UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.__)
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LITTELFUSE, INC.
(Name of Registrant as Specified In Its Charter)
______________________________________________________________________________
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SEC 1913 (02-02)
LITTELFUSE, INC.
800 East Northwest Highway
Des Plaines, Illinois 60016
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 2007
The 2007 annual meeting of the stockholders of Littelfuse, Inc. (the
"Company") will be held at the offices of the Company located at 800 East
Northwest Highway, Des Plaines, Illinois, on Friday, April 27, 2007, at 9:00
a.m., local time, for the following purposes as described in the attached Proxy
Statement:
1. To elect six directors to serve a term of one year or until their
successors are elected;
2. To approve and ratify the appointment by the Board of Directors of the
Company of Ernst & Young LLP as the Company's independent auditors for the
fiscal year of the Company ending December 29, 2007;
3. To approve the Littelfuse, Inc. Outside Directors' Equity Plan (the
"Amended and Restated Directors Plan"), as set forth herein, effective as
of April 27, 2007, which amends, restates and renames the Littelfuse, Inc.
Outside Directors' Stock Option Plan (the "Existing Directors Plan")
approved at the 2006 annual meeting of stockholders, but would not
authorize any additional shares of our common stock for issuance than is
currently authorized under the Existing Directors Plan;
and to transact such other business as may properly come before the annual
meeting or any adjournment thereof.
Stockholders of record of the Company at the close of business on March 16,
2007, will be entitled to vote at the meeting.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
/s/ Mary S. Muchoney
----------------------------------------
Mary S. Muchoney
Secretary
March 22, 2007
LITTELFUSE, INC.
800 East Northwest Highway
Des Plaines, Illinois 60016
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
APRIL 27, 2007
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of the Company of proxies for use at the Company's annual
meeting of stockholders to be held on April 27, 2007.
Any stockholder giving a proxy will have the right to revoke it at any time
prior to the time it is voted. A proxy may be revoked by written notice to us,
execution of a subsequent proxy or attendance at the annual meeting and voting
in person. Attendance at the annual meeting will not automatically revoke the
proxy. All shares represented by effective proxies will be voted at the annual
meeting or at any adjournment thereof.
The cost of soliciting proxies will be borne by us. In addition to
solicitation by mail, officers and employees of the Company may solicit proxies
by telephone or in person.
This Proxy Statement and form of proxy are first being mailed to
stockholders on or about March 20, 2007. Our 2006 annual report, including
audited financial statements, is included in this mailing.
FORWARD-LOOKING INFORMATION
Statements in this Proxy Statement not based on historical facts are
considered "forward-looking" and, accordingly, involve risks and uncertainties
that could cause actual results to differ materially from those discussed.
Although such forward-looking statements have been made in good faith and are
based on reasonable assumptions, there is no assurance that the expected results
will be achieved. These statements include (without limitation) statements as to
future expectations, beliefs, plans, strategies, objectives, events, conditions,
and financial performance. These statements are intended to constitute "forward
looking" statements in connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Littelfuse, Inc. (the
"Company," "Littelfuse," "we," "us" and "our") is providing this cautionary
statement to disclose that there are important factors that could cause actual
results to differ materially from those anticipated. Reference is made to our
Annual Report on Form 10-K for the year ended December 30, 2006 (the "2006 Form
10-K") filed with the Securities and Exchange Commission (the "SEC") for a list
of such factors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL OF THE
NOMINEES FOR DIRECTOR NAMED IN PROPOSAL 1, A VOTE FOR THE APPROVAL AND
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS AS
DISCUSSED IN PROPOSAL 2 AND A VOTE FOR THE APPROVAL OF THE AMENDED AND RESTATED
DIRECTORS PLAN AS DISCUSSED IN PROPOSAL 3.
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VOTING
Stockholders of record on the books of the Company at the close of business
on March 16, 2007, will be entitled to notice of and to vote at the meeting. A
list of the stockholders entitled to vote at the meeting will be available for
examination by any stockholder for any purpose germane to the meeting during
ordinary business hours for a period of at least 10 days prior to the meeting at
our headquarters located at 800 East Northwest Highway, Des Plaines, Illinois
60016 and at LaSalle Bank N.A., 135 South LaSalle Street, Chicago, Illinois
60603, the transfer agent for the Company. We had outstanding on March 16, 2007,
22,992,515 shares of our common stock, par value $.01 per share (the "Common
Stock"). Each outstanding share of Common Stock entitles the holder to one vote
on each matter submitted to a vote at the meeting.
The shares represented by proxies will be voted as directed in the proxies.
In the absence of specific direction, the shares represented by proxies will be
voted FOR the election of all of the nominees for directors of the Company, FOR
the approval and ratification of the appointment of Ernst & Young LLP as
independent auditors and FOR the approval of the Amended and Restated Directors
Plan. In the event any nominee for director is unable to serve, which is not now
contemplated, the shares represented by proxies may be voted for a substitute
nominee. If any matters are to be presented at the annual meeting other than the
matters referred to in this Proxy Statement, the shares represented by proxies
will be voted at the discretion of the named proxies.
Our bylaws provide that a majority of all of the shares of Common Stock
entitled to vote, whether present in person or represented by proxy, shall
constitute a quorum for the transaction of business at the meeting. Votes for
and against, abstentions and "broker non-votes" will each be counted as present
for purposes of determining the presence of a quorum. To determine whether a
specific proposal has received sufficient votes to be passed, for shares deemed
present, an abstention will have the same effect as a vote "against" the
proposal, while a broker non-vote will not be included in vote totals and will
have no effect on the outcome of the vote. The affirmative vote by the holders
of a majority of the shares present (whether in person or by proxy) at the
meeting will be required for the approval of the ratification of Ernst & Young
LLP as independent auditors and the approval of the Amended and Restated
Directors Plan. With respect to the election of directors, the six nominees who
receive the most votes at the meeting will be elected.
OWNERSHIP OF LITTELFUSE, INC. COMMON STOCK
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of March 16, 2007, by each person
known by us to be the beneficial owner of more than 5% of the outstanding Common
Stock, by each director, by each executive officer named in the Summary
Compensation Table and by all of the directors and executive officers of the
Company as a group. Information concerning persons known to us to be beneficial
owners of more than 5% of our Common Stock is based upon the most recently
available reports furnished by such persons on Schedule 13G as filed with the
Securities and
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Exchange Commission (the "Commission"). Of the shares reported, none are subject
to pledge or lien in a margin account or pursuant to a loan agreement.
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY OWNED(1)
---------------------
SHARES PERCENT
--------- -------
Ariel Capital Management, Inc.............. 2,407,380 10.5%
200 E. Randolph Drive, Suite 2900
Chicago, Illinois 60601
T. Rowe Price Associates, Inc.(2).......... 2,222,085 9.7%
100 E. Pratt Street
Baltimore, Maryland 21202
Barclays Global Investors, NA.(3).......... 1,523,032 6.6%
45 Fremont Street
San Francisco, CA 94105
Barrow, Hanley, Mewhinney & Strauss, Inc... 1,466,310 6.4%
2200 Ross Avenue 31st Floor
Dallas, TX 75201
Columbia Wanger Asset Management, L.P...... 1,385,000 6.0%
227 West Monroe Street, Suite 3000
Chicago, IL 60606
John P. Driscoll........................... 34,804 *
Anthony Grillo............................. 73,803 *
Bruce A. Karsh(4).......................... 183,744 *
John E. Major.............................. 38,767 *
Ronald L. Schubel.......................... 19,290 *
Gordon Hunter.............................. 68,296 *
Philip G. Franklin......................... 125,500 *
David Samyn................................ 19,900 *
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David W. Heinzmann......................... 40,475 *
Dal Ferbert................................ 79,135 *
All current directors and executive
officers as a group (15 persons)........ 689,019 3.0%
* Indicates ownership of less than 1% of Common Stock.
(1) The number of shares outstanding for purposes of calculating the
percentages shown includes an aggregate of 22,992,515 shares of Common
Stock which may be acquired through the exercise of stock options within 60
days of March 16, 2007.
(2) These securities are owned by various individual and institutional
investors for which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment advisor with power to direct investments and/or sole
power to vote the securities. For purposes of the reporting requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), Price
Associates is deemed to be a beneficial owner of such securities; however,
Price Associates expressly disclaims that it is, in fact, the beneficial
owner of such securities.
(3) As reported in a Schedule 13G filed with the Securities and Exchange
Commission on January 23, 2007, 1,523,032 shares represent the total number
of shares beneficially owned by Barclays Global Investors NA ("BGI"),
Barclays Global Fund Advisors ("BGFA") and Barclays Global Investors, Ltd
("BGIL"). These entities have the sole power to vote with respect to
1,420,437 shares and sole power to dispose of 1,523,032 shares. The total
number of shares beneficially owned by BGI is 851,510 over which BGI
exercises sole voting control over 748,915 shares and the power of
disposition with respect to 851,510 shares. The total number of shares
beneficially owned by BGFA is 657,263 over which BGFA exercises sole voting
control and the power of disposition with respect to 657,263 shares. The
total number of shares beneficially owned by BGIL is 14,259 over which BGIL
exercises sole voting control and the power of disposition with respect to
14,259 shares.
(4) Includes 8,000 shares of Common Stock held in trust for Mr. Karsh's wife
and children and 75,000 shares held by the Karsh Family Foundation
("Foundation"). Mr. Karsh disclaims beneficial ownership of all securities
held by the Foundation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and holders of more than 10% of the Common Stock to file
with the Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. The
Company believes that during the fiscal year ended December 30, 2006, its
executive officers and directors complied with all Section 16(a) filing
requirements. In making these statements, the Company has relied upon the
written representations of its executive officers and directors.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Six directors are to be elected at the annual meeting to serve terms of one
year or until their respective successors have been elected. The nominees for
director, all of whom are now serving as directors of the Company, are listed
below together with certain biographical information as of March 16, 2007.
Except as otherwise indicated, each nominee for director has been engaged in his
present principal occupation for at least the past five years.
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THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF ALL OF THE NOMINEES LISTED BELOW AS DIRECTORS.
John P. Driscoll, age 71, has been a director of the Company since February
1998. Mr. Driscoll has been President of Jack Driscoll Enterprises, Inc., a
management consulting firm, since 1998. In June of 1998 Mr. Driscoll retired as
Executive Vice President of Murata Electronics North America, Inc. where he was
responsible for corporate policy and strategy and oversaw government and
industry relations. Mr. Driscoll joined Murata Electronics in 1979 as Vice
President of Marketing and Sales, was appointed Senior Vice President Marketing
and Sales in 1985 and assumed the position of Executive Vice President in 1995.
Mr. Driscoll is a former Vice President of the Components Group of the
Electronic Industry Alliance, and a twenty-year member of its Board of
Governors. He was also affiliated with the Electronics Component and Technology
Conference and the Japan American Society. Mr. Driscoll has been determined by
the Board to be "independent" under the listing standards of the Nasdaq Stock
Market ("NASDAQ") on which the Company's Common Stock is listed.
