<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
DIODES INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
DIODES INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 5, 1998
NOTICE IS HEREBY GIVEN THAT THE ANNUAL MEETING (THE "MEETING")
OF THE STOCKHOLDERS OF DIODES INCORPORATED (THE "COMPANY") WILL BE HELD AT THE
RADISSON HOTEL, 30100 AGOURA ROAD, AGOURA HILLS, CALIFORNIA 91301, ON FRIDAY,
JUNE 5, 1998 AT 10:00 A.M. (CALIFORNIA TIME) FOR THE FOLLOWING PURPOSES:
TO RECEIVE AND CONSIDER:
The report of the Board of Directors on the business of the
Company and the Company's audited financial statements for the fiscal year ended
December 31, 1997, together with the report of Moss Adams LLP, the Company's
independent accountants for such period, on those audited financial statements.
TO ACT ON:
1. ELECTION OF DIRECTORS. To elect ten persons to the Board of
Directors of the Company, each to serve until the next annual meeting of
stockholders and until their successors have been elected and qualified. The
Board of Directors' nominees are: Eugene R. Conahan, Michael R. Giordano, David
Lin, M.K. Lu, Shing Mao, Michael A. Rosenberg, Erich E. Schaedlich, Leonard M.
Silverman, Raymond Soong, and William J. Spires.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS. To
ratify the appointment of Moss Adams LLP as the Company's independent certified
public accountants for the year ending December 31, 1998.
3. OTHER BUSINESS. To transact such other business as properly
may come before the Meeting or any adjournment thereof.
ONLY PERSONS WHO ARE STOCKHOLDERS OF RECORD (THE
"STOCKHOLDERS") AT THE CLOSE OF BUSINESS ON APRIL 24, 1998 ARE ENTITLED TO
NOTICE OF AND TO VOTE IN PERSON OR BY PROXY AT THE MEETING OR ANY ADJOURNMENT
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 Company. It is expected that
these materials will be mailed first to Stockholders on or about May 1, 1998.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK,
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE
TO BE SURE THAT YOUR STOCK IS VOTED. YOUR VOTE IS IMPORTANT, WHETHER YOU OWN A
FEW SHARES OR MANY. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
Dated at Westlake Village, California, this tenth day of
April, 1998,
By Order of the Board of Directors,
DIODES INCORPORATED
/s/ Joseph Liu
Joseph Liu,
Secretary
<PAGE> 3
DIODES INCORPORATED
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MATTERS TO BE CONSIDERED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Costs of Solicitations of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Outstanding Securities and Voting Rights; Revocability of Proxies . . . . . . . . . . . . . . . 2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 3
PROPOSAL ONE - ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Committees of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 . . . . . . . . . . . . . . . . . . 8
EXECUTIVE COMPENSATION AND RELATED INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Summary of Cash and Certain Other Compensation . . . . . . . . . . . . . . . . . . . . . . . . 9
Stock Options Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Stock Option Exercises and Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Employment Contracts and Termination of Employment and Change in Control Arrangements . . . . . 11
Report of the Compensation Committee of the Board of Directors to Stockholders . . . . . . . . 11
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . . 13
Performance Graph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . 15
PROPOSAL TWO - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . 16
PROPOSALS OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ANNUAL REPORT AND FORM 10-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
<PAGE> 4
DIODES INCORPORATED
3050 EAST HILLCREST DRIVE
WESTLAKE VILLAGE, CALIFORNIA 91362
(805) 446-4800
PROXY STATEMENT
ANNUAL MEETING: JUNE 5, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors (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 Friday, June 5,
1998, at the Radisson Hotel, 30100 Agoura Road, Agoura Hills, California 91301,
at 10:00 a.m. (California time) and at any adjournment thereof. Joseph Liu and
Carl Wertz, the designated proxyholders (the "Proxyholders"), are members of the
Company's management. Only stockholders of record (the "Stockholders") on April
24, 1998 (the "Record Date") are entitled to notice of and to vote in person or
by proxy at the Meeting or any adjournment thereof. This Proxy Statement and the
enclosed proxy card (the "Proxy") will be mailed first to Stockholders on or
about April 24, 1998.
MATTERS TO BE CONSIDERED
The matters to be considered and voted upon at the Meeting
will be:
1. ELECTION OF DIRECTORS. To elect ten persons to
the Board of Directors of the Company, each to serve until the next annual
meeting of stockholders and until their successors have been elected and
qualified. The Board of Directors' nominees are: Eugene R. Conahan, Michael R.
Giordano, David Lin, M.K. Lu, Shing Mao, Michael A. Rosenberg, Erich E.
Schaedlich, Leonard M. Silverman, Raymond Soong, and William J. Spires.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS. To ratify the appointment of Moss Adams LLP as the Company's
independent certified public accountants for the year ending December 31, 1998.
3. OTHER BUSINESS. To transact such other business
as properly may come before the Meeting or any adjournment thereof.
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. This solicitation
of Proxies will be made by mail and may be supplemented by telephone or other
personal contact to be made without special compensation by regular officers and
employees of the Company. If it should appear desirable to do so to ensure
adequate representation at the Meeting, officers and regular employees may
communicate with Stockholders, banks, brokerage houses, custodians, nominees and
others, by telephone, facsimile transmissions, telegraph, or in person to
request that Proxies be furnished. 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 solicitation of Proxies is $9,000.
1
<PAGE> 5
OUTSTANDING SECURITIES AND VOTING RIGHTS; REVOCABILITY OF PROXIES
The authorized capital of the Company consists of (i)
9,000,000 shares of common stock ("Common Stock"), $0.66-2/3 par value, of which
5,007,237 shares were issued and outstanding on the Record Date (with an
additional 717,115 shares held as Treasury Stock) and (ii) 1,000,000 shares of
Class A Preferred Stock, $1.00 par value ("Class A Preferred Stock"), of which
no shares 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 outstanding shares of the Common Stock constitutes a quorum for
the conduct of business at the Meeting. Abstentions will be treated as shares
present and entitled to vote for purposes 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 is or her name on the books of
the Company as of 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 candidates in nomination. 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 is hereby
solicited by the Board of Directors and the return of the Proxy shall grant such
authority.
Of the shares of Common Stock outstanding on the Record Date,
2,045,093 (or approximately 40.8%) (the "Shares") were held in name by Lite-On
Power Semiconductor Corporation ("LPSC"), which, in turn, is wholly-owned by
Vishay/Lite-On Power Semiconductor, Pte., LTD ("Vishay/LPSC"), a newly-formed
joint venture between the Lite-On Group and Vishay Intertechnology, Inc.
