with respect to a
proposal will not be included in the number of shares counted as being present
for the purposes of voting on that proposal and, accordingly, will have the
effect of reducing the number of affirmative votes required to approve the
proposal.
Of the shares of Common Stock outstanding on the Record Date,
4,601,458 (or approximately 32.2%) (the "Shares") were held in the name of
Lite-On Semiconductor Corporation ("LSC"), formerly named Lite-On Power
Semiconductor ("LPSC"). See "General Information - Security Ownership of Certain
Beneficial Owners and Management" and "Proposal One - Election of Directors -
Certain Relationships and Related Transactions" for a discussion of the
relationship between LPSC, LSC and the Company. An additional 104,318 shares (or
approximately 0.7%) were owned by directors and executive officers of the
Company on the Record Date. LSC and each director and executive officer has
informed the Company that they will vote "FOR" the election of the nominees to
the Board of Directors 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 the election of directors or the appointment of the independent registered
public accounting firm. However, brokers or nominees do not have
3
discretion to vote on 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 of Director's
nominees and "FOR" ratification of the appointment of Moss Adams LLP as the
Company's independent registered public accounting firm.
COST OF SOLICITATION OF PROXIES
This Proxy solicitation is made by the Board of Directors of
the Company, and the Company will bear the costs of this solicitation, including
the expense of preparing, assembling, printing and mailing this Proxy Statement
and any other material used in this solicitation of Proxies. If it should appear
desirable to do so to ensure adequate representation at the Meeting, officers
and regular employees may communicate with Stockholders, beneficial owners,
banks, brokerage houses, custodians, nominees and others, by telephone,
facsimile transmissions, telegraph, e-mail or in person to request that Proxies
be furnished. No additional compensation will be paid for these services to
officers or employees of the Company. The Company will reimburse banks,
brokerage houses, and other custodians, nominees and fiduciaries, for their
reasonable expenses in forwarding proxy materials to their principals. The total
estimated cost for the printing and solicitation of Proxies is $10,000.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors
knows of no business to be presented for consideration at the Meeting other than
as stated in the Notice of Annual Meeting. 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 of Directors, the Proxyholders will vote the shares
represented by the Proxies on such matters and authority to do so is included in
the Proxy. On such matters, in accordance with the recommendations of the Board
of Directors, such authorization includes authority to appoint a substitute
nominee or nominees to the Board of Directors' 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.
4
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.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNERSHIP (2) OF CLASS(3)
- ------------------------------------------------------------- ----- ------------
Lite-On Semiconductor Corporation ("LSC") 4,601,458 (4) 32.2%
- ------------------------------------------------------------- ----- ------------
Munder Capital Management 871,105 6.1%
- ------------------------------------------------------------- ----- ------------
Barclays Global Investors, N.A. 820,228 5.7%
- ------------------------------------------------------------- ----- ------------
Raymond Soong 216,600 (5) 1.5%
- ------------------------------------------------------------- ----- ------------
C.H. Chen 177,500 (5) 1.2%
- ------------------------------------------------------------- ----- ------------
Michael R. Giordano 114,187 (5)(6) *
- ------------------------------------------------------------- ----- ------------
Keh-Shew Lu 31,500 (5) *
- ------------------------------------------------------------- ----- ------------
M.K. Lu 12,000 (5) *
- ------------------------------------------------------------- ----- ------------
Shing Mao 148,500 (5) 1.0%
- ------------------------------------------------------------- ----- ------------
John M. Stich 19,500 (5)(7) *
- ------------------------------------------------------------- ----- ------------
Joseph Liu 317,500 (5) 2.2%
- ------------------------------------------------------------- ----- ------------
Mark A. King 63,000 (5) *
- ------------------------------------------------------------- ----- ------------
Carl C. Wertz 130,781 (5) *
- ------------------------------------------------------------- ----- ------------
All directors, nominees and executive officers
as a group (10 persons) 1,231,068 (8) 8.0%
- ------------------------------------------------------------- ----- ------------
* 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 Barclays Global Investors, N.A. is 45 Fremont Street, San Francisco,
CA 94105. The address of each director and executive officer of the
Company is 3050 East Hillcrest Drive, Westlake Village, California
91362.
(2) The named stockholder has sole voting power and investment power with
respect to the shares listed, except as indicated and subject to
community property laws where applicable.
(3) Under Rule 13d-3 of the Securities and Exchange Act of 1934 (the
"Exchange Act"), certain shares may be deemed to be beneficially owned
by more than one person (if, for example, a person shares the power to
vote or the power to dispose of the shares). In addition, under Rule
13d-3(d)(1) of the Exchange Act, shares which the person (or group) has
the right to acquire within 60 days after the Record Date are deemed to
be outstanding in calculating the beneficial ownership and the
percentage ownership of the person (or group) but are not deemed to be
outstanding as to any other person or group. As a result, the
percentage of outstanding shares of any person as shown in this table
does not necessarily reflect the person's actual ownership of voting
power with respect to the number of shares of Common Stock actually
outstanding at the Record Date.
(4) LSC, which holds 4,601,458 shares of Common Stock, as the record
holder, is a public company listed on the Taiwan Stock Exchange
Corporation ("TSEC") and a member of The Lite-On Group of companies.
See "Proposal One - Election of Directors - Certain Relationships and
Related Transactions" for a discussion of the relationship among LSC,
the Company and certain directors and executive officers of the
Company.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
5
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(5) Includes the following shares of Common Stock that the named
individual has the right to acquire within 60 days after the
Record Date by the exercise of vested stock options:
NAMED INDIVIDUAL SHARES
---------------- ------
Raymond Soong 183,750
C.H. Chen 177,500
Michael R. Giordano 90,500
Keh-Shew Lu 31,500
M.K. Lu 12,000
Shing Mao 139,500
John M. Stich 18,000
Joseph Liu 285,000
Mark A. King 63,000
Carl C. Wertz 126,000
(6) Includes 2,250 shares of Common Stock held in the name of UBS Trust for
the IRA of Mr. Giordano.
(7) Includes 1,500 shares of Common Stock held in the name of Stich Family
Holdings LP.
(8) Includes 1,126,750 shares that the directors and executive officers
have the right to acquire within 60 days after the Record Date, by the
exercise of vested stock options, but excludes an additional 482,000
shares that the directors and executive officers will have the right to
acquire upon the exercise of stock options which will become
exercisable in installments more than 60 days after the Record Date.
PROPOSAL ONE - ELECTION OF DIRECTORS
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Bylaws provide that the number of directors
shall be determined from time to time by the Board of Directors, but may not be
less than five nor more than seventeen. Currently, the Board of Directors has
fixed the number of directors at seven. The Bylaws further provide for the
election of each director at each annual meeting of stockholders.
The persons named below have been nominated for election to
the Board of Directors 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 to serve as a director, it is intended that the
Proxies will be voted for the election of such substitute nominees, if any, as
shall be designated by the Board of Directors. The Board of Directors has no
reason to believe that any nominee will be unavailable. 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 of Directors.
6
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.