Anthony Grillo, age 51, has been a director of the Company since December
1991. Mr. Grillo is the founder and Chief Executive Officer of American
Securities Advisors, LLC an advisory and investment firm established in 2005.
From 2001 through 2004, Mr. Grillo was a Senior Managing Director of Evercore
Partners, Inc. where he founded the restructuring practice for the firm. From
1999 through 2001 Mr. Grillo was a Senior Managing Director of Joseph Littlejohn
& Levy, Inc., a private equity firm. For eight years previous, Mr. Grillo was a
Senior Managing Director of the Blackstone Group L.P., an investment banking
firm. During those years, he was the co-founder of Blackstone's Restructuring
and Reorganization Group, Chief Operating Officer of the firm's M&A practice and
a member of its Investment Committee. Mr. Grillo has been determined by the
Board to be "independent" under NASDAQ listing standards.
Gordon Hunter, age 55, has been a director of the Company since June 2002
and became the Chairman of the Board, President and Chief Executive Officer of
Littelfuse, Inc. in January 2005. Mr. Hunter became the Chief Operating Officer
of the Company in November 2003. Prior to joining the Company, Mr. Hunter was
Vice President, Intel Communications Group, and General Manager, Optical
Products Group. Mr. Hunter was responsible for managing Intel's access and
optical communications business segments within the Intel Communications Group.
Prior to joining Intel in February 2002, he served as President of Elo
TouchSystems, a subsidiary of Raychem Corporation. He also served in a variety
of positions during a 20-year career at Raychem Corporation, including Vice
President of Commercial Electronics and a variety of sales, marketing,
engineering and management positions. Mr. Hunter currently serves on the Council
of Advisors of Shure Incorporated.
John E. Major, age 61, has been a director of the Company since December
1991. Mr. Major has been President of MTSG, a strategic consulting and
investments company, since 2003. From 2000 through 2003 he was Chairman and CEO
of Novatel Wireless Inc., which provides wireless data access solutions for PDAs
and notebook PCs. From 1998 through 1999 he was Chief Executive Officer of
Wireless Knowledge, a QUALCOMM and Microsoft joint venture. Before joining
Wireless Knowledge in 1998, Mr. Major served as Corporate Executive
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Vice President of QUALCOMM, Inc. and President of its Wireless Infrastructure
Division. Prior to joining QUALCOMM in 1996, Mr. Major served as Senior Vice
President and Staff Chief Technical Officer at Motorola, Inc. Mr. Major serves
on the Board of Directors of Verilink Corporation, Broadcom Corporation and
Lennox International Inc., all reporting companies under the Exchange Act. Mr.
Major has been determined by the Board to be "independent" under NASDAQ listing
standards.
William P. Noglows, age 49, has been a Director of the Company since
February 2007. Mr. Noglows is Chairman, President and Chief Executive Officer of
Cabot Microelectronics Corporation (NASDAQ:CCMP), a leading worldwide supplier
of consumable products used in the semiconductor manufacturing process. He
assumed his current position at Cabot Microelectronics Corporation in 2003.
Prior to that, he was an Executive Vice President and General Manager at Cabot
Corporation. In this position he was responsible for running the company's $1.2
billion core particle business, which included operations in North and South
America, Europe and Asia. Mr. Noglows was a primary founder of Cabot
Microelectronics, which has been a fully independent, publicly traded entity
since 2000. He received a bachelor's degree in chemical engineering from the
Georgia Institute of Technology. Mr. Noglows has been determined by the Board to
be "independent" under NASDAQ listing standards.
Ronald L. Schubel, age 63, has been a Director of the Company since June
2002. Mr. Schubel is Corporate Executive Vice President and President of the
Americas Region for Molex Incorporated, a global manufacturer of interconnect
systems. He began his career with Molex in 1981, spending four years in
Singapore as President of the Far East South Region. Prior to joining Molex, Mr.
Schubel worked for General Motors for 15 years. His last position with General
Motors was Director of Operations for the Packard Electronics Division. Mr.
Schubel has been determined by the Board to be "independent" under NASDAQ
listing standards.
INFORMATION CONCERNING BOARD OF DIRECTORS AND ITS COMMITTEES
COMPENSATION OF DIRECTORS. Directors who are not employees of the Company
are paid an annual Director's fee of $40,000, $1,500 for each of the four
regularly scheduled Board meetings attended and $1,000 for attendance at any
special teleconference Board or Committee meetings, plus reimbursement of
reasonable expenses relating to attendance at meetings. The Lead Director is
paid an additional $7,500 annually, the Chairman of the Audit Committee is paid
an additional $10,000 annually and the Chairman of the Compensation Committee is
paid an additional $5,000 annually. No fees are paid to Directors who are also
full-time employees of the Company.
Under the Littelfuse Deferred Compensation Plan for Non-employee Directors,
a non-employee director, at his election, may defer receipt of his director's
fees. Such deferred fees are used to purchase shares of Littelfuse Common Stock,
and such shares and any distributions thereon are deposited with a third party
trustee for the benefit of the director until the director ceases to be a
director of the Company. All non-employee directors have elected to be
compensated in Common Stock under the Littelfuse Deferred Compensation Plan for
Non-employee Directors (the "Non-employee Directors Plan"), except for Mr.
Noglows.
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The Existing Directors Plan provides for a grant at each annual meeting of
the Board of Directors to each non-employee Director of non-qualified stock
options to purchase 5,000 shares of Common Stock at the fair market value on the
date of grant. Accordingly, on May 5, 2006, Messrs. Driscoll, Grillo, Karsh,
Major and Schubel were each granted an option to purchase 5,000 shares of Common
Stock.
Please see Proposal No. 3 in this Proxy Statement which requests your
approval of an amendment, restatement and renaming of the Existing Directors
Plan for a discussion of the features of the Amended and Restated Directors
Plan. The following table sets forth compensation paid to all persons who were
directors at any time during 2006:
DIRECTOR COMPENSATION TABLE
Change in
Pension Value
and Nonqualified
Non-Equity Deferred
Fees Earned or Incentive Plan Compensation All Other
Paid in Cash Stock Awards Option Awards Compensation Earnings Compensation Total
Name ($) ($) ($)(1) ($) ($) ($) ($)
----------------- -------------- ------------ ------------- -------------- ---------------- ------------ -------
John P. Driscoll 67,750 -- 72,971 -- -- -- 140,721
Anthony Grillo 72,000 -- 72,971 -- -- -- 144,971
Bruce A. Karsh 55,500 -- 72,971 -- -- -- 128,471
John E. Major 68,750 -- 72,971 -- -- -- 141,721
Ronald L. Schubel 68,750 -- 66,597 -- -- -- 135,347
Howard B. Witt 27,000 -- -- -- -- 275,000 (2) 302,000
(1) The amounts in this column reflect the dollar amount recognized for
financial statement reporting purposes for the fiscal year ended December
30, 2006, in accordance with FAS123R of option awards under the Existing
Directors Plan, the Stock Plan for New Directors of Littelfuse, Inc. and
the 1993 Stock Plan for Employees and Directors of Littelfuse, Inc. and
thus include amounts from awards granted in and prior to 2006. Assumptions
used in the calculation of these amounts are described in footnote 12 to
the Company's audited financial statements for the fiscal year ended
December 30, 2006 included in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on February 27, 2007. The
full grant date fair value of each option awarded in 2006, determined in
accordance with FAS123R, based on the assumptions discussed under the
Summary Compensation Table below, without regard to when the award was
recognized for financial reporting purposes, is equal to $14.40. As of
December 30, 2006, the aggregate number of shares underlying option awards
outstanding was: Mr. Driscoll, 36,500 shares; Mr. Grillo, 65,020 shares,
Mr. Karsh, 55,900 shares Mr. Major, 36,500 shares; Mr. Schubel, 26,500
shares and Mr. Witt, zero shares.
(2) Relates to earnings under the Consulting Agreement with Mr. Witt that
expired on December 31, 2006. Mr. Witt ceased being a director of the
Company in May 2006 when he decided not to stand for re-election to the
Board.
ATTENDANCE AT MEETINGS. The Board of Directors held six meetings during
fiscal year 2006. All of the directors attended at least 75% of the meetings of
the Board of Directors and the committees on which they served. It is the policy
of the Company that all of the directors attend the annual meeting of the
stockholders of the Company.
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Independent members of the Board of Directors of the Company meet in
executive session without management present at least two times per year.
Stockholders wishing to communicate directly with the Board or individual
directors should communicate in writing to the Corporate Secretary of the
Company, who will in turn promptly forward such communication to the directors.
AUDIT COMMITTEE. It is the responsibility of the Audit Committee to, among
other things, (i) recommend each year to the Board of Directors independent
auditors to audit the financial statements of the Company and its consolidated
subsidiaries, (ii) review the scope of the audit plan, (iii) discuss with the
auditors the results of the Company's annual audit and any related matters, (iv)
pre-approve all audit services; (v) pre-approve all permissible non-audit
services to be performed by the Company's auditors; and (vi) review transactions
posing a potential conflict of interest among the Company and its Directors,
officers and affiliates. A copy of the Audit Committee Charter is available on
the Company's website at www.littelfuse.com. The Audit Committee met nine times
in 2006. Members of the Audit Committee are John E. Major, Ronald L. Schubel and
Anthony Grillo, the Chairman of the Committee, all of whom have been deemed by
the Board to be "independent" under the Sarbanes-Oxley Act of 2002 and NASDAQ
listing standards. The Board of Directors has determined that Anthony Grillo is
an "audit committee financial expert" based on his experience as a certified
public accountant, investment banker and private equity investor.
NOMINATING AND GOVERNANCE COMMITTEE. It is the responsibility of the
Nominating and Governance Committee to identify individuals qualified to serve
on the Board of Directors and to recommend those individuals the Board should
nominate for election at the Company's annual meeting of stockholders. The
Nominating and Governance Committee will consider nominees for the Board of
Directors recommended by stockholders, using the same evaluation process as for
any other candidate. Recommendations should be submitted to the Secretary of the
Company at the Company's principal executive offices. The Board of Directors has
adopted a charter for the Nominating and Governance Committee. A copy of that
charter is available on the Company's website at www.littelfuse.com. The
Nominating and Governance Committee met two times during 2006. The Nominating
and Governance Committee reviewed the performance of all of the current members
of the Board of Directors and determined and recommended to the Board that all
of the current directors should be nominated for re-election. In making this
recommendation, consideration was given to matters such as attendance at
meetings, preparation for meetings, input at meetings, interaction with other
board members, and other tangible or intangible benefits their service as
directors brought to the Company. No other candidates were recommended or
evaluated. Members of the Nominating and Governance Committee are Ronald L.
Schubel, the Chairman of the Committee, John P. Driscoll, Bruce A. Karsh and
William P. Noglows, each of whom have been deemed by the Board to be independent
under NASDAQ listing standards.