("Vishay"). See "Security Ownership of Certain Beneficial Owners and Management"
and "Certain Relationships and Related Transactions" for a discussion of the
relationship among Vishay, LPSC and the Company. An additional 598,000 (or
approximately 10.7%) were owned by directors and executive officers of the
Company. Vishay/LPSC and each director and executive officer has informed the
Company that it 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 auditors.
Each proposal described herein, other than the election of
directors, requires the affirmative vote of a majority of the outstanding shares
of Common Stock present in person or represented by proxy and entitled to vote
at the Meeting. Accordingly, broker non-votes and abstentions from voting on any
matter, other than the election of directors, will have the effect of a vote
"AGAINST" such matter.
A Proxy for use at the Meeting is enclosed. The Proxy must be
signed and dated by you or your authorized representative or agent. Telegraphed,
cabled or telecopied Proxies are also valid. You may revoke a Proxy at any time
before it is exercised at the Meeting by submitting a written revocation to the
Secretary of the Company or a duly executed Proxy bearing a later date or by
voting in person at the Meeting.
Brokers and nominees holding Common Stock in "street name"
which 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. In the event any such broker or nominee has not received
instructions from the beneficial owner by the date specified in the statement
accompanying such material, the broker or nominee may give or authorize the
giving of a Proxy to vote such Common Stock on the matters to be considered at
the Meeting; provided, however, that the broker or nominee may not give or
authorize the giving of a Proxy for any matter if it has notice of any contest
with respect to any matter, and, provided further, that the broker or nominee
may not vote the Common Stock "FOR" any matter which substantially affects the
rights or privileges of the Common Stock without specific instructions from the
beneficial owner. 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" the other proposals described herein.
2
<PAGE> 6
Unless revoked, the shares of Common Stock represented by
Proxies will be voted in accordance with the instructions given thereon. In the
absence of any instruction in the Proxy, your shares of Common Stock will be
voted "FOR" the election of the nominees for director set forth herein and "FOR"
the other proposals described herein.
The enclosed Proxy confers discretionary authority with
respect to any other proposals which properly may be brought before the Meeting.
As of the date hereof, management is not aware of any other matters to be
presented for action at the Meeting. However, if any other matters properly come
before the Meeting, the Proxies solicited hereby will be voted by the
Proxyholders 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.
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:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(2) PERCENT OF CLASS(3)
-------------------------------------------------------------- ------------ -------------------
<S> <C> <C>
LITE-ON POWER SEMICONDUCTOR CORPORATION ("LPSC") . . . . . . 2,045,093(4) 40.8%
FIDELITY MANAGEMENT & RESEARCH COMPANY . . . . . . . . . . . 431,400 8.6%
RAYMOND SOONG . . . . . . . . . . . . . . . . . . . . . . . 140,000(5) 2.7%
DAVID LIN . . . . . . . . . . . . . . . . . . . . . . . . . 147,000(5) 2.9%
MICHAEL R. GIORDANO . . . . . . . . . . . . . . . . . . . . 41,000(6) *
M.K. LU . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000(5) *
SHING MAO . . . . . . . . . . . . . . . . . . . . . . . . . 90,000(5) 1.8%
MICHAEL A. ROSENBERG . . . . . . . . . . . . . . . . . . . . 30,000(5) *
LEONARD M. SILVERMAN . . . . . . . . . . . . . . . . . . . . 20,000(5) *
EUGENE R. CONAHAN . . . . . . . . . . . . . . . . . . . . . -- *
ERICH E. SCHAEDLICH. . . . . . . . . . . . . . . . . . . . . -- *
WILLIAM J. SPIRES . . . . . . . . . . . . . . . . . . . . . -- *
PEDRO MORILLAS (7) . . . . . . . . . . . . . . . . . . . . . 23,333 *
JOSEPH LIU . . . . . . . . . . . . . . . . . . . . . . . . . 86,667(8) 1.7%
All directors and executive officers as a group (12 persons) 598,000(9) 10.7%
</TABLE>
* Less than 1%.
(1) The address of LPSC is 28-1, Wu Shin Street, Ta Wu Lung Industrial
Zone, Keelung City, Taiwan, R.O.C. The address of the directors and
executive officers of the Company is 3050 E. Hillcrest Drive, Westlake
Village, California 91362. The address of Vishay Intertechnology, Inc.
is 63 Lincoln Highway, Malvern, PA 19355-2120. The address of Fidelity
Management & Research Company is 82 Devonshire Street, Boston, MA
02109-3614.
(Footnotes continued on following page)
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<PAGE> 7
(Footnotes continued from previous page)
(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) Shares which the person (or group) has the right to acquire within 60
days after April 24, 1998 are deemed to be outstanding in calculating
the percentage ownership of the person (or group) but are not deemed to
be outstanding as to any other person or group. Percent of class total
does not take into account 717,115 shares held as treasury stock.
(4) LPSC, which holds 2,045,093 shares of Common Stock, as the record
holder, is owned by Vishay/LPSC, a joint venture owned 65% by Vishay
and 35% by the Lite-On Group.
(5) Represents shares of Common Stock which the named individual has the
right to acquire within 60 days of April 24, 1998, by the exercise of
vested stock options.
(6) Represents 1,000 shares of Common Stock held in the name of PaineWebber
Trust for the IRA of Mr. Giordano and 40,000 shares of Common Stock
which Mr. Giordano has the right to acquire within 60 days of April 24,
1998, by the exercise of vested stock options.
(7) See "Executive Compensation - Employment Contracts and Termination of
Employment and Change in Control Arrangements" for a discussion of Mr.
Morillas' separation agreement.
(8) Includes 76,667 shares of Common Stock which Mr. Liu has the right to
acquire within 60 days of April 24, 1998, by the exercise of vested
stock options.
(9) Includes 563,667 shares which the directors and executive officers have
the right to acquire within 60 days of April 24, 1998, by the exercise
of vested stock options, and excludes an additional 213,333 shares
which certain directors and executive officers will have the right to
acquire upon the exercise of stock options, which options will become
exercisable in installments after April 24, 1998.
Other than as disclosed in the foregoing table, to the
knowledge of the Company, no other person or company (other than Cede & Co., a
depository company) owns of record or beneficially more than 5 percent of the
issued and outstanding Common Stock of the Company.