DIRECTOR
OFFICERS AND DIRECTORS AGE POSITION WITH THE COMPANY SINCE
- ------------------------------- ---------- ----------------------------------------------------------- -------------
Raymond Soong (1) 63 Chairman of the Board of Directors 1993
- ------------------------------- ---------- ----------------------------------------------------------- -------------
C.H. Chen (2) 62 President, Chief Executive Officer, and Director 2000
- ------------------------------- ---------- ----------------------------------------------------------- -------------
Michael R. Giordano (3) 58 Director 1990
- ------------------------------- ---------- ----------------------------------------------------------- -------------
Keh-Shew Lu (4) 58 Director 2001
- ------------------------------- ---------- ----------------------------------------------------------- -------------
M.K. Lu (5) 56 Director 1995
- ------------------------------- ---------- ----------------------------------------------------------- -------------
Shing Mao (6) 69 Director 1990
- ------------------------------- ---------- ----------------------------------------------------------- -------------
John M. Stich (7) 63 Director 2000
- ------------------------------- ---------- ----------------------------------------------------------- -------------
Joseph Liu (8) 63 Senior Vice President, Operations --
- ------------------------------- ---------- ----------------------------------------------------------- -------------
Mark A. King (9) 46 Vice President, Sales and Marketing --
- ------------------------------- ---------- ----------------------------------------------------------- -------------
Carl C. Wertz (10) 50 Chief Financial Officer, Secretary and Treasurer --
- ------------------------------- ---------- ----------------------------------------------------------- -------------
(1) Raymond Soong has been the Chairman of the Board of Silitek Corporation
("Silitek") since 1990 and has been Chairman of the Boards of LSC,
formerly LPSC, since 1992, and Lite-On Technology Corporation (a
Lite-On Group company), since 1992. In October 2002, Silitek and Taiwan
Lite-On merged with Lite-On Technology Corporation. See "General
Information - Security Ownership of Certain Beneficial Owners and
Management" and "Proposal One - Election of Directors - Certain
Relationships and Related Transactions" for a discussion of the
relationships among Lite-On Technology, Silitek, LPSC, LSC and the
Company. Since 1996, Mr. Soong has also been Chairman of the Board of
FabTech, Inc. ("Diodes-FabTech" or "FabTech") (formerly a subsidiary of
LSC, acquired by the Company in December 2000). Mr. Soong is a graduate
of the National Taipei Institute of Technology's Electronic Engineering
Department. After serving as a senior engineer for RCA and as a chief
engineer for Texas Instruments, Inc. ("TI"), Mr. Soong, together with
several of his co-workers, founded Taiwan Lite-On Electronic Co. Ltd.
("Taiwan Lite-On"), a manufacturer of electronic components and
subsystems, in 1975. Mr. Soong is also Chairman of the Boards of the
Company's manufacturing subsidiaries in Shanghai, China ("Diodes-China"
and "Diodes Shanghai") and its Taipei, Taiwan subsidiary
("Diodes-Taiwan"), and is an EX OFFICIO member of the Nominating
Committee.
(2) C.H. Chen was appointed President and Chief Executive Officer of the
Company in March 2000. From 1969 to 1990, Mr. Chen held various
positions at TI, most recently as Vice President of TI-Taiwan. In 1990,
he left TI to found Dyna Image Corporation (a public company listed on
the Taiwan OTC market), a Lite-On Group company and the world's leading
supplier of contact image sensors (CISs), which are key components in
fax machines and scanners. In December 2000, Dyna Image Corporation
merged with LPSC to form LSC. Mr. Chen is currently the Vice Chairman
of LSC, Chairman of the Company's Strategic Planning Committee, an EX
OFFICIO member of the Nominating Committee, and a director of
Diodes-Taiwan, Diodes-FabTech, Diodes-China, Diodes-Shanghai, and
Diodes-Hong Kong.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
7
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(3) Michael R. Giordano CIMA joined the private-banking firm of UBS, 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 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 is Chairman of the
Company's Audit Committee and the Compensation and Stock Options
Committee, and is a member of the Strategic Planning Committee. Mr.
Giordano is also the pension consultant for the Company's 401(k) plan,
which is managed by UBS Fiduciary Trust.
(4) In 2001, Dr. Keh-Shew Lu retired as Senior Vice President of TI and
General Manager of Worldwide Mixed-Signal and Logic Products, in which
positions he served since 1998. His responsibilities included all
aspects of the analog, mixed-signal and logic products for TI worldwide
business, including design, process and product development,
manufacturing and marketing. Dr. Lu's business areas also included the
mixed-signal and RF portion of TI's digital signal processing
solutions, display solutions, and wireless communications. From 1996 to
1998, Dr. Lu was manager of TI's worldwide memory business. In
addition, he served as President of TI Asia from 1994 until 1998, where
he had responsibility for all of TI's activities in Asia (excluding
Japan). Since beginning his career at TI in 1974, Dr. Lu has held a
number of technical and managerial positions within TI's Semiconductor
Group, including Vice President and division manager of the Linear
Products Division. Dr. Lu holds a Bachelor's degree in engineering from
the National Cheng Kung University in Taiwan, and a Master's degree and
doctorate in electrical engineering from Texas Tech University. Dr. Lu
is Chairman of the boards of two privately held companies: PicoNetics,
an emerging developer of ultra low power display driver chips, and
LedEngine, an emerging developer of LED solutions. Dr. Lu is also a
director of two publicly held companies in Taiwan: Lite-On Technology
Corporation and Winbond Electronics Corporation ("Winbond"). Winbond is
focused on the development, manufacture, and marketing of personal
computer, telecommunications, and consumer electronics products. Dr. Lu
is also a director of EE Solution, Lorentz Solution and MicroFabrica,
and is a partner of WK Technology Fund. Dr. Lu is 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 a
member of the Company's Compensation and Stock Options Committee, the
Audit Committee and the Strategic Planning Committee, and is Chairman
of the Nominating Committee.
(5) M.K. Lu is currently President of LSC, to which position he was
re-appointed in March 2000. In November 1998, Mr. Lu formed a new
company, Actron Technology Corporation, and is also acting Chairman of
this manufacturer of pressfit diodes for the automotive market. From
1991 to June 1998, Mr. Lu was President and a director of LPSC. From
1983 to 1990, Mr. Lu was General Manager/Vice President of Silitek. See
"General - Security Ownership of Certain Beneficial Owners and
Management" and "Proposal One - Election of Directors - Certain
Relationships and Related Transactions" for a discussion of the
relationship among Silitek, LPSC, LSC and the Company. Since 1995, Mr.
Lu has been a director of FabTech. Mr. Lu earned his Bachelor's degree
in Electrical Engineering at Tatung University of Technology and is a
Business Administration graduate of the National Chengchi University.
Mr. Lu is also a member of the Chinese Management Association and the
Chinese Association for Advancement of Management, and is a director of
Diodes-China and Diodes-Shanghai.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
8
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(6) In 2000, Dr. Shing Mao retired as Chairman of the Board of Lite-On,
Inc., a California corporation located in Milpitas, California, and a
wholly owned subsidiary of Taiwan Lite-On, in which position he served
since 1988. See "General Information - Security Ownership of Certain
Beneficial Owners and Management" and "Proposal One - Election of
Directors - Certain Relationships and Related Transactions" for a
discussion of the relationship among Silitek, LSC and the Company.
Since 1989, Dr. Mao has been a director of Dyna Investment Co., Ltd. of
Taiwan, a venture capital company. Dr. Mao was a director of LSC from
1989 to 2000. Since 1996, Dr. Mao has also been a director of FabTech.
Before joining Lite-On, Dr. Mao served in a variety of management
positions with Raytheon Company for four years, with TI for 11 years,
and with UTL Corporation (later acquired by Boeing Aircraft Company)
for seven years. Dr. Mao earned his Ph.D. degree in electrical
engineering at Stanford University in 1963. Dr. Mao is a member of the
Company's Nominating Committee.