Director Qualification Standards
The Nominating and Governance Committee will take into consideration such
factors as it deems appropriate, including the following:
- Experience as an executive or director of a publicly traded company;
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- Familiarity with the business of the Company and its industry;
- Availability to actively participate in meetings of the Board of
Directors and attend the annual meeting of stockholders;
- Knowledge and experience in the preparation or evaluation of financial
statements;
- Diversity;
- Satisfaction of the criteria for independence established by the
Commission and NASDAQ listing standards, as they may be amended from
time to time; and
- Ability to interact in a productive manner with the other members of
the Board of Directors.
Policy and Procedures with Respect to Related Person Transactions
In February 2007, the Board of Directors adopted the Littelfuse, Inc.
Policy on Related Person Transactions. This written policy provides that the
Nominating and Governance Committee will review and approve Related Person
Transactions (as defined below). The Chair of the Nominating and Governance
Committee has delegated authority to act between Committee meetings.
The policy defines a "Related Person Transaction" as a transaction,
arrangement or relationship (including any indebtedness or guarantee of
indebtedness) or any series of similar transactions, arrangements or
relationships in which the Company (including any of its subsidiaries) was, is
or will be a participant and the amount involved exceeds $120,000, and in which
any Related Person had, has or will have a direct or indirect interest.
"Related Person" is defined as (1) any person who is, or at any time since
the beginning of the Company's last fiscal year was, a director, executive
officer, or a nominee to become a director of the Company; (2) any person who is
known to be the beneficial owner of more than 5% of any class of the Company's
voting securities; (3) any immediate family member of any of the foregoing
persons, which means any child, stepchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law of the director, executive officer, nominee, or more than 5%
beneficial owner; (4) any person (other than a tenant or employee) sharing the
household of such director, executive officer, nominee, or more than 5%
beneficial owner; (5) any firm, corporation or other entity in which any of the
foregoing persons is employed or is a partner or principal or in a similar
position or in which such person has a 5% or greater beneficial ownership
interest; and (6) any charitable or non-profit organization in which any of the
foregoing persons is actively involved in fundraising or otherwise serves as a
director, trustee or in a similar capacity.
The General Counsel of the Company will assess whether a proposed
transaction is a Related Person Transaction for purposes of the policy.
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The approval procedures in the policy identify the factors the Nominating
and Governance Committee will consider in evaluating whether to approve or
ratify Related Person Transactions or material amendments to previously approved
Related Person Transactions. The Nominating and Governance Committee will
consider all of the relevant facts and circumstances available to the Nominating
and Governance Committee, including (if applicable) but not limited to: the
benefits to the Company; the impact on a director's independence in the event
the Related Person is a director, an Immediate Family Member of a director or an
entity in which a director is a partner, shareholder or executive officer; the
availability of other sources for comparable products or services; the terms of
the transaction; and the terms available to unrelated third parties or to
employees generally. The Nominating and Governance Committee will approve only
those Related Person Transactions that are in, or are not inconsistent with, the
best interests of the Company and its shareholders, as the Nominating and
Governance Committee determines in good faith.
In 2006, the Company's unwritten policy with respect to Related Person
Transactions was to evaluate and monitor Related Person Transactions. Any such
transaction was required to comply with the Company's policies, including the
Company's Code of Conduct which addresses conflicts of interest, and any
payments by the Company to a director's primary business affiliation or the
primary business affiliation of an immediate family member of a director for
goods or services, or other contractual arrangements were required to be
approved by the Audit Committee in accordance with The Nasdaq Stock Market rules
and be made in the ordinary course of business and on substantially the same
terms as those prevailing at the time for comparable transactions with
non-affiliated persons.
The Company did not enter into any Related Person Transactions in 2006.
COMPENSATION COMMITTEE. The Compensation Committee's charter is posted on
the Company's website, at www.littelfuse.com. The Compensation Committee is
charged in the Charter with the authority to review the Company's compensation
practices and policies, review and recommend to the Board for its consideration
and determination the compensation for the Chief Executive Officer and the other
executive officers, evaluate Chief Executive Officer performance, and annually
review and report on the Company's compensation discussion and analysis and
recommend its inclusion in the Company's Form 10-K and proxy statement. The
Compensation Committee held nine meetings in 2006. The members of the
Compensation Committee are John P. Driscoll, Chairman, Bruce A. Karsh and
William P. Noglows. See the "Compensation Committee Report" below.
Processes and Procedures
The Compensation Committee focuses on good governance practices and
procedures in its operation. In 2006 this included:
- considering compensation for the Named Executive Officers (as defined
below) in the context of all of the components of total compensation;
- requiring several meetings to discuss important decisions;
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- reviewing tally sheets for the Named Executive Officers including all
components of total compensation packages;
- receiving meeting materials several days in advance of meetings;
- conducting executive sessions with Committee members only; and
- obtaining professional advice from an outside compensation consultant
engaged directly by the Committee that enabled the Committee to make
decisions in the best interests of the Company, and having direct
access to the outside compensation consultant.
Delegation of Authority
The Compensation Committee Charter does not provide authority to the
Committee to delegate its role and responsibilities to any persons.
Role of Executive Officers
A discussion of the role of management in determining compensation levels
can be found in this Proxy Statement under "EXECUTIVE COMPENSATION -
COMPENSATION DISCUSSION AND ANALYSIS."
Role of Compensation Consultants
During 2005 and 2006, Towers Perrin assisted the Committee with
comprehensive analysis of market data and its implications for pay at the
Company, as well as various other executive compensation issues.
TECHNOLOGY COMMITTEE. It is the responsibility of the Technology Committee
to review the research and development activities of the Company and ensure the
Company maximizes the use of technology throughout the organization. The
Technology Committee met four times in 2006. Members of the Technology Committee
are John E. Major, Ronald L. Schubel and Gordon Hunter, the Chairman of the
Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Bruce A. Karsh and John P. Driscoll served on the Compensation Committee
during fiscal 2006. No executive officer of the Company served as a member of
the compensation committee, or a board of directors performing equivalent
functions, of any entity that had one or more of its executive officers serving
as a member of the Company's Compensation Committee.
-12-
EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate other filings with the SEC,
including this Proxy Statement, in whole or in part, the following Compensation
Committee Report shall not be deemed to be incorporated by reference into any
such filings.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is charged with certain responsibilities
relating to compensation of the Company's executive officers. The Compensation
Committee evaluates and recommends to the full Board of Directors for approval
all compensation of executive officers, including salaries, bonuses, and
compensation plans, policies and programs of the Company.
The Committee also fulfills its duties with respect to the Compensation
Discussion and Analysis and Compensation Committee Report portions of the proxy
statement, as described in the Compensation Committee's charter.
The Compensation Discussion and Analysis has been prepared by management of
the Company. The Company is responsible for the Compensation Discussion and
Analysis and for the disclosure controls relating to executive compensation. The
Compensation Discussion and Analysis is not a report or disclosure of the
Compensation Committee.
The Compensation Committee met with management of the Company and the
Compensation Committee's outside consultant to review and discuss the
Compensation Discussion and Analysis. Based on the foregoing review and
discussions, the Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in this Proxy
Statement and the Company's 2006 Form 10-K, and the Board of Directors approved
that recommendation.
Compensation Committee:
John P. Driscoll (Chairman)
Bruce A. Karsh
William P. Noglows
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COMPENSATION DISCUSSION AND ANALYSIS
This section provides information regarding the compensation and benefit
programs in place for our Chief Executive Officer, Chief Financial Officer and
the three other most highly compensated executive officers of the Company
(collectively, "Named Executive Officers" or "NEOs") for 2006. It includes
information regarding the overall objectives of our compensation program and
each element of compensation that we provide.
TOTAL REWARDS PHILOSOPHY
The Compensation Committee of our Board of Directors (the "Committee") is
responsible for guiding and overseeing the formulation and application of the
compensation and benefit programs for our NEOs. The Committee acts pursuant to a
charter that has been approved by our Board.
The objective of the Company's Total Rewards Philosophy is to drive
performance and to create stockholder value. The intention of the Total Rewards
Philosophy is to help drive our global business growth and success by fully
leveraging our investment in our human capital and our Total Rewards programs.
The Compensation Committee has worked with the Company's management to
design compensation programs that encourage high performance, promote
accountability and assure that our employees' interests are aligned with the
interests of the Company's stockholders.
The primary objectives of our executive compensation policies are to:
- Attract, retain, and motivate highly qualified executives,
- Reward executives based upon our financial performance at levels
competitive with peer companies, and
- Align a significant portion of the executive compensation with driving
Company performance and stockholder value in the form of
performance-based executive bonuses and long-term equity incentives.
The design of our specific programs is based on the following guiding
principles:
Performance
We believe that the best way to accomplish alignment of compensation plans
with the interest of our stockholders is to link pay directly to individual,
business area and Company performance. When performance exceeds expectations,
total pay levels are expected to be above the competitive median. When
performance falls below expectations, total pay levels are expected to be below
competitive levels.
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Competitiveness
Compensation and benefit programs are designed to be competitive with those
provided by companies with whom we compete for talent. In general, our total
compensation programs are considered competitive when they are at median levels
as measured against the total compensation programs of competitor companies.
Benefit programs are designed to provide competitive levels of protection
and financial security and are not based on performance.
Cost
Compensation and benefit programs are designed to be cost effective and
affordable, ensuring that the interests of our stockholders are considered.
COMPONENTS OF TOTAL COMPENSATION
The compensation of our NEOs primarily consists of four variable
components:
- salaries,
- a potential cash bonus under the Company's Annual Incentive Plan
("AIP"),
- equity compensation opportunities, and
- other benefits.
Each component is designed to achieve a specific purpose and to contribute
to a total package that is competitive, appropriately performance-based, and
valued by the Company's executives.
Competitive Benchmarking
Each year, competitive compensation levels for our Chief Executive Officer
(the "CEO") and other NEOs are established through the use of survey data from
nationally recognized consulting firms. These market analyses include base
salary, annual incentive opportunities and long-term incentive opportunities of
pay for comparable revenue sized manufacturing companies in general industry, as
well as companies in our specific electronics components sector. In addition, to
gain further insight into pay practices for NEOs among other electronics
companies, in 2005 Littelfuse adopted an industry reference group as a secondary
source to evaluate compensation levels. Our Board of Directors and the Committee
have engaged an external international compensation consulting firm, Towers
Perrin, for advice with respect to executive compensation matters and assistance
in gathering and evaluating the industry data. Companies included in this
reference group are set forth below:
-15-
TICKER
COMPANY SYMBOL
------- ------
Actuant Corporation ATU
Altera Corporation ALTR
Franklin Electric Company Inc. FELE
Linear Technology Corporation LLTC
Molex Inc. MOLX
ON Semiconductor Corporation ONNN
Plexus Corporation PLXS
Technitrol Inc. TNL
Xilinx Inc. XLNX
The compensation guidelines are generally based on the 50th percentile of
the general industry data specific to each position on a total compensation
basis and on an element-by-element of compensation basis. In some instances,
however, Littelfuse may provide compensation above or below the 50th percentile
for a particular element for a particular position, based on internal factors,
including the executive's operating responsibilities, management level and
tenure and performance in the position.