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. The number of directors is currently
composed of seven members. The Board of Directors has fixed the number of
directors at ten. 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 shareholders
and until their 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.
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 above,
as of the date hereof, no directorships are held by any director in a company
which has a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the
4
<PAGE> 8
"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.
The following table sets forth certain biographical
information of the nominees for director and the executive officers of the
Company as of the Record Date. The term of office of each director expires with
the annual meeting of shareholders or when a successor is elected and qualified:
<TABLE>
<CAPTION>
DIRECTOR
OFFICERS AND DIRECTORS AGE POSITION WITH THE COMPANY SINCE (1)
- ------------------------------------ ----- --------------------------------------------- ---------
<S> <C> <C> <C>
Raymond Soong (2).................. 56 Chairman of the Board 1993
Michael A. Rosenberg (3)........... 69 President and Director 1989
Michael R. Giordano (4)............ 51 Director 1990
David Lin (5)...................... 51 Director and former President and CEO 1991
M.K. Lu (6)........................ 49 Director 1995
Shing Mao (7)...................... 62 Director 1990
Leonard M. Silverman (8)........... 58 Director 1995
Eugene R. Conahan (9).............. 47 Director - Nominee N/A
Erich E. Schaedlich (10)........... 54 Director - Nominee N/A
William J. Spires (11)............. 56 Director - Nominee N/A
Joseph Liu (12).................... 56 Vice President-Operations, Chief N/A
Financial Officer and Secretary
</TABLE>
(1) Directors are elected at each annual meeting of shareholders.
(2) Mr. Soong has been the Chairman of the Board of Silitek Corporation
since 1990 and has been Chairman of the Board of LPSC since 1992. See
"Security Ownership of Certain Beneficial Owners and Management" and
"Certain Relationships and Related Transactions" for a discussion of
the relationships among Silitek, LPSC, Vishay and the Company. Since
1995, Mr. Soong has also been a director of FabTech, a subsidiary of
LPSC, with whom the Company entered into an agreement in February 1996,
whereby Diodes gains a new supply of processed wafers used in the
manufacture of several types of discrete semiconductors. 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, Mr. Soong, together with
several of his coworkers, founded Taiwan Liton Electronic Co. Ltd.,
("Taiwan Liton"), in 1975. Taiwan Liton, which manufactures electronic
components and subsystems, is an affiliate of Silitek through common
control, and its stock is listed on the Taipei Stock Exchange. Mr.
Soong is also Chairman of the Board of Taiwan Liton, and the KaiHong
joint venture.
(3) Mr. Rosenberg was appointed President of the Company on October 9, 1997
and has served as a director of the Company since 1989. Since 1992, Mr.
Rosenberg also has served as an independent consultant to Vishay.
Vishay, with worldwide sales exceeding $1 billion, is the world's
largest manufacturer of passive electronic components and a Fortune
1000 company. See "Certain Relationships and Related Transactions" for
a discussion of the relationships among Silitek, LPSC, Vishay and the
Company. Until 1991, Mr. Rosenberg was President, Principal Operating
Officer and a director of SFE Technologies, a manufacturer of
electronic components with principal offices in San Fernando,
California. From 1970 to 1990, Mr. Rosenberg served as Vice President
Technology of SFE Technologies. Until his appointment as President of
the Company, Mr. Rosenberg also served on the Company's Compensation
and Options Committee.
(Footnotes continued on following page)
5
<PAGE> 9
(Footnotes continued from previous page)
(4) Mr. Giordano joined the investment banking firm of PaineWebber
Incorporated as a Senior Vice President-Investment Consulting, when
PaineWebber acquired his previous firm, Kidder Peabody and Company,
Inc. Mr. Giordano advises corporations, foundations, trusts, and
municipal governments in investments and finance. Mr. Giordano was with
Kidder Peabody since 1979. Formerly a captain and pilot in the USAF,
Mr. Giordano received his Bachelors 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 a member
of the Company's Audit Committee and Compensation and Options
Committee.
(5) Mr. Lin, who resigned on October 9, 1997, had served as President and
Chief Executive Officer of the Company since March 1993. Mr. Lin
continues to serve as a director of the Company. Mr. Lin is also
President of Silitek and had served as Executive Vice President of
Silitek since 1990, prior to becoming President. See "Security
Ownership of Certain Beneficial Owners and Management" and "Certain
Relationships and Related Transactions" for a discussion of the
relationships among Silitek, LPSC and the Company. Mr. Lin was
previously President of Texas Instruments Asia, Limited, in Taiwan from
1982 to 1990. Mr. Lin has been a director of LPSC since 1991 and a
director of Maxi Switch, Inc., a U.S. based computer keyboard
manufacturer and a member of the Lite-On Group, since 1990. Mr. Lin is
also a director of the KaiHong joint venture.
(6) Mr. Lu has been President and a director of LPSC since 1991, and is now
President of the newly formed joint venture, Vishay/LPSC. From 1983 to
1990, Mr. Lu was General Manager/Vice President of Silitek. See
"Security Ownership of Certain Beneficial Owners and Management" and
"Certain Relationships and Related Transactions" for a discussion of
the relationship between Silitek, LPSC and the Company. Since 1995, Mr.
Lu has also been a director of FabTech. Mr. Lu earned his Bachelor of
E.E. at Tatung Institute of Technology and is a graduate of the
Institute of Administration at National Chengchi University. Mr. Lu is
also a present member of the Chinese Management Association and the
Chinese Association for Advancement of Management. Mr. Lu is also a
director of the KaiHong joint venture.
(7) From 1988 to present, Dr. Mao has been Chairman of the Board of
Lite-On, Inc., a California corporation located in Milpitas,
California, and a wholly owned subsidiary of Taiwan Liton. See
"Security Ownership of Certain Beneficial Owners and Management" and
"Certain Relationships and Related Transactions" for a discussion of
the relationships among Silitek, LPSC, and the Company. Dr. Mao has
been a director of Dyna Investment Co., Ltd. of Taiwan, a venture
capital company, and a director of LPSC, both since 1989. Since 1995,
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 Texas Instruments for 11 years, and with
UTL Corporation (later acquired by Boeing Aircraft Company) for seven
years. Dr. Mao earned his Ph.D. degree in electrical engineering at
Stanford University in 1963. Dr. Mao is a member of the Company's Audit
Committee and Compensation and Options Committee.