(7) John M. Stich is the President and Chief Executive Officer of The Asian
Network; a consulting company that specializes in assisting
high-technology companies to expand their business in Asia. Prior to
this position, Mr. Stich was the Chief Marketing Officer for TI in
Japan with responsibility for TI's sales and marketing in Japan from
1994 to 1999. Mr. Stich joined TI in 1964, and has served in various
management positions, including Marketing Manager for TI Asia in Tokyo
from 1970 to 1972, Marketing Director in Taiwan from 1978 to 1982,
Managing Director of TI-Hong Kong from 1982 to 1991, and Vice
President-Semiconductors for TI Asia from 1991 to 1994. Mr. Stich has
also been active in leading various industry associations, including
serving as Governor for the American Chamber of Commerce in Japan and
in Hong Kong, as Chairman of the Semiconductor Industry Association
(Japan Chapter), and as President of the Japan America Society of
Dallas/Fort Worth. Mr. Stich is also a member of the Advisory Board to
Southern Methodist University's Asian Studies Program and is President
of Project Oasis, a non-profit organization that helps needy children.
Mr. Stich was appointed in 2004 to be the Honorary Consul-General of
Japan at Dallas. In addition, Mr. Stich is a director of Stonestreet
One, Inc., a leading provider of solutions based on short-range
wireless technologies. Mr. Stich is a member of the Company's Audit
Committee, the Compensation and Stock Options Committee, the Nominating
Committee and the Strategic Planning Committee.
(8) In May 1998, Joseph Liu was appointed President of Vishay/LPSC and Vice
President, Far East Operations for the Company, the former position in
which he served until March 2000, when Vishay agreed to sell its 65%
interest in the Vishay/LPSC joint venture to The Lite-On Group, the 35%
owner. Mr. Liu continues to serve as the Company's Senior
Vice-President, Operations. Mr. Liu previously served as Vice
President, Operations of the Company from 1994 to 1998 and Chief
Financial Officer, Secretary and Treasurer from 1990 to 1998. Mr. Liu
was also the Company's Vice-President, Administration from 1990 to
1994. Prior to joining the Company, Mr. Liu held various management
positions with TI Dallas, since 1971, including Planning Manager,
Financial Planning Manager, Treasury Manager, Cost Accounting Manager
and General Accounting Manager with TI Taiwan, Ltd. in Taipei; from
1981 to 1986 as Controller with TI Asia in Singapore and Hong Kong;
from 1986 to 1989 as Financial Planning Manager, TI Latin America
Division (for TI Argentina, TI Brazil and TI Mexico) in Dallas; and
from 1989 to 1990 as Chief Coordinator of Strategic Business Systems
for TI Asia Pacific Division in Dallas. Mr. Liu is also President and a
director of Diodes-China and Diodes-Shanghai, and is President of
Diodes-FabTech. See "Proposal One - Election of Directors - Certain
Relationships and Related Transactions" for a discussion of the
relationship among Diodes-China, Diodes-Shanghai, Diodes-FabTech and
the Company.
(9) Mark A. King, the Company's Vice President, Sales since 1991, was
appointed the Company's Vice President, Sales and Marketing in May
1998. Before joining the Company, Mr. King served for nine years in
various sales management positions at Lite-On, Inc., a California
corporation located in Milpitas, California, and a manufacturer of
optoelectronic products.
(10) Carl C. Wertz was appointed the Company's Chief Financial Officer,
Secretary and Treasurer in 1998. Mr. Wertz was the Company's Controller
since 1993. Before joining the Company, Mr. Wertz served in various
financial management and accounting positions, most recently as
Controller of Westco Products, a manufacturer and distributor of food
products, headquartered in Southern California. Mr. Wertz, a licensed
CPA, has over 20 years of manufacturing and distribution experience,
and began his accounting career with Deloitte & Touche LLP. Mr. Wertz
is a director of the Company's Asian subsidiaries, Diodes-China,
Diodes-Shanghai, Diodes-Taiwan, and Diodes-Hong Kong.
9
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors 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 of Directors. The members of each Committee are as
follows:
- ----------------------------- --------------------- --------------------- ----------------------- --------------------
COMPENSATION AND
STOCK OPTIONS STRATEGIC PLANNING
AUDIT COMMITTEE COMMITTEE NOMINATING COMMITTEE COMMITTEE
- ----------------------------- --------------------- --------------------- ----------------------- --------------------
RAYMOND SOONG EX OFFICIO member (1)
- ----------------------------- --------------------- --------------------- ----------------------- --------------------
C. H. CHEN EX OFFICIO member (1) Chair
- ----------------------------- --------------------- --------------------- ----------------------- --------------------
MICHAEL R. GIORDANO (2) Chair (3) Chair Member
- ----------------------------- --------------------- --------------------- ----------------------- --------------------
KEH-SHEW LU (2) Member Member Chair Member
- ----------------------------- --------------------- --------------------- ----------------------- --------------------
M.K. LU
- ----------------------------- --------------------- --------------------- ----------------------- --------------------
SHING MAO (2) Member
- ----------------------------- --------------------- --------------------- ----------------------- --------------------
JOHN M. STICH (2) Member Member Member Member
- ----------------------------- --------------------- --------------------- ----------------------- --------------------
(1) - Non-voting Member
(2) - Independent Director
(3) - Audit Committee Financial Expert
AUDIT COMMITTEE. The Audit Committee makes recommendations to
the Board of Directors 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 of Directors 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 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 of Directors
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 of Directors has determined that each member of the
Compensation and Stock Options Committee is "independent" as that term is
defined under the rules of Nasdaq.
STRATEGIC PLANNING COMMITTEE. The Strategic Planning Committee
focuses on new product development, marketing, and research and development
operations of the Company.
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 of Directors, consistent with criteria approved
by the Board of Directors, and (ii) selects the director nominees for the next
annual meeting of stockholders.
The Board of Directors has determined that each member of the
committee is "independent" as that term is defined under the rules of Nasdaq.
CHARTERS OF THE COMMITTEES. The charters of the Audit
Committee, the Compensation and Stock Options Committee, and the Nominating
Committee are available on the Company's website at www.diodes.com
10
MEETINGS OF THE BOARD AND COMMITTEES
The Board of Directors held four meetings during 2004. The
Audit Committee held 9 meetings, and the Compensation and Stock Options
Committee and the Nominating Committee both held one meeting during 2004. The
Strategic Planning Committee did not meet separately during 2004, but met during
a general Board of Directors meeting. All of the persons who were directors of
the Company or members of committees were present for at least 75% of the
meetings during 2004.
NOMINATING PROCEDURES AND CRITERIA
Among its functions, the Nominating Committee considers and
approves nominees for election to the Board of Directors. In addition to the
candidates proposed by the Board of Directors 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 2006
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 of Directors, 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 of
Directors, has recommended the Board of Directors' 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, Diodes Incorporated 3050 East Hillcrest Drive, Westlake Village,
California 91362.
Communications are distributed to the Board of Directors, or
to any individual director, depending on the facts and circumstances set forth
in the communication. In that regard, the Board of Directors has requested that
certain items that are unrelated to the duties and responsibilities of the Board
of Directors should be excluded, including the following: junk mail and mass
mailings; product complaints; product inquiries; new product suggestions;
resumes 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.
11
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives $1,500 for
each meeting of the Board of Directors or committee meeting attended in person,
and $750 for each meeting in which such director participates by telephone.