A. SALARIES
Purpose: The determination of each executive officer's base salary is
designed to achieve two objectives of our executive compensation philosophy. The
first objective is to pay executive officers competitively to attract, retain,
and motivate highly qualified executives and the second is to reward executives
based upon our financial performance at levels competitive with peer companies.
Base salaries are paid because they are industry standard and therefore must be
paid for us to remain competitive.
Performance drivers: Several factors are taken into consideration when
setting base salaries, namely the individual scope of responsibility, years of
experience, past and future contributions to the Company's success, and overall
company performance.
Determination of amounts: Base compensation is targeted for the 50th
percentile of the benchmark companies, adjusted to compensate for larger or
smaller revenue responsibilities. The Company strives to be market competitive
and externally equitable in an effort to attract and retain talented executive
officers. The CEO's salary is determined by individual performance, market
salary data, defined salary ranges assigned to the position and internal equity
considerations. In 2006, we made salary adjustments to the base salaries of the
NEOs to bring the base salary levels up to the market median, effective July 1,
2006. On August 4, 2006, the effective date of executive pay increases was
changed from July 1 to February 1 to align the executives with all other Company
employees. In connection with this alignment, the annual salary of the NEOs
increased 2%, effective February 1, 2007.
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Administration: The CEO recommends officer salary levels (other than for
himself) to the Committee for approval based on individual performance, market
salary data, defined salary ranges assigned to the position and internal equity
considerations. The Committee reviews these recommendations and makes its
recommendations to the full Board for approval.
The Committee makes CEO salary recommendations to the full Board for
approval.
B. ANNUAL INCENTIVE PLAN
Purpose: The Annual Incentive Plan is designed to reward employees for
contributing to the achievement of our corporate goals and driving shareholder
value, thereby addressing all three of the objectives of our executive
compensation policies. The Committee, after consulting with the Chief Executive
Officer, establishes a threshold, target and a maximum amount that may be
awarded as an annual incentive compensation award to each executive officer
other than the Chief Executive Officer (the "Other Executive Officers"), and
makes its own determination with respect to the Chief Executive Officer. The
threshold, target and maximum amounts are percentages of such executive
officer's base salary established for each of the NEOs with input from
compensation survey data. Cash bonus opportunities are an industry standard that
we feel we must provide to remain competitive.
Performance drivers: At the end of each fiscal year, the amount of the
total award paid to each NEO is determined based on Company financial objectives
and individual objectives using a mathematical formula weighting each one of the
factors.
In determining each of the NEO's total award, Company performance is
determined based on the achievement by the Company of specified financial
objectives applicable to each NEO in various measures, which include sales,
earnings per share and cash from operations, as well as performance measurements
of the areas of the Company within the scope of authority of the NEO, while
individual performance is determined based on each of the NEO's achievement of
specified individual performance objectives. For example, for 2006 the
performance objectives at target level for the Chief Executive Officer consisted
of sales of $488.1 million, earnings per share of $1.32 and cash from operations
of $45.0 million, as well as individual performance objectives.
The threshold, target and maximum awards granted under the 2006 Annual
Incentive Plan are set forth in the Grants of Plan Based Awards Table included
in this Proxy Statement.
Determination of amounts: In February 2007, the Committee calculated the
financial objective performance factors and made determinations as to the
individual performance factors and awarded payouts under the 2006 Annual
Incentive Plan to the NEOs as set forth in the Summary Compensation Table under
the Non-Equity Incentive Plan Compensation column.
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Administration: The Annual Incentive Plan funding is based on our overall
results in relation to the threshold, target and maximum performance goals
established for the year. The AIP bonus amounts are earned based on the
achievement of the established financial performance objectives on a sliding
scale from 0% to 200% of the target amount. Bonuses paid to individual
executives are based on both the actual financial results in relation to the
target goals under the plan and an evaluation of the executive's performance in
relation to his or her individual performance objectives. Awards are granted
based on an explicit formula approved by the Committee and recommended to the
full Board for approval, typically in February of each year. At the end of each
fiscal year, the amount of the total award paid to each of the Other Executive
Officers is calculated by the Committee based on Company and individual
performance using the mathematical formula weighting each of the factors
described above, after consulting with the Chief Executive Officer. The
Committee, in administering the Annual Incentive Plan as it relates to the Chief
Executive Officer, makes all of the calculations described above with respect to
the Chief Executive Officer after analyzing these factors. The Committee then
recommends the awards to the full Board for approval, typically in February of
the following year.
The Board retains the discretion to adjust any awards determined by the
formula to make adjustments to the financial performance objectives for
extraordinary events. For 2006, these adjustments consisted of items such as
severance charges and commodity price changes. Individual performance is
considered in determining final awards for all Annual Incentive Plan
participants.
C. EQUITY PLANS
Purpose: The Company provides two types of equity awards under the
Littelfuse, Inc. Equity Incentive Compensation Plan (the "2006 Equity Plan") to
its NEOs: stock option awards and Performance Share/Unit awards. Consistent with
long-term incentive trends, we have adopted a portfolio approach using both
stock options and Performance Shares/Units for long-term incentive award
purposes. Performance Shares/Units vest upon the achievement of important
financial objectives that support our overall business strategy. The equity
awards are designed to align executive's financial interests with driving
stockholder value, foster stock ownership and retain executives. Each equity
program creates a direct linkage between executive wealth generation and
stockholder gains. We also provide equity-based compensation to remain
competitive in the marketplace. The Company does not currently have a formal
policy regarding equity or other security ownership requirements for its NEOs.
Performance drivers:
(1) Stock Options
The number of stock options granted to executive officers is based on
market analysis of general industry data and reference group data. Individual
grants are determined by the NEO's position and responsibilities. Grants of
stock options are intended to recognize different levels of contribution to the
achievement by the Company of its performance goals as well as different levels
of responsibility and experience as indicated by each NEO's position. The 2006
Equity Plan does not permit grants of stock with exercise prices below their
fair market value.
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(2) Performance Shares/Units
The Committee grants Performance Share/Unit awards based on the Company
attaining certain financial performance goals relating to return on net tangible
assets (RONTA) and earnings before interest, taxes, depreciation and
amortization (EBITDA) during the three fiscal year period commencing with the
fiscal year in which the award is granted. The performance goals and target
awards are established at the start of each three fiscal year period based on
the evolving business strategy of the Company. The target amounts of Performance
Shares/Units awarded in 2006 is set forth below:
TARGET AWARD
(# OF PERFORMANCE
OFFICER SHARES/UNITS)
------- -----------------
Gordon Hunter, Chairman, President and
Chief Executive Officer 6,000
Philip G. Franklin, Vice President,
Operations Support and Chief Financial Officer 5,000
David R. Samyn, Vice President 5,000
David W. Heinzmann, Vice President 5,000
Dal Ferbert, Vice President 5,000
The Performance Shares/Units may be earned based on achievement of the
foregoing financial performance goals on a sliding scale from 20% to 100% of the
target amount of Performance Shares/Units awarded at the end of the three-year
period.
EBITDA growth of at least 11% was the threshold and over 15% was the
maximum performance goal for that performance factor and RONTA of at least 13%
was the threshold and over 17% was the maximum for that performance factor in
the 2006 Performance Share/Unit awards.
Determination of Amounts: The Committee established a target level of
long-term incentive opportunity for the NEOs to approximate the median of
competitive industry practice. Grant guidelines for each of the forms of
long-term incentive compensation (stock options and Performance Shares/Units)
were established. The guidelines were established in order to deliver a total
opportunity value, at grant, equal to the Company's targeted level of long-term
incentive opportunity. The allocation of grant opportunity between the two
long-term incentive programs was based primarily on a combination of market
practice, internal equity considerations and
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relative importance of the objectives behind each of the programs (i.e., provide
value tied to stock price appreciation, foster stock ownership, and retention).
Administration: The Committee approves the awards of stock options and
Performance Shares/Units upon recommendation of the CEO with respect to Other
Executive Officers and on its own with respect to the CEO, and calculates the
Performance Share/Unit awards to be paid out based on the performance factors
set forth above at the end of the three-year period. The overall funding levels
are ultimately subject to the judgment and approval of the Committee to ensure
appropriate alignment with the interest of the Company's stockholders.
For NEOs, stock options range from 22% to 60% of their long-term incentive
opportunity and Performance Share/Unit awards range from 40% to 78% of their
long-term incentive opportunity based upon target levels.
D. OTHER BENEFITS
Littelfuse provides company sponsored insurance and retirement benefit
plans and perquisites to the executives. The NEOs participate in the same
benefit plans designed for all of our full time US employees.
Insurance Plans
The core insurance package includes health, dental, disability and basic
group life insurance coverage. The NEOs are provided with a supplemental life
insurance plan in order to provide a targeted level of coverage equal to three
times salary plus $10,000.
Retirement Plans
Littelfuse provides retirement benefits to executives through a combination
of qualified (under the Internal Revenue Code) and non-qualified plans.
Littelfuse, Inc. Retirement Plan (The "Pension Plan")
The Pension Plan is a qualified defined benefit plan, under the applicable
provisions of the Internal Revenue Code, intended to provide for an
employee's financial security in retirement.
Littelfuse, Inc. Supplemental Executive Retirement Plan ("SERP")
The Supplemental Executive Retirement Plan is a defined contribution,
non-qualified plan that is a legacy plan and is not being offered to
employees who are not currently participants. The plan was intended to
provide supplemental retirement benefits to enable the Company to attract
and retain executives. Mr. Franklin is the only NEO participant in the SERP
plan.
Littelfuse, Inc. 401(k) Plan
The Littelfuse 401(k) plan provides employees the opportunity to save for
retirement on a
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tax-favored basis. Executives may elect to participate in the Littelfuse
401(k) plan on the same basis as all other Littelfuse employees.
Perquisites
The CEO and other NEOs are provided with financial planning services and
executive physicals. Each NEO is entitled to up to $10,000 per year of financial
planning services per NEO for 2006 and $5,000 per year thereafter, except for
Mr. Hunter, who is entitled to $15,000 per year of financial planning, and up to
$5,000 per year for an executive physical for each NEO. Additionally, Mr. Hunter
is provided with a Company automobile.
TOTAL REWARDS POLICIES AND PROCESS
The Annual Compensation Process
The Committee reviews the benchmarking and performance results presented by
management in determining the appropriate aggregate and individual compensation
levels for the performance year. In conducting its review, the Committee
considers quantitative performance results, the overall need of the organization
to attract, retain and motivate the executive team, and the total cost of
compensation programs. The Committee also reviews executive tally sheets,
detailing the executive's total target and actual compensation during the year.