(8) From 1984 to present, Dr. Silverman has been the Dean of Engineering at
the University of Southern California ("USC"), and has been employed by
USC since 1968. Dr. Silverman is internationally known for his
pioneering work in the theory and application of multi-variable control
systems and signal processing and has more than 100 publications to his
credit. Dr. Silverman has been honored as a Fellow of the IEEE, as a
Distinguished Member of the IEEE Control Society, and has received a
Centennial Medal of the IEEE. He has also received election to the
National Academy of Engineering, one of the highest honors that can be
bestowed on an engineer. Dr. Silverman also serves on the Board of
Directors for Advanced Micro Devices and Netter Digital Entertainment,
Inc., as well as for the Colachis Foundation, the Lord Foundation, and
the M.C. Gill Foundation. Dr. Silverman earned his A.B., B.S., M.S. and
Ph.D. degrees in electrical engineering at Columbia University during
the period 1961 through 1966. Dr. Silverman is a member of the
Company's Audit Committee and Compensation and Options Committee.
(9) Mr. Conahan has been Vice President, Sales - The Americas of Vishay
since December 1997, and previously served as General Manager, Film
Resistors Division of Vishay since 1995. From 1990 to 1995, Mr. Conahan
served as Vice President, Control Products for Square D Corporation, a
manufacturer of distribution, control and instrumentation equipment.
(Footnotes continued on following page)
6
<PAGE> 10
(Footnotes continued from previous page)
(10) Mr. Schaedlich has been Senior Vice President - Worldwide Sales for
Vishay Europe GmbH since late 1997. From 1993 to 1997, Mr. Schaedlich
served as Vice President Sales and Marketing for Vishay Europe. From
1993 to present, Mr. Schaedlich also serves as director for Vishay
Electronic GmbH, Vishay Germany, Vishay Benelux, Vishay Switzerland and
Vishay Austria. From 1994 to present, Mr. Schaedlich serves as a
director for Vishay Europe GmbH, and from 1997 to present he serves as
a director for Vishay Denmark A/S .
(11) Mr. Spires has been a Vice President and Secretary of Vishay since
1981. Previously, Mr. Spires served as Vice President - Industrial
Relations since 1980 and has been employed by Vishay since 1970.
(12) Mr. Liu has served as Vice President, Operations of the Company since
1994 and Chief Financial Officer and Secretary since 1990. Mr. Liu was
the Company's Vice President, Administration from 1990 to 1994. Prior
to joining the Company, Mr. Liu held various management positions with
Texas Instruments ("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 Chief Coordinator of Strategic Business Systems for
TI Asia Pacific Division in Dallas. Mr. Liu is President and a director
of the KaiHong joint venture, and serves as Chief Financial Officer of
FabTech. See "Certain Relationships and Related Transactions" for a
discussion of the relationships among KaiHong, FabTech and the Company.
There are no family relationships among any of the directors
or executive officers of the Company and, except as set forth above, as of the
date hereof, no directorships are held by any director in a company which 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. 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.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a standing Audit Committee and a
Compensation and Options Committee. The members of the Audit Committee are Dr.
Shing Mao, Dr. Leonard Silverman, and Michael Giordano. Michael A. Rosenberg was
a member of the Audit Committee until he was appointed President of the Company
in October 1997. The Audit Committee met twice during fiscal year 1997. The
Audit Committee makes recommendations to the Board of Directors regarding the
engagement of the Company's independent auditors, 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 auditors. The Audit
Committee also monitors policies to prohibit unethical, questionable or illegal
activities by the Company's employees.
The Compensation and Options Committee consists of Dr. Shing
Mao, Dr. Leonard Silverman, and Michael Giordano. Michael A. Rosenberg was a
member of the Compensation and Options Committee until he was appointed
President of the Company in October 1997. The Compensation and Options Committee
makes recommendations to the Board of Directors regarding compensation, benefits
and incentive arrangements for officers and other key employees of the Company
including awards under the Company's Incentive Bonus Plan. The Compensation and
Options Committee also administers the Company's 1993 Incentive Stock Option
Plan ("1993 ISO Plan"), the Company's 1993 Non-Qualified Stock Option Plan
("1993 NQO Plan"), and the Company's 1984 Non-Qualified Stock Option Plan ("1984
NQO Plan").
The Board of Directors met one time during fiscal year 1997.
The Compensation and Options Committee and the Audit Committee each met once
during fiscal year 1997. All of the persons who were directors of the Company or
members of committees were present for all of the meetings during fiscal year
1997.
7
<PAGE> 11
STOCK OPTION PLANS
The 1993 ISO Plan provides for the issuance of up to 1,000,000
shares of the Company's authorized but unissued 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, unmatured 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 10 years from the date of grant.
The 1993 NQO Plan became effective retroactively to July 6,
1993, upon approval by the shareholders at the Company's 1994 annual meeting.
The 1993 NQO Plan provides for the issuance of up to 1,000,000 shares of the
Company's authorized but unissued Common Stock. 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, unmatured options are accelerated to
maturity. The Compensation and Options Committee, which administers the 1993 NQO
Plan, has full discretion to determine whether or not options granted under the
1993 NQO Plan shall have a right to relinquish up to one-half of an unexercised
position of an option for an amount of cash, if concurrently, the holder of the
option exercises a portion of the option and purchases a number of shares of
stock at least equal to the number of shares which could have been purchased
under the portion of the option relinquished ("SAR"). However, the Board of
Directors has expressly stated that it has not and does not intend to grant such
SAR. The shares to be issued upon exercise of options under the 1993 NQO Plan
require a three-year vesting period. The option price is 100% of the fair market
value of such shares on the date the option is granted. Options expire ten years
from the grant of the option.
The 1984 NQO Plan provides for the issuance of up to 300,000
shares of the Company's authorized but unissued Common Stock. Options granted
under the 1984 NQO 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, unmatured options are accelerated to maturity. An option
granted under the 1984 NQO Plan may not be priced at less than 100% of fair
market value on the date of grant and expires 10 years from the date of grant.
COMPENSATION OF DIRECTORS
All directors each receive $750 for each meeting of the Board
of Directors attended during the year ended December 31, 1997. No additional
amounts are paid to directors for committee participation or special
assignments. The Board of Directors may modify such compensation in the future.
Both employee and non-employee directors are eligible to receive grants of stock
options.