In addition, the following annual, non-qualified stock options
are granted to both employee and non-employee directors. The exercise price of
each option is no less than that fair market value of the Common Stock on the
date of grant, and the option vests in three equal annual installments
commencing on the first anniversary of the date of grant:
o The Chairman of the Board receives an option to purchase 52,500 shares of
the Company's Common Stock,
o All other directors each receive an option to purchase 9,000 shares of
the Company's Common Stock,
o In addition, the Audit Committee members receive an option to purchase
4,500 shares of the Company's Common Stock, with the Audit Committee
chairman receiving an additional option to purchase 3,000 shares, and
all other committee members receive an option to purchase 1,500 shares
of the Company's Common Stock, with the committee chairman receiving an
additional 1,500-share stock option grant.
The Board of Directors may modify such compensation in the
future.
12
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain information concerning
all cash and non-cash compensation paid or accrued for services to the Company
in all capacities to its Chief Executive Officer and to each of the other three
most highly compensated executive officers (the "Named Executives") for each of
the fiscal years ended December 31, 2002, 2003 and 2004.
SUMMARY COMPENSATION TABLE
- -------------------------------- ------------------------------------------ ------------------------------------------- ------------
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPEN-SATION STOCK OPTIONS/ SARS LTIP COMPEN-SATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) (1) AWARDS ($) (#) (2) PAYOUTS($) ($)
- ------------------ ---- ---------- --------- ------- ---------- ------- ---------- ---
- ----------------------- -------- ------------- ------------- -------------- ------------- --------------- ------------- ------------
C.H. CHEN 2004 150,000 383,700 2,400 -- 52,500 -- --
President and 2003 150,000 272,000 1,100 -- 52,500 -- --
Chief Executive 2002 150,000 210,000 2,400 -- 75,000 -- --
Officer
- ----------------------- -------- ------------- ------------- -------------- ------------- --------------- ------------- ------------
- ----------------------- -------- ------------- ------------- -------------- ------------- --------------- ------------- ------------
JOSEPH LIU 2004 208,000 314,400 37,200 -- 22,500 -- --
Sr. Vice President, 2003 200,000 224,000 35,000 -- 22,500 -- --
Operations 2002 164,800 170,000 51,900 -- 22,500 -- --
- ----------------------- -------- ------------- ------------- -------------- ------------- --------------- ------------- ------------
- ----------------------- -------- ------------- ------------- -------------- ------------- --------------- ------------- ------------
MARK KING 2004 177,000 281,900 36,400 -- 18,000 -- --
Vice President, Sales 2003 170,000 191,000 32,900 -- 18,000 -- --
and Marketing 2002 164,800 140,000 32,400 -- 18,000 -- --
- ----------------------- -------- ------------- ------------- -------------- ------------- --------------- ------------- ------------
- ----------------------- -------- ------------- ------------- -------------- ------------- --------------- ------------- ------------
CARL WERTZ 2004 146,000 216,800 33,700 -- 13,500 -- --
Chief Financial 2003 140,000 138,000 29,200 -- 13,500 -- --
Officer, Secretary 2002 123,600 100,000 24,500 -- 13,500 -- --
and Treasurer
- ----------------------- -------- ------------- ------------- -------------- ------------- --------------- ------------- ------------
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
13
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(1) Certain of the Company's executive officers receive personal benefits
in addition to salary and cash bonuses, including, but not limited to,
auto allowances, per-diem, life insurance payable at the direction of
the employee, contributions under the Company's 401(k) Plan, and group
health insurance. Other Annual Compensation consists of the following:
--------------- ------------------ ----------------- ------------------ -----------------
YEAR MR. CHEN MR. LIU MR. KING MR. WERTZ
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
PER-DIEM 2004 -- -- -- --
--------------- ------------------ ----------------- ------------------ -----------------
2003 -- 5,451 -- --
--------------- ------------------ ----------------- ------------------ -----------------
2002 -- 23,360 -- --
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
AUTOMOBILE 2004 -- 10,128 7,200 7,200
--------------- ------------------ ----------------- ------------------ -----------------
2003 -- 7,236 7,200 7,200
--------------- ------------------ ----------------- ------------------ -----------------
2002 -- 7,236 7,200 7,200
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
401(K) PLAN 2004 -- 19,614 19,614 19,614
--------------- ------------------ ----------------- ------------------ -----------------
2003 -- 16,000 16,000 16,000
--------------- ------------------ ----------------- ------------------ -----------------
2002 -- 13,322 14,741 10,614
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
LIFE INSURANCE 2004 1,812 1,812 1,812 1,812
--------------- ------------------ ----------------- ------------------ -----------------
2003 1,140 1,140 1,140 1,140
--------------- ------------------ ----------------- ------------------ -----------------
2002 1,812 1,812 1,812 1,812
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
HEALTH INSURANCE 2004 540 5,670 7,732 5,034
--------------- ------------------ ----------------- ------------------ -----------------
2003 -- 5,158 8,598 4,868
--------------- ------------------ ----------------- ------------------ -----------------
2002 540 6,130 8,618 4,880
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
TOTAL 2004 2,352 37,224 36,358 33,660
--------------- ------------------ ----------------- ------------------ -----------------
2003 1,140 34,985 32,938 29,208
--------------- ------------------ ----------------- ------------------ -----------------
2002 2,352 51,860 32,371 24,506
---------------------- --------------- ------------------ ----------------- ------------------ -----------------
(2) Stock options are adjusted for the 3-for-2 stock split in November 2003.
14
STOCK OPTION GRANTS
The following table contains certain information concerning
the grant of stock options during the fiscal year ended December 31, 2004 to the
Named Executives. The Company granted no Stock Appreciation Rights ("SARs")
during 2004.
OPTION/SAR GRANTS IN FISCAL YEAR 2004 POTENTIAL REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF STOCK PRICE
APPRECIATION FOR TEN-YEAR OPTION
INDIVIDUAL GRANTS TERM(1)
- ----------------------------------------------------------------------------------------- -----------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE OR
OPTIONS/SARS GRANTED TO BASE PRICE EXPIRATION
NAME GRANTED (#) EMPLOYEES (%) ($/SH) DATE 5% ($) 10% ($)
------------------- ---------------- ------------------- --------------- ---------------- ------------------- ------------------
C.H. CHEN 52,500 13.4 18.32 7/14/2014 604,871 1,532,861
------------------- ---------------- ------------------- --------------- ---------------- ------------------- ------------------
JOSEPH LIU 22,500 5.7 18.32 7/14/2014 259,230 656,941
------------------- ---------------- ------------------- --------------- ---------------- ------------------- ------------------
MARK A. KING 18,000 4.6 18.32 7/14/2014 207,384 525,553
------------------- ---------------- ------------------- --------------- ---------------- ------------------- ------------------
CARL C. WERTZ 13,500 3.4 18.32 7/14/2014 155,538 394,164
------------------- ---------------- ------------------- --------------- ---------------- ------------------- ------------------
- ----------------------------------------------------------------------------------------- ------------------- -------------------
Increase in market value of the Company's Common Stock for ALL STOCKHOLDERS at assumed 5% 10%
-- ---
annual rates of stock price appreciation (as used in the table above) from $18.32 per (TO $29.84/SHARE) (TO $47.52/SHARE)
----------------- -----------------
share, over the ten-year period, based upon 14,149,758 shares outstanding on December $ 163,024,308 $ 413,135,605
31, 2004
- ----------------------------------------------------------------------------------------- ------------------- -------------------
(1) The Potential Realizable Value is the product of (a) the difference
between (i) the product of the closing sale price per share at the date
of grant and the sum of (A) 1 plus (B) the assumed rate of appreciation
of the market price of the Common Stock, compounded annually over the
term of the option and (ii) the per share exercise price of the option
and (b) the number of shares of Common Stock underlying the option at
December 31, 2004. These amounts represent certain assumed rates of
appreciation only. For example, an $18.32 per share price with a 5%
annual growth rate for 10 years results in a stock price of $29.84 per
share and a 10% growth rate results in a price of $47.52 per share.