However, the amount of compensation already realized or potentially realizable
does not directly impact the level at which future pay opportunities may be set.
In 2007 and for the foreseeable future, base salaries will be reviewed in
the Fall. Any changes made to the base salaries generally will be effective
February 1 of the following year.
The benefits payable for the preceding year and the terms of the program
for the current year for the Annual Incentive Plan are established generally in
February or March of each year.
Stock options and Performance Share/Unit awards are usually granted in
April or May of each year at the regularly scheduled meetings of the
Compensation Committee and the full Board held in connection with our Annual
Meeting of Stockholders. Since we establish the meeting schedule and agenda for
these grants well in advance, there is no opportunity for manipulation of
exercise prices on option grants if we are in possession of non-public
information at the time of the meetings. Approval of grants for any newly-hired
or promoted executives during the course of the year generally occur at the
Compensation Committee meeting immediately following the hiring or promotion.
Allocation Between Cash and Non-Cash Compensation and Current and Long-Term
Compensation
Littelfuse believes that both cash compensation and non-cash compensation
are appropriate mechanisms for delivering compensation. Cash compensation is
used as current compensation (i.e. base salary and annual incentive awards),
while non-cash compensation (i.e., share based compensation) is generally used
only for long-term compensation. The allocation
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between cash and non-cash compensation is an outcome of our targeted
competitiveness for individual program elements, including salary, annual
incentive compensation and long-term incentive grants, and our practice with
respect to allocating between the different types of long-term incentive grants,
such as Performance Shares/Units and stock options.
Similar to the mix between current and long-term compensation, Littelfuse
does not target a specific allocation between cash and non-cash compensation by
position. However, the allocation does vary by management level:
- The CEO receives approximately 70% of total target compensation in the
form of cash compensation and the remaining 30% in non-cash
compensation.
- The Other Executive Officers receive an average of 65% of total target
compensation in the form of cash compensation and 35% in non-cash
compensation.
- The mix of compensation ultimately realized by the executives is
determined by a combination of individual, team and company-wide
performance over time.
The allocation between current and long-term compensation is based
primarily on competitive market practices relative to base salaries, annual
incentive awards, and long-term incentive values, as opposed to a targeted
allocation between current and long-term pay. Littelfuse also considers certain
internal factors that may cause it to target a particular element of an
executive's compensation differently. These internal factors may include the
executive's operating responsibilities, management level and tenure and
performance in the position. The Company considers the total compensation to be
delivered to individual executives, and as such exercises discretion in
determining the portion allocated to annual and long-term incentive opportunity.
The Company believes that this "total compensation" approach provides the
ability to align pay decisions with the short and long-term needs of the
business. It also allows for the flexibility needed to recognize differences in
performance by providing differentiated pay.
While there is no specific targeted policy mix between current and
long-term compensation for each position, the Company does vary current and
long-term compensation by management level. Generally speaking, as base salary
levels increase, more weight is placed on long-term compensation.
In addition to the above described compensation elements, the NEOs
participate in Littelfuse's qualified and non-qualified retirement income
programs. Although not payable while the executives are active employees, these
programs do pay out in the form of cash upon retirement.
Management's Role
The key elements of management's role in determining compensation levels
for the NEOs are as follows:
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- DEVELOP PERFORMANCE MEASURES: Identify appropriate performance
measures and recommend performance targets that are used to determine
annual and long-term awards.
- COMPILE BENCHMARK DATA: Management participates in compensation
surveys through reputable third party firms which are used to gather
data on base salary, annual cash and long-term performance award.
- DEVELOP COMPENSATION RECOMMENDATIONS: Based on the benchmark survey
data and publicly disclosed compensation information, the CEO and Vice
President, Human Resources prepare recommendations for the NEOs (other
than the CEO position) and present these recommendations to the
Committee.
- CEO COMPENSATION: After being provided the foregoing information with
respect to the CEO, the CEO's compensation package is determined by
the Committee and approved by independent members of the Board during
executive session.
The Independent Consultant
The Committee has the authority under its charter to engage the services of
outside advisors to assist in carrying out its duties. Under this authority, the
Committee engaged an internationally recognized outside compensation consultant,
Towers Perrin, to provide advice on all matters related to the CEO's and other
executives' compensation and board compensation. Towers Perrin does not provide
any other services to the Company.
Post-Employment Compensation
Littelfuse provides termination related payments equal to (1) the
executive's annual base salary through the date of termination, (2) benefits
accrued and vested as of the date of termination under the Pension Plan, SERP,
401(k) Plan and vacation plan, and (3) the amount of any compensation previously
deferred by the executive.
If within the two year period following a Change of Control the executive
terminates his employment for Good Reason (as that term is defined in the
executive's Change of Control Agreement), is terminated other than for Cause (as
that term is defined in the executive's Change of Control Agreement), or is
terminated by reason of his death or disability, the executive will be entitled
to receive compensation and benefits beyond those described in the previous
paragraph. These additional termination related payments are provided for under
Littelfuse's change of control agreements. Provisions under these agreements are
based on competitive practice and are designed to ensure that executives'
interests remain aligned with the interests of the stockholders should a
potential change of control arise.
Pursuant to his empolyment agreement, in the event Mr. Hunter terminates
his employment for Good Reason (as that term is defined in his employment
agreement), is terminated other than for Cause (as that term is defined in his
employment agreement), or is terminated by reason of his death or disability, he
will be
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entitled to receive compensation and benefits beyond those described in the
opening paragraph of this section. These additional termination related payments
are provided for under his employment agreement, the provisions of which are
based on competitive practice.
Discretion
The Annual Incentive Plan is subject to the application of negative and
positive discretion based on individual and Company-wide determinations. Awards
made under the 2006 Equity Plan may not be amended or modified in a manner
adversely affecting any award without the consent of the award recipient and the
Committee has no authority to waive or modify any award term to the extent that
the waived or modified term was mandatory under the 2006 Equity Plan.
Impact of Accounting and Tax Issues on Executive Compensation
In setting individual executive's compensation levels, we do not explicitly
consider accounting and tax issues. However, the company does analyze the
overall expense arising from aggregate executive compensation levels and awards
and the components of the Company's pay programs.
As one of the factors in its consideration of compensation matters, the
Company also considers the anticipated tax treatment to the Company and to the
executive officers of various payments and benefits. Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), places a limit of
$1,000,000 on the amount of compensation that the Company may deduct in any one
year with respect to its CEO and each of the next four most highly compensated
executive officers. Certain performance-based compensation approved by
stockholders is not subject to the deduction limit. The 2006 Equity Plan has
been approved by stockholder vote; as a result, stock option and Performance
Share/Unit awards under this plan may qualify for a performance-based deduction
and may not be subject to the deductibility limit imposed by Section 162(m) of
the Code. However, to maintain flexibility in compensating our key executives,
it is not a stated policy that all compensation must be deductible. The Company
and the Committee will consider various alternatives to preserving the
deductibility of compensation payments and benefits to the extent reasonably
practicable and to the extent consistent with the Company's other compensation
goals.
Pledges
Currently, we do not restrict pledges of our Common Stock by our NEOs and
directors, but none of our NEOs or directors currently have pledged any of their
Common Stock.
Employment Contracts
As of May 1, 2006, the Company entered into an Employment Agreement with
Mr. Gordon Hunter, the Chairman of the Board, President and Chief Executive
Officer of the Company. The Employment Agreement generally sets forth the terms
and conditions of Mr. Hunter's employment by the Company, including, but not
limited to, his duties, compensation and benefits, termination of employment and
severance benefits, and confidentiality and non-competition provisions. The
foregoing description of the terms of the
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Employment Agreement is qualified in its entirety by reference to the Employment
Agreement as set forth on Exhibit 10.1 to our Annual Report on Form 10-K for the
fiscal year ended December 30, 2006. Other than the change of control employment
agreements discussed under "-POST-EMPLOYMENT COMPENSATION," none of the other
NEOs have employment agreements.
2007 COMPENSATION DETERMINATIONS
A. SALARIES
In 2006, NEO pay increases were changed from July 1 to February 1 to align
the executives with all Company employees. In connection with this alignment,
the annual salary of the NEOs increased 2%, effective February 1, 2007, from the
amounts set forth in the Summary Compensation Table.
B. ANNUAL INCENTIVE PLAN
In March 2007, the Committee established the threshold, target and maximum
amounts to be awarded under the Annual Incentive Plan for fiscal year 2007 for
the NEOs, subject to achievement of financial objectives of the Company and
individual performance objectives. Financial objectives include sales, cash flow
and earnings per share. Individual performance objectives vary depending upon
the specific operating objectives and responsibility for each NEO. The following
table summarizes Annual Incentive Plan target percentages:
MINIMUM, TARGET AND MAXIMUM
AMOUNTS AS A PERCENTAGE OF
NAME BASE SALARY
---- ---------------------------
G. Hunter 0, 90 & 180%
P. Franklin 0, 60 & 120%
D. Samyn 0, 50 & 100%
D. Heinzmann 0, 50 & 100%
D. Ferbert 0, 50 & 100%
The Annual Incentive Plan payment amounts are earned based on the
achievement of the established financial performance objectives of the Plan on a
sliding scale from 0% to 200% of the target amounts identified above.
C. EQUITY PLANS
Determinations as to equity plan awards for 2007 will be made in March and
in May 2007.
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COMPENSATION TABLES AND NARRATIVE DISCLOSURES
The following table sets forth compensation information for the Company's
Named Executive Officers for services rendered in all capacities to the Company
and its subsidiaries in fiscal year 2006.
SUMMARY COMPENSATION TABLE
CHANGE IN PENSION
VALUE AND
NON-EQUITY NONQUALIFIED
STOCK OPTION INCENTIVE PLAN DEFERRED ALL OTHER TOTAL
SALARY BONUS AWARDS AWARDS COMPENSATION COMPENSATION COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($)(2) ($)(2) ($)(3) EARNINGS ($)(4) ($)(5)(6) ($)
--------------------------- ---- ------- ------ ------ ------- -------------- ----------------- ------------ ------------
Gordon Hunter..............
Chairman of the Board,
President and Chief
Executive Officer 2006 612,000 -- 53,140 625,665 882,000 22,922 46,505 2,242,232
Philip G. Franklin.........
Vice President, Operations
Support and Chief Financial
Officer 2006 331,500 -- 60,034 319,216 318,500 44,015 157,209 1,230,747
David Samyn................
Vice President 2006 265,200 -- 60,034 159,766 208,000 14,190 19,321 726,511
David W. Heinzmann.........
Vice President 2006 229,500 -- 60,034 178,566 135,057 35,147 19,293 657,597
Dal Ferbert................
Vice President 2006 219,300 -- 60,034 212,103 162,972 72,889 19,287 746,585
----------
(1) All cash compensation received by each Named Executive Officer for fiscal
year 2006 is found in either the Salary or Non-Equity Incentive Plan
Compensation columns of this Table. The amounts that would generally be
considered "bonus" awards are found under the Non-Equity Incentive Plan
Compensation column.