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 the Common
Stock and any changes in that ownership to the Securities and Exchange
Commission (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, 1997, all reporting persons filed reports on a timely
basis, except Silitek Corporation, which filed a late Form 4 in connection with
the purchase of 50,000 shares of the Company's Common Stock in May 1997. To
avoid the inadvertent failure of directors, executive officers and stockholders
to timely file these reports in the future, the Company will periodically advise
such persons of their filing obligations.
8
<PAGE> 12
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following sets forth certain summary information concerning
compensation paid or accrued by the Company to its executive officers (the
"Named Executives") for each of the fiscal years ended December 31, 1997, 1996
and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------------
Annual Compensation (1) Awards Payouts
----------------------------------- ------------------------- ----------
Other Securities All
Name and Annual Restricted Underlying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary($) Bonus($) sation($) Awards($) SARs(#) Payouts($) sation($)
- -------- ---- --------- -------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MICHAEL A. 1997 --(2) -- -- -- -- -- --
ROSENBERG 1996 -- -- -- -- -- -- --
President 1995 -- -- -- -- -- -- --
DAVID LIN 1997 --(3) -- -- -- -- -- --
President and 1996 --(3) -- -- -- 100,000(4) -- --
Chief Executive 1995 --(3) -- -- -- -- -- --
Officer
PEDRO MORILLAS 1997 133,000(5) 64,000 -- -- -- -- --
Executive 1996 133,000 60,000 -- -- 70,000(6) -- --
Vice President 1995 128,003 146,481 -- -- -- -- --
JOSEPH LIU 1997 120,000 99,266 -- -- -- -- --
Vice President- 1996 120,000 30,000 -- -- 50,000(7) -- --
Operations, 1995 115,564 73,240 -- -- -- -- --
Chief Financial
Officer and
Secretary
</TABLE>
(1) Certain of the Company's executive officers receive personal benefits
in addition to salary and cash bonuses, including car allowances, life
insurance payable at the direction of the employee, contributions under
the Company's 401(k) Plan, and group health insurance. The aggregate
amount of such personal benefits does not exceed the lesser of $50,000
or 10% of the total annual salary and bonus reported for the Named
Executives.
(2) Mr. Rosenberg was appointed President on October 9, 1997. Mr. Rosenberg
receives no direct compensation from the Company, other than issuance
of the Company's stock options and reinbursement of expenses while on
Company business. In addition, Mr. Rosenberg receives cash compensation
directly from Vishay for his services as a consultant to Vishay. See
"Certain Relationships and Related Transactions" for a discussion of
the relationship among Silitek, LPSC, Vishay and the Company.
(3) Mr. Lin, who resigned on October 9, 1997 to pursue other business
interests with the Lite-On Group in East Asia, received no direct
compensation from the Company, other than issuance of the Company's
stock options. However, Mr. Lin received cash compensation directly
from Silitek for his services as President of Silitek. See "Certain
Relationships and Related Transactions" for a discussion of the
relationships among Silitek, LPSC, Vishay and the Company.
(Footnotes continued on following page)
9
<PAGE> 13
(Footnotes continued from previous page)
(4) Mr. Lin's options were granted pursuant to the Company's 1993
Non-Qualified Stock Option Plan ("1993 NQO Plan") at an exercise price
of $6.00. The 1993 NQO Plan became effective retroactively to July 6,
1993, upon approval by the shareholders at the Company's 1994 annual
meeting. The 1993 NQO Plan provides for the issuance of up to 1,000,000
shares of the Company's authorized but unissued Common Stock. Options
granted shall terminate and be of no force and effect with respect to
any shares not previously taken up by optionee upon the expiration of
ten years from the date of grant. 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, unmatured options
are accelerated to maturity. The Compensation and Stock Option
Committee, which administers the 1993 NQO Plan, has full discretion to
determine whether or not options granted under the 1993 NQO Plan shall
have a right to relinquish up to one-half of an unexercised position of
an option for an amount of cash, if concurrently, the holder of the
option exercises a portion of the option and purchases a number of
shares of stock at least equal to the number of shares which could have
been purchased under the portion of the option relinquished ("SAR").
However, the Board has expressly stated that it has not and does not
intend to grant such SAR. The shares to be issued upon exercise of
options under the 1993 NQO Plan require a three-year vesting period.
The option price is 100% of the fair market value of such shares on the
date the option is granted. Options expire ten years from the grant of
the option. On October 8, 1997, the Board of Directors amended such
options so that they shall be exercisable in full.
(5) Mr. Morillas' employment terminated effective February 28, 1998. See
"Executive Compensation - Employment Contracts and Termination of
Employment and Change in Control Arrangements" for a discussion of Mr.
Morillas' separation agreement.
(6) Mr. Morillas' options were issued pursuant to the Company's 1993
Incentive Stock Option Plan ("1993 ISO Plan") at an exercise price of
$6.00 and are exercisable annually in three equal amounts over a three
year vesting period. The 1993 ISO Plan provides for the issuance of up
to 1,000,000 shares of the Company's authorized but unissued Common
Stock. Options granted under the 1993 ISO Plan are not transferable,
except by will or the laws of descent or distribution. An 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, unmatured 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 10 years
from the date of grant. See "Executive Compensation - Employment
Contracts and Termination of Employment and Change in Control
Arrangements" for a discussion of Mr. Morillas' separation agreement.
(7) Mr. Liu's options granted in 1996 were issued pursuant to the Company's
1993 ISO Plan at an exercise price of $6.00 and are exercisable
annually in three equal amounts over a three year vesting period.
STOCK OPTION GRANTS
The following table contains information
concerning the grant of stock options during fiscal year ended December 31, 1997
to the Named Executives:
OPTION/SAR GRANTS IN FISCAL YEAR 1997(1)
NONE
(1) During fiscal 1997, no options were granted to the Named Executives
under the 1993 NQO Plan or the 1993 ISO Plan. On October 8, 1997, the
Company's Board of Directors amended all options held by Mr. Lin so
that such options shall be exercisable in full.