Actual gains, if any, on stock option exercises are dependent upon a
variety of factors, including market conditions and the price
performance of the Common Stock. No assurance can be made that the rate
of appreciation presented in this table can be achieved.
STOCK OPTION EXERCISES AND HOLDINGS
The following table contains certain information with respect
to the Named Executives concerning the exercise of options during the fiscal
year ended December 31, 2004 and unexercised options held by the Named
Executives as of December 31, 2004.
AGGREGATED OPTION / SAR EXERCISES IN FISCAL YEAR 2004
AND FISCAL YEAR-END OPTION VALUES (1)
SHARES VALUE OF UNEXERCISED
ACQUIRED ON VALUE NUMBER OF UNEXERCISED "IN-THE-MONEY" OPTIONS/SARS
NAME EXERCISE (#) REALIZED ($) OPTIONS/SARS AT 12/31/04 (#) AT 12/31/04 ($) (2)
- ---- ------------ ------------ ---------------------------- -------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ -------------- ------------ --------------
- ----------------------- ---------------- --------------- ----------------- ------------------- --------------- ------------------
C.H. CHEN 100,000 1,185,363 192,500 112,500 2,170,131 985,508
- ----------------------- ---------------- --------------- ----------------- ------------------- --------------- ------------------
JOSEPH LIU 120,000 1,897,962 285,000 45,000 3,663,610 367,900
- ----------------------- ---------------- --------------- ----------------- ------------------- --------------- ------------------
MARK A. KING 155,625 3,579,756 63,000 36,000 748,870 294,320
- ----------------------- ---------------- --------------- ----------------- ------------------- --------------- ------------------
CARL C. WERTZ -- -- 126,000 27,000 2,096,266 220,740
- ----------------------- ---------------- --------------- ----------------- ------------------- --------------- ------------------
(1) All stock options have been adjusted to account for the Company's
3-for-2 stock splits in July 2000 and November 2003.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
15
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(2) The value of unexercised "in-the-money" options is the difference
between the closing sale price of the Company's Common Stock on
December 31, 2004 ($22.63 per share) and the exercise price of the
option, multiplied by the number of shares subject to the option.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information with respect to
shares of Common Stock that may be issued under our equity compensation plans as
of December 31, 2004.
- --------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
BE ISSUED UPON EXERCISE EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
(A) (B) (C)
PLAN CATEGORY
- --------------------------------------------------------------------------------------------------------------------------
Equity Compensation Plans Approved by
Security Holders 2,739,200 (1) $10.63 719,629 (2)
- --------------------------------------------------------------------------------------------------------------------------
Equity Compensation Plans Not Approved by
Security Holders 0 N/A 0
- --------------------------------------------------------------------------------------------------------------------------
TOTAL 2,739,200 $10.63 719,629
- --------------------------------------------------------------------------------------------------------------------------
(1) Shares issuable pursuant to outstanding options under the 1993
Non-qualified Stock Option Plan, the 1993 Incentive Stock
Option Plan, and the 2001 Omnibus Equity Incentive Plan as of
December 31, 2004.
(2) Represents shares of Common Stock that may be issued pursuant
to future awards under the Incentive Bonus Stock Plan and the
2001 Omnibus Equity Incentive Plan.
EMPLOYEE BENEFITS PLANS
1993 ISO PLAN
The 1993 Incentive Stock Option Plan (the "1993 ISO Plan")
provides for the grant of incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), to purchase
up to 2,250,000 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, 1,596,908 shares have been issued on the exercise
of options granted and 629,125 shares were subject to outstanding options under
the 1993 ISO Plan. The 1993 ISO Plan expired on May 10, 2003, and, therefore, no
additional options can be granted.
16
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 2,250,000 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, 1,663,650 shares have been issued on the
exercise of options granted and 566,100 shares were subject to outstanding
options under the 1993 NQO Plan. The 1993 NQO Plan expired on May 10, 2003, and,
therefore, no additional options can be granted.
2001 OMNIBUS EQUITY INCENTIVE PLAN
GENERAL. In April 2001, the 2001 Omnibus Equity Incentive Plan
(the "2001 Incentive Plan") became effective. Under the 2001 Incentive Plan,
employees, non-employee directors and consultants of the Company and its
subsidiaries are eligible to receive shares of Common Stock of the Company or
other securities or benefits with a value derived from the value of the Common
Stock of the Company. The purpose of the 2001 Incentive Plan is to enable the
Company to attract, retain and motivate employees, non-employee directors and
consultants by providing for or increasing their proprietary interests in the
Company and, thereby, further align their interests with those of the Company's
stockholders.
The maximum number of shares of Common Stock that may be
issued pursuant to awards granted under the 2001 Incentive Plan may not exceed
the sum of (i) 1,500,000 shares (split adjusted) and (ii) on each January 1, an
additional number of shares equal to 1% of the total number of shares of Common
Stock outstanding on the immediately preceding December 31; provided, however,
that the maximum number of shares of Common Stock that may be issued pursuant to
incentive stock options under the 2001 Incentive Plan may not exceed 3,000,000
shares (split adjusted).
As of the Record Date, 94,850 shares have been issued on the
exercise of options granted, 1,385,300 shares were subject to outstanding
options, and 597,362 shares were available for issuance under awards that may be
granted under the 2001 Incentive Plan.
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.
17
An award granted under the 2001 Incentive Plan may include a
provision accelerating the receipt of benefits upon the occurrence of specified
events, such as a change of control of the Company or a dissolution,
liquidation, merger, reclassification, sale of substantially all of the property
and assets of the Company or other significant corporate transactions. The
Committee may grant options that either are intended to be "incentive stock
options" as defined under Section 422 of the Code, or are not intended to be
incentive options ("non-qualified stock options"). Incentive stock options may
be granted only to employees.
No incentive stock option may be granted under the 2001
Incentive Plan to any person who, at the time of the grant, owns (or is deemed
to own) stock possessing more than 10% of the total combined voting power of the
Company or any affiliate of the Company, unless the option exercise price is at
least 110% of the fair market value of the stock subject to the option on the
date of the grant and the term of the option does not exceed five years from the
date of the grant. In addition, the aggregate fair market value, determined at
the time of the grant, of the shares of Common Stock with respect to which
incentive stock options are exercisable for the first time by an optionee during
any calendar year (under all such plans of the Company and its subsidiaries) may
not exceed $100,000. As a result of enactment of Section 162(m) of the Code, and
to provide the Committee flexibility in structuring awards, the 2001 Incentive
Plan states that in the case of stock options and stock appreciation rights, no
person may receive in any year a stock option to purchase more than 100,000
shares or a stock appreciation right measured by more than 100,000 shares.
If awards granted under the 2001 Incentive Plan expire, are
canceled or otherwise terminate without being exercised, the Common Stock not
purchased pursuant to the award again becomes available for issuance under the
2001 Incentive Plan. Awards may not be granted under the 2001 Incentive Plan on
or after the tenth anniversary of the adoption of the 2001 Incentive Plan.