(2) The amounts in these columns reflect the dollar amount recognized as
expense for financial statement reporting purposes for the fiscal year
ended December 30, 2006, in accordance with FAS 123(R) of Performance
Share/Unit awards and option awards under our 2006 Equity Plan and its
predecessors and thus include amounts from awards granted in and prior to
2006. Assumptions used in the calculation of these amounts are described in
footnote 12 to the Company's audited financial statements for the fiscal
year ended December 30, 2006 included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on February 27,
2007.
(3) Represents payouts for 2006 performance under the Annual Incentive Plan.
See "-COMPENSATION DISCUSSION AND ANALYSIS" and "-NARRATIVE DISCLOSURE TO
SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE" for a
discussion of how amounts were determined.
(4) Amounts shown in this column are the sum of (1) the increase in the
actuarial present value of each Named Executive Officer's accumulated
benefit under the Littelfuse Inc. Retirement Plan from December 31, 2005 to
December 31, 2006, and (2) the difference between the interest credited on
account balances in the Littelfuse Inc. Supplemental Executive Retirement
Plan for fiscal year 2006 and the interest that would have been credited
for the year had the interest crediting rate been equal to 120% of the
long-term Applicable Federal Rate published by the Internal Revenue Service
for December 2006.
Account balances in the Littelfuse Inc. Supplemental Executive Retirement
Plan earn interest at a rate of 8.00% per annum, with interest being
credited on December 31 of each year. 120% of the long-term Applicable
Federal Rate published by the Internal Revenue Service for December 2006
was 5.89%.
(5) The amounts in this column reflect for each Named Executive Officer
matching contributions allocated by the Company to each Named Executive
Officer pursuant to the Company's 401(k) Plan, which is available to all
salaried employees, and the cost of insurance premiums paid by the Company
with respect to term life insurance. Each NEO also receives tax and
financial planning services provided by a third-party service provider, a
physical examination, and, in the case of Mr. Hunter the use of a company
automobile.
(6) The amounts in this column for Mr. Franklin includes the Littelfuse Inc.
Supplemental Executive Retirement Plan allocation of $137,757.
-26-
The following table provides additional information with respect to options
and stock-based awards granted in 2006, the value of which was provided in the
Stock Awards and Options Awards columns of the Summary Compensation Table, and
the potential range of payouts associated with the Annual Incentive Plan.
GRANTS OF PLAN-BASED AWARDS TABLE
Estimated Possible Payouts Estimated Future Payouts
Under Non-Equity Incentive Under Equity Incentive Plan
Plan Awards(1) Awards(2)
--------------------------- ---------------------------
Threshold Target Maximum Threshold Target Maximum
Name Grant Date ($) ($) ($) (#) (#) (#)
---- ---------- --------- ------- ------- --------- ------- -------
Gordon Hunter 05/05/2006 -- 459,000 918,000 1,200 6,000 6,000
Philip G. 05/05/2006 -- 165,750 331,500 1,000 5,000 5,000
Franklin
David Samyn 05/05/2006 -- 106,080 212,160 1,000 5,000 5,000
David W. 05/05/2006 -- 91,800 183,600 1,000 5,000 5,000
Heinzmann
Dal Ferbert 05/05/2006 -- 87,720 175,440 1,000 5,000 5,000
All Other
Option Grant Date
Awards: # Exercise or Fair Value
of Base Price of Stock
Securities of Option and Option
Underlying Awards Awards
Name Options ($/Sh) $(3)
---- ---------- ----------- ----------
Gordon Hunter 60,000 34.33 1,046,580
Philip G. 22,000 34.33 479,870
Franklin
David Samyn 15,000 34.33 381,800
David W. 15,000 34.33 381,800
Heinzmann
Dal Ferbert 15,000 34.33 381,800
(1) The Annual Incentive Plan payment amounts are earned based on the
achievement of the established financial performance objectives of the Plan
on a sliding scale of 0% to 200% of the target amount established, thus
there is no Threshold amount. The amount shown in the Maximum column is
200% of such target amount. These amounts are based on the individual's
2006 salary and position. See "-COMPENSATION DISCUSSION AND ANALYSIS" and
"-NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF
PLAN-BASED AWARDS TABLE" for information regarding the description of
performance-based conditions.
(2) The amounts shown under this heading reflect the Performance Share/Unit
awards. Performance Shares/Units may be earned based on achievement of the
established financial performance goals on a sliding scale from 0% to 100%
of the target amount of awarded shares at the end of the three-year period.
The amount shown in the Threshold column is 20% of the target amount shown
in the Target column. The target is set at 100% of the possible award.
Therefore the amount shown in the Maximum column is the same as the target
amount. See "-COMPENSATION DISCUSSION AND ANALYSIS" and "-NARRATIVE
DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS
TABLE" for information regarding the terms of the awards, the description
of performance-based vesting conditions, and the criteria for determining
the amounts payable.
(3) Represents the full grant date fair value at target of the option and
Performance Share/Unit awards reported in this Table under the Estimated
Possible Payouts Under Equity Incentive Plan Awards and All Other Options
Awards: # of Securities Underlying Options columns awarded in 2006
determined in accordance with FAS 123R, based on the assumptions discussed
under the Summary Compensation Table, without regard to when the award was
recognized for financial reporting purposes. The options are valued at
$14.01 per share and the Performance Share/Unit awards are valued at
$34.33 per share.
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED
AWARDS TABLE
Annual Incentive Plan
The actual amounts of short-term incentive awards relating to the 2006
Annual Incentive Plan were paid in February 2007 and are set forth under the
Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
The amounts listed in the Threshold, Target and Maximum columns under the
Estimated Future Payments Under Non-Equity Incentive Plan Awards heading of the
Grants of Plan-Based Awards Table represent the potential range of cash awards
for the Annual Incentive Plan for 2006. For 2006, a target award was established
for each Named Executive Officer as a percent of base salary as shown below.
-27-
Named Executive Annual Incentive Plan Target as
Officer Percent of Base Salary
--------------- -------------------------------
G. Hunter 75%
P. Franklin 50%
D. Samyn 40%
D. Heinzmann 40%
D. Ferbert 40%
The target award percentages above were applied to the Named Executive
Officer's annual base salary at the end of 2006.
Option Awards and Performance Share/Unit Awards
The stock option awards vest over five years in 20% increments and have a
ten year term. At the end of the three-year performance period relating to the
Performance Shares/Units, one-half of any earned Performance Share/Unit awards
are issued as restricted shares of our Common Stock in the names of the officers
but are held by the Company subject to the lapse of the restrictions related to
continued employment over the next three years. The cash equivalent of the other
half of any earned Performance Share/Unit awards will be paid annually in thirds
as the restrictions on the Common Stock lapse.
Once Performance Shares/Units are earned, they will continue to rise and
fall in value with our Common Stock price during the restricted period.
No dividends have been paid by the Company on our Common Stock, but in the
event that a dividend would be paid by us on our Common Stock, dividends would
also be paid on Performance Shares/Units that have been earned and issued prior
to the lapse of the restrictions.
As of May 1, 2006, the Company entered into an Employment Agreement with
Mr. Hunter, the Chairman of the Board, President and Chief Executive Officer of
the Company. The Employment Agreement generally sets forth the terms and
conditions of Mr. Hunter's employment by the Company, including, but not limited
to, his duties, compensation and benefits, termination of employment and
severance benefits, and confidentiality and non-competition provisions. The
foregoing description of the terms of the Employment Agreement is qualified in
its entirety by reference to the Employment Agreement as set forth on Exhibit
10.1 to our Annual Report on Form 10-K for the year ended December 30, 2006.
As of January 1, 2005, the Company entered into a two-year Consulting
Agreement with Howard B. Witt, the former Chief Executive Officer, President,
and Chairman of the Board of the Company. The terms of the Consulting Agreement
provide that Mr. Witt was paid $275,000 per year during the term of the
agreement.
-28-
Mr. Witt ceased being a director of the Company in May 2006 when he decided not
to stand for re-election to the Board. This Consulting Agreement expired on
December 31, 2006.
Other than Mr. Hunter's employment agreement and the change of control
employment agreements described under "--POST-EMPLOYMENT COMPENSATION," the
Company does not have any employment agreements with the Named Executive
Officers.
See "--COMPENSATION DISCUSSION AND ANALYSIS" for a discussion of the
proportion of salary and bonus in relation to total compensation which is
discussed under "Allocation between cash and non-cash compensation and current
and long-term compensation," and other material terms of our Named Executive
Officers' compensation and the related amounts included in the foregoing tables.