10
<PAGE> 14
STOCK OPTION EXERCISES AND HOLDINGS
The following table contains information with respect to the
Named Executives concerning the exercise of options during the fiscal year ended
December 31, 1997 and unexercised options held by the Named Executives as of
December 31, 1997:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares
Acquired Value Value of Unexercised
on Exercise Realized Number of Unexercised "In-the-Money" Options/SAR
Name (#) ($) Options/SAR's at 12/31/97(#) at 12/31/97($)(1)
- -------------------- ----------- -------- ------------------------------ -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
MICHAEL ROSENBERG 5,000 58,125 30,000 20,000 138,750 37,500
DAVID LIN 0 -- 147,000 0 469,500 --
PEDRO MORILLAS 16,667 168,540 23,333 0 43,749 --
JOSEPH LIU 0 -- 76,667 33,333 151,251 62,499
</TABLE>
(1) 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, 1997 ($7.875 per share) and the exercise price of the
option, multiplied by the number of shares subject to the option.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Effective March 16, 1993, the Company entered into an
employment agreement with Pedro Morillas, the Company's Executive Vice
President. Under such employment agreement, Mr. Morillas was entitled to, among
other things, (i) receive an annual base salary and performance bonus subject to
the determination and evaluation of the Company's Compensation and Stock Options
Committee on a yearly basis, (ii) participate in all plans sponsored by the
Company for employees in general, (iii) use a Company car, and (iv) receive an
option to purchase from the Company up to 50,000 shares of the Company's Common
Stock at $1.875 per share (exercisable in three equal installments commencing
June 10, 1994 and expiring on the tenth anniversary of the date of grant).
Mr. Morillas' employment terminated effective February 28,
1998. Pursuant to a separation agreement, the Company will pay Mr. Morillas
$140,000 in twelve equal, monthly installments beginning March 1, 1998 in lieu
of unvested stock options. With the exception of those stock options which have
already vested, all stock options granted to Mr. Morillas have terminated.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS TO STOCKHOLDERS
The Report of the Compensation and Options Committee of the
Board of Directors to Stockholders 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 COMMITTEE
The Compensation and Options Committee (the "Committee")
consists of three directors, Dr. Shing Mao, Dr. Leonard Silverman, and Michael
R. Giordano, who are not employees or former employees of the Company. Michael
A. Rosenberg was a member of the Compensation and Options Committee until he was
appointed President of the Company in October 1997. The Committee recommends
salary practices for executive personnel, reviews the performance of the Company
and the executive officers, sets performance objectives, recommends the
compensation of executive officers, and recommends the grant of options under
the Company's various stock option plans.
11
<PAGE> 15
The Company's general approach to compensating executive
officers is to pay cash salaries which are competitive with salaries paid to
executives of other companies in the Company's industry, which are of similar
size and engaged in a similar line of business, and to employ a subjective
assessment of the individual's experience and past and potential contribution to
the Company.
The Company's policy in compensating executive officers is to
establish methods and levels of compensation that will provide strong incentives
to promote the profitability and growth of the Company and reward superior
performance. Compensation of executive officers includes base salary,
performance-based incentive bonuses and stock-based programs. Salaries are
established by the Committee based on the Committee's subjective assessment of
the executive's scope of responsibility, level of experience, individual
performance, and contribution to the business.
The Company believes that the emphasis on performance-based
and stock-based compensation serves to align the interests of the executive
officers with the interests of the Company's stockholders. The Company also
seeks to establish overall compensation levels that are sufficiently competitive
to attract, retain, and motivate highly competent management personnel. Mr.
Morillas' base salary was paid in accordance with the terms and conditions of a
compensation agreement based upon the aforementioned subjective criteria of the
Committee. See "Employment Contracts and Termination of Employment and Change in
Control Arrangements." Mr. Liu's base salary is also paid in accordance with
subjective criteria set by the Committee.
The Company's performance, for purposes of compensation
decisions, is measured under the annual bonus plan against goals established
prior to the start of the fiscal year by the Committee, and is reviewed and
approved by the Committee. The Company's annual bonus plan is based on specific
financial performance results. Bonuses, set at a fixed amount and paid as a
percentage of the total, are based upon reaching a percentage between 80 and
120% of the goal. Bonus compensation paid to Mr. Morillas was based upon goals
set by the Committee for net sales and profit before tax. Mr. Liu's bonus is
based on targets set by the Committee for net sales, and profit before tax, as
well as, return on assets.
COMPENSATION FOR THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
No cash compensation was paid by the Company to Mr. David Lin,
the Company's President and Chief Executive Officer until his resignation in
October 1997. Because Mr. Lin serves as President of Silitek Corporation, he is
compensated directly by Silitek. Mr. Lin was, however, eligible to participate
in, and receive stock option grants through, the Company's 1993 Non-Qualified
Stock Option Plan. Any Shares that have been granted to Mr. Lin were based upon
the Committee's subjective assessment of the performance of Mr. Lin and the
Company. On October 8, 1997, the Company's Board of Directors amended all
options held by Mr. Lin so that such options shall be exercisable in full.
No cash compensation, other than expense reinbursement, was
paid by the Company to Mr. Michael A. Rosenberg, the Company's President since
his appointment in October 1997. Because Mr. Rosenberg serves as a consultant to
Vishay Intertechnology, Inc., he is compensated directly by Vishay. Mr.
Rosenberg is however, eligible to participate in, and receive stock option
grants through, the Company's 1993 Non-Qualified Stock Option Plan. Any Shares
that have been granted to Mr. Rosenberg were based upon the Committee's
subjective assessment of the performance of Mr. Rosenberg and the Company.
STOCK OPTIONS
The Committee strongly believes that the interests of senior
management must be closely aligned with those of the Company's stockholders.
Stock options are granted to officers selected employees whose contributions and
skills are important to the long-term success of the Company. Stock options
granted to executive officers to date are granted at the fair market value as of
the date of grant with a ten year term. If employment is terminated, the term of
the grant is 90 days from the termination date. To encourage retention, the
ability to exercise options granted under the plans is subject to vesting
restrictions. The Committee's policy is to award an initial grant at the date of
employment, which vests over three years, and is in recognition of the executive
officer's potential contribution to the Company. The three year vesting period
may be increased or decreased at the Committee's discretion. After three years,
it is at the Committee's discretion to award additional grants based upon future
contribution. Decisions made by the Committee regarding the timing and size of
other option grants take into consideration Company and individual
12
<PAGE> 16
performance, competitive market practices, and the size and term of option
grants made in prior years. The Committee does not consider current option
holdings when granting additional options.
The Company's stock option plans have been amended and
approved by the stockholders so stock options that have been awarded can qualify
for exclusion under Section 162(m) of the Internal Revenue Code of 1986 as
performance-based compensation.