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 ten percent 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.
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
18
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.
INCENTIVE BONUS STOCK PLAN
The Company's Incentive Bonus Stock Plan provides that the
Board of Directors 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 of Directors may also elect to grant a number of shares of
Common Stock to the employee. As of the Record Date, 279,000 shares of Common
Stock were available for issuance under the Incentive Bonus Stock Plan.
401(K) PLAN
The Company maintains a 401(k) profit sharing 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 PRC, the Company
maintains a retirement plan pursuant to the local Municipal Government for its
employees in China. The Company is required to make contributions to the
retirement plan at a rate of 22.5% of the employee's eligible payroll.
Pursuant to the Taiwan Labor Standard Law and Factory Law, the
Company maintains a retirement plan for its employees in Taiwan. The Company
makes contributions at a rate of 6% of the employee's eligible payroll.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
None.
REPORT OF THE COMPENSATION AND STOCK OPTIONS COMMITTEE OF THE BOARD OF
DIRECTORS TO STOCKHOLDERS
THE REPORT OF THE COMPENSATION AND STOCK OPTIONS COMMITTEE OF
THE BOARD OF DIRECTORS SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH
ACTS.
REPORT OF THE COMPENSATION AND STOCK OPTIONS COMMITTEE
GENERAL
The Compensation and Stock Options Committee (the "Committee")
consists of three directors, Michael R. Giordano (Chairman), John M. Stich and
Dr. Keh-Shew Lu. The Board of Directors has determined that each member of the
Committee is "independent" as that term is defined under the rules of Nasdaq.
The Committee determines the compensation of the executive officers of the
Company. The Committee also administers the Company's equity incentive plans and
401(k) plan. The Compensation Committee operates under a written charter
approved by the Board of Directors.
COMPENSATION PHILOSOPHY
The Company's compensation programs are designed to attract,
retain and motivate executives critical to the Company's long-term growth and
profitability. Compensation of executive officers consists of base salaries,
performance-based incentive bonuses, and long-term equity incentive awards. The
Compensation Committee's policy
19
generally is to design the total compensation package to be competitive with
the total compensation paid to executives of other companies in the Company's
industry that are of similar size. Bonus programs and equity incentives plans
are designed to motivate our executives to achieve strategic objectives and
performance objectives established by the Board of Directors.
BASE SALARIES
Executive officers receive a relatively small portion of their
total compensation as base salary. Base salaries are generally at or below the
median base salaries paid to officers with comparable duties by other companies
in our industry that are of a similar size. The Compensation Committee
periodically reviews an independent survey of executive compensation. Salaries
are established by the Compensation Committee based on its subjective assessment
of the executive's scope of responsibility, level of experience, individual
performance, and past and potential contribution to the Company's business.
BONUSES
Performance-based incentive bonuses are based upon the
achievement of specific financial performance objectives established at the
beginning of each fiscal year. Bonuses are primarily based upon (i) the
Company's revenue growth exceeding that of the Company's industry and (ii) the
growth in the Company's net income over the prior year.
EQUITY INCENTIVES
The Compensation Committee believes that long-term equity
incentive awards serve to align the interests of the executive officers with
those of the Company's stockholders. Under the 2001 Omnibus Equity Incentive
Plan, the Company may grant any type of award whose value is derived from the
value of the Common Stock of the Company, including shares of Common Stock,
options and stock appreciation rights. To date, the Company has only granted
stock options under its equity incentive plans.
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 Compensation Committee's policy is to award options
annually, which generally vest over three years, and are in recognition of the
executive officer's current and potential contribution to the Company. Decisions
made by the Compensation Committee regarding the timing and size of subsequent
option grants take into consideration the Company's and the individual's
performance, competitive market practices, and the size and term of option
grants made in prior years.
COMPENSATION FOR THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. C.H. Chen was appointed President, Chief Executive
Officer, and a director of the Company in March 2000. Mr. Chen also serves as
the Vice Chairman of LSC, a Lite-On Group company, for which he is also
compensated by LSC. The Committee believes that Mr. Chen's base salary of
$150,000 is substantially below that of the chief executive officers of other
companies in the Company's industry. Mr. Chen's bonus of $383,700 in 2004 was
based upon the achievement of specific financial performance objectives
established at the beginning of that year and relating to the Company's growth
in revenue and net income over the prior year (specifically, for 2004, the
Company increased revenue 35.6%, while the industry grew 18.9%, and the Company
increased net income 153% from $10.1 million to $25.6 million). Stock options
granted to Mr. Chen in 2004 are based upon the Committee's subjective assessment
of the performance of Mr. Chen and the Company.
20
DEDUCTIBILITY OF COMPENSATION
Under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), a public company generally will not be entitled to a
deduction for non-performance-based compensation paid to certain executive
officers to the extent such compensation exceeds $1.0 million. Special rules
apply for "performance-based" compensation, including the approval of the
performance goals by the stockholders of the Company.
The stockholders of the Company have approved each of the
Company's incentive plans for the purpose of qualifying those plans under
Section 162(m). Therefore, the Compensation Committee believes that all
compensation paid to the Company's executive officers in fiscal 2004 will be
fully deductible. In order to maintain flexibility in compensating executive
officers in a manner designed to promote the Company's goals, the Compensation
Committee reserves the right to award future compensation which would not comply
with Section 162(m) if it concludes that this is in the Company's best
interests.
Dated: April 13, 2005
COMPENSATION AND STOCK OPTIONS COMMITTEE OF THE BOARD OF DIRECTORS OF
DIODES INCORPORATED
Michael R. Giordano, CHAIRMAN
Dr. Keh-Shew Lu
John M. Stich
COMPENSATION AND STOCK OPTIONS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Options Committee consists of three
directors, Michael R. Giordano (Chairman), Dr. Keh-Shew Lu and John M. Stich. No
person who served as a member of the Company's Compensation and Stock Options
Committee during 2004 has ever been an officer or employee of the Company or any
of its subsidiaries. During 2004, 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 of Directors.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS TO STOCKHOLDERS
THE REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO
THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY
REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
REPORT OF THE AUDIT COMMITTEE
The Board of Directors maintains an Audit Committee comprised of three of
the Company's directors, Michael R. Giordano (Chairman), Dr. Keh-Shew Lu and
John M. Stich. 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 of Directors 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:
o Reviewed and discussed with management the audited
financial statements contained in the Company's Annual
Report on Form 10-K for fiscal 2004; and
o 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.
21
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:
o 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
o 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 2004 was compatible with their independence.
The Audit Committee operates under a written charter, which
was adopted by the Board of Directors and is assessed annually for adequacy by
the Audit Committee. On April 8, 2004, the Audit Committee recommended, and the
Board of Directors adopted, an amended charter for the committee. The Audit
Committee held nine meetings during fiscal 2004.
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 of Directors, and the Board of Directors
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, 2004 for
filing with the Securities and Exchange Commission. The Audit Committee also has
recommended, and the Board of Directors 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, 2005.
Dated: April 13, 2005
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF DIODES INCORPORATED,
Michael R. Giordano, CHAIRMAN
Dr. Keh-Shew Lu
John M. Stich
CODE OF ETHICS
The Company has adopted a Code of Ethics applicable to the
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions of the Company.
The Code of Ethics is published on our website, at www.diodes.com. We intend to
disclose future amendments to, or waivers from, certain provisions of the Code
of Ethics applicable to senior financial executives on our website within two
business days following the date of such amendment or waiver.