-29-
The following table provides information regarding the outstanding equity
awards held by each of the Named Executive Officers as of December 31, 2006.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
Option Awards Stock Awards
---------------------------------------------------------------- --------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Equity Awards: # Payout
Incentive of Value of
Plan Market Unearned Unearned
Awards: # # of Value of Shares, Shares,
# of # of of Shares Shares or Units or Units or
Securities Securities Securities or Units Units of Other Other
Underlying Underlying Underlying of Stock Stock Rights Rights
Unexercised Unexercised Unexercised Option Option That That Have That Have That Have
Options - Options - Unearned Exercise Expiration Have Not Not Not Vested Not Vested
Name Exercisable Unexercisable Options Price ($) Date Vested(1) Vested
($)(2) (3) ($)(4)
------------- ------------ -------------- ----------- --------- ---------- -------- ---------- ---------- ----------
Gordon Hunter 1,000 0 N/A 23.4800 06/14/2013
1,000 0 N/A 23.4800 06/14/2014
1,000 0 N/A 23.4800 06/14/2015
1,000 0 N/A 23.4800 06/14/2016
0 1,000 N/A 23.4800 06/14/2017
3,000 2,000 N/A 20.2400 05/02/2013
4,000 8,000 N/A 26.5100 11/07/2013
18,000 12,000 N/A 28.0800 11/07/2013
12,000 18,000 N/A 38.1100 04/30/2014
4,000 16,000 N/A 31.8000 01/18/2015
12,000 48,000 N/A 27.2100 05/06/2015
0 60,000 N/A 34.3300 05/05/2013
0 0 0 0
5,400 172,152 0 0
0 0 1,200 38,256
0 0 6,000 191,280
Philip G. 2,000 0 N/A 5.0000 01/04/2010
Franklin 2,000 0 N/A 5.0000 01/04/2011
2,000 0 N/A 5.0000 01/04/2012
2,000 0 N/A 5.0000 01/04/2013
2,000 0 N/A 5.0000 01/04/2014
4,000 0 N/A 19.1880 01/04/2010
-30-
4,000 0 N/A 19.1880 01/04/2011
4,000 0 N/A 19.1880 01/04/2012
4,000 0 N/A 19.1880 01/04/2013
4,000 0 N/A 19.1880 01/04/2014
4,400 0 N/A 35.5000 04/28/2011
4,400 0 N/A 35.5000 04/28/2012
4,400 0 N/A 35.5000 04/28/2013
4,400 0 N/A 35.5000 04/28/2014
4,400 0 N/A 35.5000 04/28/2015
4,400 0 N/A 27.1000 04/27/2012
4,400 0 N/A 27.1000 04/27/2013
4,400 0 N/A 27.1000 04/27/2014
4,400 0 N/A 27.1000 04/27/2015
4,400 0 N/A 27.1000 04/27/2016
4,400 0 N/A 25.2000 04/26/2013
4,400 0 N/A 25.2000 04/26/2014
4,400 0 N/A 25.2000 04/26/2015
4,400 0 N/A 25.2000 04/26/2016
0 4,400 N/A 25.2000 04/26/2017
13,200 8,800 N/A 20.2400 05/02/2013
8,800 13,200 N/A 38.1100 04/30/2014
4,400 17,600 N/A 27.2100 05/06/2015
0 22,000 N/A 34.3300 05/05/2013
2,000 63,760 0 0
4,500 143,460 0 0
0 0 1,000 31,880
0 0 5,000 159,400
David Samyn 9,000 6,000 N/A 17.0500 02/07/2013
6,000 9,000 N/A 38.1100 04/30/2014
3,000 12,000 N/A 27.2100 05/06/2015
0 15,000 N/A 34.3300 05/05/2013
2,000 63,760 0 0
4,500 143,460 0 0
0 0 1,000 31,880
0 0 5,000 159,400
David W. 600 0 N/A 11.6251 07/21/2009
Heinzmann 400 0 N/A 16.1251 07/21/2009
400 0 N/A 16.1251 07/21/2010
-31-
400 0 N/A 17.8126 07/17/2008
400 0 N/A 17.8126 07/17/2009
400 0 N/A 17.8126 07/17/2010
400 0 N/A 17.8126 07/17/2011
500 0 N/A 28.8750 07/25/2008
500 0 N/A 28.8750 07/25/2009
500 0 N/A 28.8750 07/25/2010
500 0 N/A 28.8750 07/25/2011
500 0 N/A 28.8750 07/25/2012
500 0 N/A 23.2500 07/31/2009
500 0 N/A 23.2500 07/31/2010
500 0 N/A 23.2500 07/31/2011
500 0 N/A 23.2500 07/31/2012
500 0 N/A 23.2500 07/31/2013
500 0 N/A 19.7500 07/30/2010
500 0 N/A 19.7500 07/30/2011
500 0 N/A 19.7500 07/30/2012
500 0 N/A 19.7500 07/30/2013
500 0 N/A 19.7500 07/30/2014
500 0 N/A 34.6200 07/28/2011
500 0 N/A 34.6200 07/28/2012
500 0 N/A 34.6200 07/28/2013
500 0 N/A 34.6200 07/28/2014
500 0 N/A 34.6200 07/28/2015
600 0 N/A 27.5000 07/27/2012
600 0 N/A 27.5000 07/27/2013
600 0 N/A 27.5000 07/27/2014
600 0 N/A 27.5000 07/27/2015
600 0 N/A 27.5000 07/27/2016
3,200 800 N/A 20.3400 07/26/2012
9,000 6,000 N/A 20.2400 05/02/2013
6,000 9,000 N/A 38.1100 04/30/2014
3,000 12,000 N/A 27.2100 05/06/2015
0 15,000 N/A 34.3300 05/05/2013
2,000 63,760 0 0
4,500 143,460 0 0
0 0 1,000 31,880
0 0 5,000 159,400
-32-
Dal Ferbert 1,000 0 N/A 9.3751 05/13/2007
1,000 0 N/A 9.3751 05/13/2008
800 0 N/A 11.1551 05/06/2007
800 0 N/A 11.1551 05/06/2008
800 0 N/A 11.1551 05/06/2009
800 0 N/A 16.5001 05/05/2007
800 0 N/A 16.5001 05/05/2008
800 0 N/A 16.5001 05/05/2009
800 0 N/A 16.5001 05/05/2010
800 0 N/A 19.0000 04/26/2007
800 0 N/A 19.0000 04/26/2008
800 0 N/A 19.0000 04/26/2009
800 0 N/A 19.0000 04/26/2010
800 0 N/A 19.0000 04/26/2011
800 0 N/A 23.0000 04/25/2008
800 0 N/A 23.0000 04/25/2009
800 0 N/A 23.0000 04/25/2010
800 0 N/A 23.0000 04/25/2011
800 0 N/A 23.0000 04/25/2012
800 0 N/A 25.2500 05/01/2009
800 0 N/A 25.2500 05/01/2010
800 0 N/A 25.2500 05/01/2011
800 0 N/A 25.2500 05/01/2012
800 0 N/A 25.2500 05/01/2013
800 0 N/A 20.1250 04/30/2010
800 0 N/A 20.1250 04/30/2011
800 0 N/A 20.1250 04/30/2012
800 0 N/A 20.1250 04/30/2013
800 0 N/A 20.1250 04/30/2014
1,600 0 N/A 35.5000 04/28/2011
1,600 0 N/A 35.5000 04/28/2012
1,600 0 N/A 35.5000 04/28/2013
1,600 0 N/A 35.5000 04/28/2014
1,600 0 N/A 35.5000 04/28/2015
2,000 0 N/A 27.1000 04/27/2012
2,000 0 N/A 27.1000 04/27/2013
2,000 0 N/A 27.1000 04/27/2014
2,000 0 N/A 27.1000 04/27/2015
-33-
2,000 0 N/A 27.1000 04/27/2016
3,000 0 N/A 25.2000 04/26/2013
3,000 0 N/A 25.2000 04/26/2014
3,000 0 N/A 25.2000 04/26/2015
3,000 0 N/A 25.2000 04/26/2016
0 3,000 N/A 25.2000 04/26/2017
9,000 6,000 N/A 20.2400 05/02/2013
6,000 9,000 N/A 38.1100 04/30/2014
3,000 12,000 N/A 27.2100 05/06/2015
0 15,000 N/A 34.3300 05/05/2013
2,000 63,760 0 0
4,500 143,760 0 0
0 0 1,000 31,880
0 0 5,000 159,400
(1) Represents outstanding grants of Performance Shares/Units granted at 60%
and 90% of target, based upon achieving certain financial performance goals
for the three-year periods beginning in 2003 and 2004, respectively. Under
the Performance Share/Unit component of the 2006 Equity Plan and its
predecessors, since 2003, the Compensation Committee has granted
Performance Share/Unit awards based on the Company attaining certain
financial performance goals relating to return on net tangible assets and
earnings before interest, taxes, depreciation and amortization during the
following three-year period. The shares may be earned based on achievement
of the foregoing financial performance goals on a sliding scale from 20% to
100% of the target amount of awarded shares at the end of the three-year
period. If any shares are earned, they may be issued as shares or paid in
the cash equivalent or a combination thereof. Earned restricted shares are
issued in the name of the executive but held by the Company subject to
restrictions relating to continued employment with the Company that lapse
in thirds over the next three-year period. No dividends have been paid on
our Common Stock, but in the event that a dividend would be paid by the
Company on our Common Stock, dividends also would be paid on Performance
Shares/Units that have been earned and issued prior to the lapse of the
restrictions.
(2) The dollar value of the payout of Performance Share/Unit awards is based
on the number of Performance Shares/Units that have been earned but not
vested. Valuations are based on the closing price of $31.88 per share of
the Company's Common Stock on the Nasdaq Stock Market on December 29, 2006,
the last business day of 2006. There is no guarantee that, if and when the
Performance Share/Unit awards vest, they will have this value.
(3) Represents outstanding grants of Performance Shares/Units granted at 20%
and 100% of target, based upon achieving certain financial performance
goals for the three-year periods beginning in 2005 and 2006, respectively.
Under the Performance Share/Unit component of the 2006 Equity Plan and its
predecessors, since 2003, the Compensation Committee has granted
Performance Share/Unit awards based on the Company attaining certain
financial performance goals relating to return on net tangible assets and
earnings before interest, taxes, depreciation and amortization during the
following three-year period. The shares may be earned based on achievement
of the foregoing financial performance goals on a sliding scale from 20% to
100% of the target amount of awarded shares at the end of the three-year
period. If any shares are earned, they may be issued as shares or paid in
the cash equivalent or a combination thereof. Earned restricted shares are
issued in the name of the executive but held by the Company subject to
restrictions relating to continued employment with the Company that lapse
in thirds over the next three-year period. No dividends have been paid on
our Common Stock, but in the event that a dividend would be paid by the
Company on our Common Stock, dividends also would be paid on Performance
Shares/Units that have been earned and issued prior to the lapse of the
restrictions.
(4) The dollar value of the payout of Performance Share/Unit awards is based
on number of Performance Shares/Units that have not been earned and are not
vested. Valuations are based on the closing price of $31.88 per share of
the Company's Common Stock on the Nasdaq Stock Market on December 29, 2006,
the last business day of 2006. There is no guarantee that, if and when
future Performance Share/Unit awards vest, they will have this value.
-34-
The following table provides the amounts received upon exercise of options
or similar instruments or the vesting of stock or similar instruments during the
most recent fiscal year.
OPTIONS EXERCISES AND STOCK VESTED TABLE
Option Awards Stock Awards
------------------------------ ------------------------------
# of Shares # of Shares
Acquired on Value Realized Acquired on Value Realized on
Name Exercise Upon Exercise ($) Vesting (1) Vesting ($) (2)
---- ----------- ----------------- ----------- -----------------
Gordon Hunter -- -- -- --
Philip G. Franklin -- -- 1,000 31,880
David Samyn -- -- 1,000 31,880
David W. Heinzmann 3,600 78,538 1,000 31,880
Dal Ferbert -- -- 1,000 31,880
(1) These shares were earned and vested under the Performance Share/Unit awards
under the predecessor to the 2006 Equity Plan due to achievement of
specified financial goals for Performance Shares/Units awarded during
2003-2005. Pursuant to Performance Shares Agreements awarded in 2003 and
earned at the end of fiscal 2005, the restrictions lapsed for each of
Messrs. Franklin, Samyn, Heinzmann and Ferbert on the equivalent of 1,000
shares of Common Stock of the Company at the end of 2006, half of which
were issued in stock and the other half paid in cash. The vested shares
were issued free of restrictions on January 2, 2007.
One-half of the remaining 8,000 units earned, or 4,000 units, are
restricted shares that were issued in the names of the officers in 2006 but
are held by the Company subject to the lapse of the restrictions related to
continued employment over the next two years. The cash equivalent of the
other 4,000 shares will be paid in halves as the restrictions lapse.
(2) The value of the vested restricted shares is based on the closing price on
December 29, 2006 of $31.88 per share.
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933 or the Exchange Act
that might incorporate by reference filings, including this Proxy Statement, in
whole or in part, the preceding Report of the Compensation Committee on
Executive Compensation and the Performance Graph included in "Company
Performance" shall not be incorporated by reference into any such filings.