Dated: April 3, 1998
Compensation Committee of the Board of Directors
Michael R. Giordano
Michael A. Rosenberg
Shing Mao
Leonard Silverman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Options Committee consists of three
directors, Michael R. Giordano, Dr. Shing Mao, and Leonard Silverman. Michael A.
Rosenberg, was a member of the Compensation and Options Committee until he was
appointed President of the Company on October 9, 1997.
No person who served as a member of the Company's Compensation
Committee during the 1997 fiscal year has ever been an officer or employee of
the Company or any of its subsidiaries.
David Lin, the President, Chief Executive Officer and a
director of the Company until his resignation in October 1997, was President and
a director of Silitek. Silitek's entire Board of Directors participated in
compensation decisions for Silitek in the absence of its Compensation Committee
during fiscal year 1997. Mr. Lin resigned as President and Chief Executive
Officer of the Company on October 9, 1997, but remains on the Board of
Directors.
During the years ended December 31, 1997 and 1996,
approximately 32% and 28%, respectively, of the purchases of products for resale
by the Company, amounting to approximately $15,630,000 and $10,403,000,
respectively, were from LPSC. These products, which were also available
generally from other sources, were purchased in transactions negotiated at
prices competitive with prices charged by other vendors of similar products in
similar quantities. There are no special or exclusive trading agreements or
understandings between the Company and LPSC, other than the Company's marketing
agreement with LPSC. See "Certain Relationships and Related Transactions."
13
<PAGE> 17
PERFORMANCE GRAPH
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 American Stock Exchange
Market Index ("AMEX Market Index") and a Company-constructed electronics
manufacturing and distribution peer group for the five fiscal years ending
December 31, 1997. 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 or under the Exchange Act, except to the extent
that the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG DIODES INCORPORATED, AMEX MARKET INDEX AND PEER GROUP INDEX (1)
<TABLE>
<CAPTION>
- ------------------------------------------ -------- --------- ---------- - ---------- ------------ ----------
1992 1993 1994 1995 1996 1997
- ------------------------------------------ -------- --------- ---------- - ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Diodes Incorporated $ 100 $ 390.91 $ 363.64 $ 763.64 $ 527.27 $ 709.09
- ------------------------------------------ -------- --------- ---------- - ---------- ------------ ----------
AMEX Market Index 100 118.81 104.95 135.28 142.74 176.68
- ------------------------------------------ -------- --------- ---------- - ---------- ------------ ----------
Peer Group Index (weighted average) 100 146.84 174.66 355.48 300.86 483.83
- ------------------------------------------ -------- --------- ---------- - ---------- ------------ ----------
</TABLE>
(1) Assumes $100 invested on December 31, 1992 in the Common Stock of
Diodes Incorporated, the stock of the companies in the AMEX Market
Index, and in the stocks of the peer group companies, and that all
dividends received within a quarter, if any, were reinvested in that
quarter. The peer group companies consist of Microsemi Corporation,
Nu-Horizons Electronics Corporation, Siliconix, Inc., Semtech
Corporation, Sterling Electronics Corporation, Unitrode Corporation,
Western Microtechnology, Inc., and Taitron Components, Inc.
14
<PAGE> 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LPSC is the record owner of 41.0% and 40.8% of the Company's
issued and outstanding Common Stock, excluding treasury stock, at December 31,
1997, and the Record Date, respectively. In August 1997, the ownership of LPSC
was transferred to Vishay/LPSC, a newly formed joint venture between the Lite-On
Group and Vishay. Vishay holds a 65% interest in the joint venture, and the
Lite-On Group holds the other 35%.
During the years ended December 31, 1997 and 1996,
approximately 32% and 28%, respectively, of the purchases of products for resale
by the Company, amounting to approximately $15,630,000 and $10,403,000,
respectively, were from LPSC. These products, which were also available
generally from other sources, were purchased in transactions negotiated at
prices competitive with prices charged by other vendors of similar products in
similar quantities. There are no special or exclusive trading agreements or
understandings between the Company and LPSC, other than the Company's marketing
agreement with LPSC.
In February 1996, the Company announced an agreement with
FabTech whereby the Company may purchase processed wafers used in the
manufacture of several types of discrete semiconductors. The Company has
provided FabTech with approximately $2.5 million in working capital to be used
in upgrading, reconfiguring, and starting up operations at an existing wafer
fabrication facility located in Lee's Summit, Missouri. The Company receives
interest from FabTech on the $2.5 million advance at a rate equal to the
Company's current cost of capital. FabTech is a wholly-owned subsidiary of LPSC.
The Company's Taiwan and China manufacturing facilities
receive wafers from FabTech, among others. Output from the FabTech facility
includes wafers used in the production of Schottky barrier diodes, fast recovery
epitaxial diodes (FREDs), and other widely used value-added products. Schottky
barrier diodes are employed in the manufacture of the power supplies found in
personal computers, telecommunications devices and other applications where high
frequency, low forward voltage and fast recovery are required.
One of the Company's primary strategic programs was the
formation of the KaiHong joint venture on mainland China, which provides
replacements for a portion of the ITT product line. In March 1996, the Company
entered into the KaiHong joint venture for the development of additional
manufacturing capacity in Shanghai, R.O.C. The joint venture allows for the
manufacturing and sale of diodes and associated electronic components, mainly in
SOT-23 packaged components.
Due to the recent success of the facility and through an
arrangement in accordance with the original joint venture agreement previously
filed, the Company increased its controlling interest in KaiHong to 95%, and
increased its equity contribution to approximately $4.75 million, in the fourth
quarter of 1997. Also during the last quarter of 1997, the KaiHong joint venture
began shipments of products to customers other than the Company, and thus has
begun to contribute to the Company's consolidated sales.
Mr. Raymond Soong, who became a director and Chairman of the
Board of the Company effective March 16, 1993, is also the Chairman of the Board
of Silitek, LPSC, Taiwan Liton, and the KaiHong joint venture.
Mr. Michael A. Rosenberg, appointed President of the Company
in October 1997, and serving as a director of the Company since 1989, also
serves as a consultant to Vishay, for which consulting services he is
compensated by Vishay.
Mr. David Lin, who has been a director of the Company since
1991, was from March 1993 to October 1997, President and Chief Executive Officer
of the Company. Mr. Lin is the President and a director of Silitek, for which
services he is compensated by Silitek. See "Executive Compensation." Mr. Lin is
also a director of the KaiHong joint venture.