22
PERFORMANCE GRAPH
On June 19, 2000, the Company's Common Stock commenced trading
on the Nasdaq Stock Market, National Market System ("Nasdaq"), under the symbol
"DIOD." From November 10, 1966 to June 16, 2000, the Company's Common Stock
traded on the American Stock Exchange ("Amex"), under the symbol "DIO." Set
forth below is a line graph comparing the yearly percentage change in the
cumulative total stockholder return of the Company's Common Stock against the
cumulative total return of the Nasdaq Composite and the Nasdaq Industrial Index
for the five calendar years ending December 31, 2004. The graph is not
necessarily indicative of future price performance.
THE GRAPH SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH
ACTS.
[LINE GRAPH OMITTED]
---------------------------------------- -------- ------------ ----------- ------------ ------------ -----------
TOTAL RETURN ANALYSIS (1) 1999 2000 2001 2002 2003 2004
---------------------------------------- -------- ------------ ----------- ------------ ------------ -----------
DIODES INCORPORATED $ 100 $72.41 $ 46.41 $ 67.07 $ 198.91 $ 236.91
---------------------------------------- -------- ------------ ----------- ------------ ------------ -----------
NASDAQ INDUSTRIAL INDEX 100 66.24 62.05 45.99 71.63 82.97
---------------------------------------- -------- ------------ ----------- ------------ ------------ -----------
NASDAQ COMPOSITE INDEX 100 60.71 47.93 32.82 49.23 53.46
---------------------------------------- -------- ------------ ----------- ------------ ------------ -----------
Source: CTA Public Relations. Data from BRIDGE Information Systems, Inc.
(1) The graph assumes $100 invested on December 31, 1999 in the Common
Stock of the Company, the stock of the companies in the Nasdaq
Composite Index and the Nasdaq Industrial Index, and that all dividends
received within a quarter, if any, were reinvested in that quarter.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company conducts business with two related party
companies, LSC (and its subsidiaries) and Keylink International (formerly Xing
International) (and its subsidiaries). LSC, a 32.5% shareholder at December 31,
2004, 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.
C.H. Chen, the Company's President and Chief Executive Officer, and a member of
the Company's Board of Directors, is also Vice-Chairman of LSC. M.K. Lu, a
member of the Company's
23
Board of Directors, is President of LSC, while Raymond Soong, the Company's
Chairman of the Board, is the Chairman of The Lite-On Group, a significant
shareholder of LSC.
The Audit Committee reviews all related party transactions for
potential conflict of interest situations, and approves all such transactions,
in accordance with such procedures as it may adopt from time to time. The
Company believes that all related party transactions are on terms no less
favorable to the Company than would be obtained from unaffiliated third parties.
In 2004, the Company sold silicon wafers to LSC totaling 11.1%
(10.7% in 2003) of the Company's sales, making LSC the Company's largest
customer. Also for 2004, 17.2% (17.3% in 2003) of the Company's sales were from
discrete semiconductor products purchased from LSC, making LSC the Company's
largest outside vendor. Under a long-standing sales agreement, the Company is
the exclusive North American distributor for certain LSC product lines. In
addition, the Company leases warehouse space from LSC for its operations in Hong
Kong. Such transactions are on terms no less favorable to the Company than could
be obtained from unaffiliated third parties. The Audit Committee of the Board of
Directors has approved the contracts associated with the related party
transactions.
In December 2000, the Company acquired a wafer foundry,
FabTech, Inc., from LSC. As part of the purchase price, at December 31, 2004,
LSC holds a subordinated, interest-bearing note for approximately $3.8 million.
In May 2002, the Company renegotiated the terms of the note to extend the
payment period from two years to four years, and, as a result, monthly payments
of approximately $208,000 plus interest began in July 2002. 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 has entered into several management incentive agreements with members of
FabTech's management. The agreements provide members of FabTech's management
guaranteed annual payments as well as contingent bonuses based on the annual
profitability of FabTech, subject to a maximum annual amount. Any portion of the
guaranteed and contingent liability paid by FabTech is reimbursed by LSC. 2004
is the final year of the management incentive agreements, with final payment
made by March 31, 2005.
In 2004, the Company sold silicon wafers to companies owned by
Keylink International totaling 0.9% (1.1% in 2003) of the Company's sales. Also
for 2004, 3.5% (4.6% in 2003) of the Company's sales were from discrete
semiconductor products purchased from companies owned by Keylink International.
In addition, Diodes-China and Diodes-Shanghai lease their manufacturing
facilities from, and subcontract a portion of their manufacturing process (metal
plating and environmental services) to, Keylink International. The Company also
pays a consulting fee to Keylink International. Such transactions are on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties. The Audit Committee of the Board of Directors has approved the
contracts associated with the related party transactions.
In October 2002, Silitek and Taiwan Lite-On merged with
Lite-On Technology Corporation, a publicly traded company on the Taiwan Stock
Exchange. Prior to this merger, Silitek was affiliated through common ownership
and control with Taiwan Lite-On, and both companies were members of The Lite-On
Group and publicly traded on the Taiwan Stock Exchange.
Raymond Soong, who became a director and Chairman of the Board
of the Company effective March 1993, is also the Chairman of the Boards of The
Lite-On Group, Lite-On Technology Corporation, Diodes-China, Diodes-Shanghai,
Diodes-Taiwan and Diodes-FabTech.
Dr. Shing Mao, who is a director of the Company, retired in
2000 as Chairman of the Board of Lite-On Milpitas, a wholly-owned subsidiary of
Taiwan Lite-On which merged with Lite-On Technology Corporation in 2002. Dr. Mao
was also a director of LSC from 1989 to 2000, and since 1996, has been a
director of FabTech.
M.K. Lu, who has been a director of the Company since 1995, is
also President of LSC and acting President of Actron Technology Corporation,
both Lite-On Group companies. From 1983 to 1990, Mr. Lu was General Manager/Vice
President of Silitek. Mr. Lu is also a director of Diodes-China,
Diodes-Shanghai, and Diodes-FabTech.
Michael Giordano, a director of the Company, is Senior Vice
President-Investment Consulting at the investment-banking firm of UBS, Inc.
Along with his son, James Giordano, Michael Giordano has, from time to time,
assisted directors, executive officers, and employees of the Company in stock
option exercises and subsequent stock sales of the Company's Common Stock, as
well as provided investment management services. Mr. Giordano is also the
pension
24
consultant for the Company's 401(k) plan, which is managed by UBS Fiduciary
Trust. In addition, Mr. Giordano has, from time to time, provided investment
management services for directors and officers of The Lite-On Group. All such
services have been provided by UBS, Inc. at customary rates and terms.
John M. Stich, a director of the Company, is also President
and CEO of The Asian Network. In 2000 and 2001, Mr. Stich had received fees as a
marketing consultant to the Company. In 2002, Mr. Stich ceased performing
marketing consulting services for the Company.
Dr. Keh-Shew Lu, a director of the Company, retired as Senior
Vice President of TI and manager of Worldwide Mixed-Signal Products -
Semiconductor Group in 2001. During 2002, Dr. Lu received fees as an engineering
consultant to the Company. In 2003, Dr. Lu ceased performing engineering
consulting services for the Company. Dr. Lu is also a director of Lite-On
Technology Corporation.