Silitek is affiliated through common ownership and control
with Taiwan Liton, and both companies are members of the Lite-On Group. Both
Silitek and Taiwan Liton are public corporations in Taiwan with stock registered
on the Taipei Stock Exchange. Taiwan Liton owns 100% of the voting shares of
Lite-On Milpitas.
15
<PAGE> 19
Dr. Shing Mao, who is a director of the Company, is Chairman
of the Board of Lite-On Milpitas, a wholly-owned subsidiary of Taiwan Liton. Dr.
Mao is also a director of LPSC, and since 1995, has also been a director of
FabTech, with whom the Company entered into an agreement with in January 1996,
whereby Diodes gained a new supply of processed wafers used in the manufacture
of several types of discrete semiconductors. FabTech is a subsidiary of LPSC.
Mr. M.K. Lu, who has been a director of the Company since
1995, is also the President and a director of LPSC since 1991. Mr. Lu is now
President of Vishay/LPSC that owns 100% of LPSC. From 1983 to 1990, Mr. Lu was
General Manager/Vice President of Silitek. Mr. Lu is also a director of the
KaiHong joint venture.
During 1997, Mr. Michael R. Giordano, a director of the
Company and Senior Vice President-Investment Consulting at the investment
banking firm of PaineWebber, Inc., has, from time to time, assisted directors
and executive officers of the Company in stock option exercises and subsequent
stock sales of the Company's Common Stock. Mr. Giordano is also the pension
consultant for the Company's 401(k) plan and has, from time to time, in such
capacity assisted LPSC in stock transactions. Compensation received by Mr.
Giordano for services rendered to the Company and LPSC for services other than
as a director in 1997 was less than $3,000.
The employment of Mr. Pedro Morillas as Executive Vice
President of the Company and director of the KaiHong joint venture terminated
effective as of February 28, 1998. See "Executive Compensation - Employment
Contracts and Termination of Employment and Change in Control Arrangements" for
a discussion of Mr. Morillas' separation agreement.
Mr. Joseph Liu, Vice President, Operations, Chief Financial
Officer and Secretary of the Company, is also President and a director of the
KaiHong joint venture, and serves as Chief Financial Officer of FabTech.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF THE BOARD OF DIRECTORS' NOMINEES.
PROPOSAL TWO - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Moss Adams LLP, certified accountants, has been
the Company's independent accountants since 1993 and has been selected by the
Board of Directors to serve as its independent accountants for the fiscal year
ending December 31, 1998. Professional services rendered by Moss Adams LLP for
the fiscal year ended December 31, 1997 consisted of an audit of the Company's
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 fiscal 1997 were
furnished at customary rates and terms. The Audit Committee of the Board of
Directors met periodically with representatives of Moss Adams LLP during the
past fiscal year. The members of the Audit Committee are Messrs. Giordano, Mao,
and Silverman. 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.
Stockholders are being asked to ratify the appointment of Moss
Adams LLP as the Company's independent public accountants for the fiscal year
ending December 31, 1998. Ratification of the proposal requires the affirmative
vote of a majority of the shares of Common Stock represented and voting at the
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.
PROPOSALS OF STOCKHOLDERS
Under certain circumstances, stockholders are entitled to
present proposals at stockholder meetings. Any such proposal to be included in
the proxy statement for the Company's 1999 annual meeting of stockholders must
be submitted by a stockholder prior to December 11, 1998, in a form that
complies with applicable regulations.
16
<PAGE> 20
ANNUAL REPORT AND FORM 10-K
The Company's Annual Report of the fiscal year ended December
31, 1997 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 auditors,
for the fiscal years ended December 31, 1997, 1996 and 1995.
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 FISCAL YEAR ENDED DECEMBER
31, 1997, BY WRITING TO THE COMPANY; ATTN: JOSEPH LIU, 3050 EAST HILLCREST
DRIVE, WESTLAKE VILLAGE, CALIFORNIA 91362.
OTHER MATTERS
Management knows of no business which will be presented for
consideration at the Meeting other than as stated in the Notice of Meeting. If,
however, other matters are properly brought before the Meeting, it is the
intention of the Proxyholders to vote the shares represented by the Proxies on
such matters in accordance with the recommendation of the Board of Directors and
authority to do so is included in the Proxy.
Dated at Westlake Village, California, this tenth day of
April, 1998,
By Order of the Board of Directors,
DIODES INCORPORATED
/s/ Joseph Liu
Joseph Liu,
Secretary
17
<PAGE> 21
REVOCABLE PROXY DIODES INCORPORATED REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 5, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Diodes Incorporated (the "Company") hereby
nominates, constitutes and appoints Michael A. Rosenberg and Joseph Liu, and
each of them, the attorney, agent and proxy 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 The Radisson Hotel, 30100 Agoura Road, Agoura Hills,
California 91301, on Friday, June 5, 1998 at 10:00 a.m. (California time), and
any adjournments thereof, as fully and with the same force and effect as the
undersigned might or could do if personally thereat, as follows:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for [ ]
(except as marked to the contrary below) all nominees listed below
Discretionary Authority to cumulate votes
is granted
</TABLE>
Nominees: Eugene R. Conahan; Michael R. Giordano; David Lin; M.K. Lu; Shing Mao;
Michael A. Rosenberg; Erich E. Schaedlich; Leonard M. Silverman;
Raymond Soong; and William J. Spires.
(Instructions: To withhold authority to vote for any one or more nominees, write
that nominee's or nominees' name(s) in the space provided below)
- --------------------------------------------------------------------------------
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR ratification of appointment of Moss Adams LLP as the Company's
independent certified public accountants for the year ending
December 31, 1998. FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. OTHER BUSINESS In their discretion, the proxyholders are authorized to
transact such other business as may properly come before the Meeting and any
adjournment thereof.
Please Sign and Date On Reverse Side
<PAGE> 22
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
CERTIFIED PUBLIC ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 1998. ALL
PROPOSALS TO BE ACTED UPON ARE PROPOSALS OF THE COMPANY. IF ANY OTHER BUSINESS
IS PRESENTED AT THE MEETING THIS PROXY SHALL BE VOTED BY THE PROXYHOLDERS IN
ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF THE BOARD OF DIRECTORS.
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. All joint
owners should sign.)
I (We) do [ ] do not [ ]
expect to attend the
Meeting.
If no specification is made, this Proxy will be voted "FOR" proposals 1 and
2. PLEASE SIGN, DATE AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE IN THE
POSTAGE PREPAID ENVELOPE PROVIDED.