Mark A. King, the Company's Vice President of Sales and
Marketing, has an approximate $100,000 investment in one of the Company's
computer software vendors (a privately-held company). Mr. King's investment was
made subsequent to the Company's purchase of the software, which is used for
sales quotation and channel management, and has been approved by the Board of
Directors. Fees paid to this software vendor in 2004, including annual software
maintenance and consulting fees, were approximately $105,000.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under Section 16(a) of the Exchange Act, the Company's
directors, executive officers and any persons holding ten percent or more of the
Common Stock are required to report their ownership of Common Stock and any
changes in that ownership to the SEC and to furnish the Company with copies of
such reports. Specific due dates for these reports have been established and the
Company is required to report any failure to file on a timely basis by such
persons. Based solely upon a review of copies of reports filed with the SEC
during the fiscal year ended December 31, 2004, all reporting persons filed
reports on a timely basis except Messrs. Soong, Chen, Giordano, Mao, Stich, M.K.
Lu, Keh-Shew Lu, Liu, King and Wertz who filed Form 4's on August 26, 2004 for
stock options granted on July 14, 2004. 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
of Directors, upon recommendation of the Audit Committee to serve as its
independent registered public accounting firm for the calendar year ending
December 31, 2005. Professional services rendered by Moss Adams LLP for 2004
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 2004 were furnished at customary rates and terms.
Representatives of Moss Adams LLP are expected to be present at the Meeting.
They will have the opportunity to make a statement, if they so desire, and
respond to appropriate questions from Stockholders.
25
AUDIT FEES, TAX FEES, AND ALL OTHER FEES
For the fiscal years ended December 31, 2003 and 2004, fees
for services provided by Moss Adams LLP were approximately as follows:
--------------------------------------------------------------- -------------- -------------
DESCRIPTION 2003 (1) 2004
--------------------------------------------------------------- -------------- -------------
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. $ 158,000 $ 426,000
--------------------------------------------------------------- -------------- -------------
AUDIT-RELATED FEES, including assurance related fees,
accounting consultation and related services $ 31,000 $ 31,000
--------------------------------------------------------------- -------------- -------------
TAX FEES, professional services for income tax return
preparation, tax advice and tax planning $ 74,000 $ 105,000
--------------------------------------------------------------- -------------- -------------
ALL OTHER FEES, not included in above $ 11,000 $ 19,000
--------------------------------------------------------------- -------------- -------------
TOTAL $ 274,000 $ 581,000
--------------------------------------------------------------- -------------- -------------
(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 if 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 of Directors 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
26
PROPOSALS OF STOCKHOLDERS AND STOCKHOLDER NOMINATIONS FOR 2006 ANNUAL MEETING
Under certain circumstances, stockholders are entitled to
present proposals at stockholder meetings. Currently, the 2006 annual meeting of
stockholders is expected to be held on or about June 1, 2006.
SEC rules provide that any stockholder proposal to be included
in the proxy statement for the Company's 2006 annual meeting must be received by
the Secretary of the Company at the Company's office at 3050 East Hillcrest
Drive, Westlake Village, California 91362 prior to December 29, 2005, in a form
that complies with applicable regulations. If the date of the 2006 annual
meeting is advanced or delayed more than 30 days from the date of the 2005
annual meeting, stockholder proposals intended to be included in the proxy
statement for the 2006 annual meeting must be received by us within a reasonable
time before the Company begins to print and mail the proxy statement for the
2006 annual meeting. Upon any determination that the date of the 2006 annual
meeting will be advanced or delayed by more than 30 days from the date of the
2005 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 14, 2006,
the proxies solicited by the Board of Directors for the 2006 annual meeting of
stockholders will confer authority on the Proxyholders to vote the shares in
accordance with their best judgment and discretion if the proposal is presented
at the 2006 annual meeting of stockholders without any discussion of the
proposal in the proxy statement for such meeting.
Stockholders may nominate candidates for the Board of
Directors at an annual meeting. Stockholders who wish to request that the
Nominating Committee consider a candidate for the 2006 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
2006 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 2006 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, 2004 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,
2002, 2003 and 2004.
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, 2004, BY WRITING TO THE COMPANY; ATTN: INVESTOR RELATIONS, 3050 EAST
HILLCREST DRIVE, WESTLAKE VILLAGE, CALIFORNIA 91362, OR EMAIL THE REQUEST TO
DIODES-FIN@DIODES.COM. 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 eighteenth day of
April 2005.
By Order of the Board of Directors,
DIODES INCORPORATED
/s/ Carl C. Wertz
Carl C. Wertz,
Secretary
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REVOCABLE PROXY REVOCABLE PROXY
DIODES INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS - JUNE 1, 2005
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Diodes Incorporated (the "Company")
hereby nominates, constitutes and appoints C.H. Chen 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 at DoubleTree Guest Suites, Times Square Room, 1568 Broadway, New York,
New York 10036, at 9:00 a.m. (New York time), and any adjournments thereof, as
fully and with the same force and effect as the undersigned might or could do if
personally thereat, as follows:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
Discretionary authority to cumulate votes is granted
Nominees: C.H. Chen, Michael R. Giordano, Keh-Shew Lu, M.K. Lu, Shing Mao,
Raymond Soong, and John M. Stich.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ONE OR MORE NOMINEES,
WRITE THAT NOMINEE'S OR NOMINEES' NAME(S) IN THE SPACE PROVIDED)
- --------------------------------------------------------------------------------
2. 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 ending
December 31, 2005.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. OTHER BUSINESS
In their discretion, the Proxyholders are authorized to transact such
other business as properly may come before the Meeting and any
adjournment thereof.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Please Sign And Date On Reverse Side
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REVOCABLE PROXY REVOCABLE PROXY
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "FOR" THE ELECTION OF EACH
OF THE NOMINEES, AND "FOR" RATIFICATION OF MOSS ADAMS LLP AS THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31,
2005. ALL PROPOSALS TO BE ACTED UPON ARE PROPOSALS OF THE BOARD OF DIRECTORS. 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 OF DIRECTORS, THIS PROXY SHALL BE VOTED BY THE PROXYHOLDERS IN
ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF THE BOARD OF DIRECTORS. AT
THE DATE THIS PROXY STATEMENT WENT TO PRESS, WE DID NOT ANTICIPATE ANY OTHER
MATTERS WOULD BE RAISED AT THE ANNUAL MEETING.
The undersigned hereby ratifies and confirms all that said attorneys
and Proxyholders, or either of them, or their substitutes, shall lawfully do or
cause to be done by virtue hereof, and hereby revokes any and all proxies
heretofore given by the undersigned to vote at the Meeting. The undersigned
hereby acknowledges receipt of the Notice of Annual Meeting and the Proxy
Statement accompanying said notice.
Date:____________________
------------------------
(Name of Stockholder, Printed)
-----------------------
(Signature of Stockholder)
-----------------------
(Name of Stockholder, Printed)
-----------------------
(Signature of Stockholder)
(Please date this Proxy and sign your name as it appears on your stock
certificate(s). Executors, administrators, trustees, etc. should give their full
titles. If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person. All joint owners should
sign.)
I (We) do [ ] do not [ ] expect to attend the Meeting.
This Proxy will be voted "FOR" the election of all nominees whose names
appear above unless authority to do so is withheld. Unless "AGAINST" or
"ABSTAIN" is indicated, the Proxy will be voted "FOR" the ratification of the
appointment of Moss Adams LLP as the Company's independent registered public
accounting firm. PLEASE SIGN, DATE AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE
IN THE POSTAGE PREPAID ENVELOPE PROVIDED.
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