COMPANY PERFORMANCE
The following graph compares the five-year cumulative total return on the
Common Stock to the five-year cumulative total returns on the Russell 2000 Index
and the Dow Jones Electrical Components and Equipment Industry Group Index. The
Company believes that the Russell 2000 Index and the Dow Jones Electrical
Components and Equipment Industry Group Index represent a broad market index and
peer industry group for total return performance comparison.
The Russell 2000(R) Index consists of the 2,000 smallest companies,
including the Company.
The Dow Jones Electrical Components and Equipment Industry Group Index
includes the Common Stock of American Superconductor Corp., Amphenol Corp.,
Anaren Microwave, Inc., Arrow Electronics, Inc., Avnet, Inc. AVX Corp.,
Benchmark Electronics, Inc., C&D Technologies, Inc., Capstone Turbine Corp.,
Commscope, Inc., CTS Corp., Emerson, Fuelcell Energy, Inc., General Cable
Corp.,Hubbell Inc. Class B, Jabil Circuit, Inc., Kemet Corp., Littelfuse, Inc.,
Methode Electronics, Inc., Molex, Inc. and Molex, Inc. Class A, Park
Electrochemical Corp., Plexus Corp., Plug Power, Inc., Power-One, Inc.,
Powerwave Technologies, Inc., Regal-Beloit Corp., Sanmina Corp., Solectron
Corp., SPX Corp., Technitrol, Inc., Thomas & Betts Corp., Three-Five Systems,
Inc., Valence Technology, Inc., Vicor Corp., Vishay Intertechnology, Inc.
(PERFORMANCE GRAPH)
-35-
In the case of the Russell 2000 Index and the Dow Jones Electrical
Components and Equipment Industry Group Index, a $100 investment made on
December 31, 2001, and reinvestment of all dividends is assumed. In the case of
the Company, a $100 investment made on December 31, 2001 is assumed (the Company
paid no dividends in 2002, 2003, 2004, 2005, or 2006). Returns are at December
31 of each year, with the exception of 2002, 2003, 2004 and 2006 for the
Company, which are at December 28, 2002, January 3, 2004, January 1, 2005 and
December 30, 2006, respectively.
PENSION BENEFITS
The table below provides the actuarial present value of the Named Executive
Officers' accumulated benefits under the Littelfuse Inc. Retirement Plan and the
number of years of service credited to each Named Executive Officer under the
Plan.
PENSION BENEFITS TABLE
Number of Present Value of Payments During
Years Credited Accumulated Last Fiscal Year
Name Plan Name Service (#) Benefit ($) (1) ($)
---- -------------------------------- -------------- ---------------- ----------------
Gordon Hunter Littelfuse, Inc. Retirement Plan 3 $ 71,532 --
Philip G. Franklin Littelfuse, Inc. Retirement Plan 8 $168,108 --
David Samyn Littelfuse, Inc. Retirement Plan 4 $ 52,122 --
David W. Heinzmann Littelfuse, Inc. Retirement Plan 22 $169,908 --
Dal Ferbert Littelfuse, Inc. Retirement Plan 30 $409,057 --
(1) The figures shown in the Pension Benefit Table represent the present value
as of December 31, 2006 of the benefit earned under the pension plan as of
that date. Present values were determined based on the following
assumptions:
- Although future compensation and service are not factored into the
calculation of the accrued benefit, each Named Executive Officer is
assumed to continue in active service until the earliest date at which
he is entitled to retire and commence to receive unreduced benefit
payments;
- The benefit for each Named Executive Officer is assumed to be paid as
an annuity for the life of the Named Executive Officer;
-36-
- The Temporary Supplemental Monthly Retirement Income is assumed to
increase 5% per annum until the amount of benefit reaches the $600 cap
described below; and
- The discount rate and mortality assumptions used to value the plan for
GAAP FAS 87/132/158 disclosure purposes as of December 31, 2006.
Specifically, a discount rate of 6.00% per annum and the RP-2000
Mortality Table (post-retirement only) were used.
All US employees, including the Named Executive Officers, are eligible to
participate in the Company's non-contributory, defined benefit retirement plan,
qualified under the applicable provisions of the Internal Revenue Code, upon
completion of one year of service. The plan provides a benefit equal to 1% of
Final Average Monthly Compensation plus 1/2% of Final Average Monthly
Compensation in excess of Covered Compensation, for each year of service over
one. Final Average Monthly Compensation is the monthly average of the five
consecutive years' compensation out of the last ten years that give the highest
average. Compensation considered is base pay or wages actually paid, excluding
overtime and bonuses, and is further subject to the IRS qualified plan pay limit
($220,000 for 2006).
Participants become 100% vested after completion of five years of service.
The benefit is payable as a life annuity commencing at the plan's Normal
Retirement Date, which is the first of the month coincident with or next
following the attainment of age 65 and completion of five years of service.
Participants are eligible for early retirement upon attaining age 55 and
completing ten years of service. Participants opting for early retirement are
eligible for immediate commencement of their benefit, with said benefit
unreduced if payments commence at or after age 62, and reduced by formula for
commencements prior to age 62. Participants separating from service after
earning a non-forfeitable right to a benefit but prior to becoming eligible for
early retirement are not eligible to have their benefit payments commence prior
to their Normal Retirement Date.
In addition to the formula benefit described above, participants who retire
after becoming eligible for early retirement but prior to their Normal
Retirement Date are entitled to receive a Temporary Supplemental Monthly
Retirement Income beginning at age 62, with such monthly payment continuing
until their attainment of age 65. This supplement, $456.22 per month in fiscal
year 2006, is adjusted annually to reflect inflation, but is ultimately capped
at $600 per month.
NONQUALIFIED DEFERRED COMPENSATION
The following table discloses contributions, earnings and balances under
the Littelfuse Inc. Supplemental Executive Retirement Plan ("SERP") for each
Named Executive Officer.
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NONQUALIFIED DEFERRED COMPENSATION TABLE
Executive Company Aggregate Aggregate Aggregate Balance
Contributions Contributions Earnings in Withdrawals/ at 12/31/06
Name in 2006 ($) in 2006 ($) (1) 2006 ($) (2) Distributions ($) ($) (3)
---- ------------- --------------- ------------ ----------------- -----------------
Gordon Hunter N/A N/A N/A N/A N/A
Philip G. Franklin N/A $137,757 $51,490 $0 $832,872
David Samyn N/A N/A N/A N/A N/A
David W. Heinzmann N/A N/A N/A N/A N/A
Dal Ferbert N/A N/A N/A N/A N/A
(1) These amounts are included in amounts reported in the All Other
Compensation column of the Summary Compensation Table.
(2) These amounts are included in amounts reported in the Change in Pension
Value and Nonqualified Deferred Compensation Earnings column of the Summary
Compensation Table to the extent that they exceed the interest that would
have been credited in 2006 had the interest crediting rate been equal to
120% of the long-term Applicable Federal Rate published by the Internal
Revenue Service for December 2006. For Mr. Franklin, $13,580 is reported in
the Change in Pension Value and Nonqualified Deferred Compensation Earnings
column of the Summary Compensation Table.
(3) For Mr. Franklin, the amount shown in this column includes $0 of his own
contributions, $646,819 of Company contributions and $186,053 of interest
earnings. Of the amount reported in this column, $643,625 was previously
reported as compensation (or interest earnings thereon) to Mr. Franklin in
previous years. As of December 31, 2006, Mr. Franklin is 80% vested in his
SERP account balance.
The Company maintains the Littelfuse Inc. Supplemental Executive Retirement
Plan ("SERP"), a non-qualified defined contribution plan that is a legacy plan
that was closed to new participants several years ago. The plan was intended to
provide supplemental retirement benefits to enable the Company to attract and
retain executives. Mr. Franklin is the only NEO who is a participant in this
Plan.
The SERP is an unfunded plan with a notional account maintained for each
participant. An allocation is made on December 31 of each year to each active
participant's notional account. The amount of the allocation is the amount
necessary to fully fund the participant's target benefit (described below) by
December 31 of the year ending coincident with or immediately preceding his
attainment of age 62. In addition to this annual allocation, on December 31 each
year each active participant's notional account is credited with interest of
8.00% of the account balance as of the previous December 31.
The target benefit under the SERP is 65% of the participant's Final Average
Compensation, prorated for service projected to the participant's Normal
Retirement Date less than 12 years, and offset by (a) the benefits attributable
to employer contributions under any qualified retirement plans maintained by the
Company and (b) 50% of the participant's estimated Social Security benefit. With
regard to offset (a), the benefit is projected to the participant's Normal
Retirement Date and converted to a joint and 50% survivor annuity. Final Average
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Compensation is the average annual compensation paid to the participant by the
Company during the five consecutive calendar year period preceding his
termination of employment. Compensation includes the participant's base salary
and any other cash compensation payments to the participant, including amounts
deferred under the 401(k) or 125 (cafeteria) plans, and further includes any
bonuses attributable to a calendar year regardless of whether the bonuses are
paid during such calendar year.
Participants become 30% vested in their notional account balance after
completing three years of service, and earn an additional 10% vesting for each
subsequent year of service until becoming 100% vested after ten years of
service. Participants also become 100% vested upon death, total and permanent
disability or attainment of age 62, regardless of their length of service.
Participants who are terminated for cause, or who are employed by a competitor
within two years of their termination of employment, forfeit their entire
account balance.
Upon termination or retirement after completing ten years of service,
participants may choose to have their benefit payments commence as early as age
55. They may choose to receive their benefit in a lump sum (equal to their
vested account balance) or in one of a handful of actuarially equivalent annuity
forms of payment.
POST-EMPLOYMENT COMPENSATION
Upon the termination of a Named Executive Officer, he may be entitled to
additional benefits or payments beyond those provided under the benefit plans
covering all salaried employees of Littelfuse, depending on the event triggering
the termination. The events that would trigger a Named Executive Officer's
entitlement to additional benefits or payments, and the estimated value of these
additional benefits or payments, are described in the following table. The table
has been prepared assuming a termination date and, where applicable, a Change of
Control date of December 30, 2006, and a stock price of $31.88 per share, which
was the closing price of one share of our common stock on December 29, 2006 (the
last trading day of fiscal year 2006):
G. Hunter P. Franklin D. Samyn D. Heinzmann D. Ferbert
---------- ----------- ---------- ------------ ----------
Voluntary Resignation
for Good Reason or
Involuntary Termination
other than for Cause $2,074,958(a) $666,298(e) $ -- $ -- $ --
Voluntary Resignation
other than for Good
Reason or Involuntary
Termination for Cause $ -- $666,298(e) $ -- $ -- $ --
Voluntary Resignation
for Good Reason or
Involuntary Termination
other than for Cause
within 2 years of a
Change of Control $6,225,067(b) $4,348,895(b) $2,000,502(b) $1,623,404(b) $1,721,120(b)
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Death $3,245,832(c) $2,258,608(c) $1,157,840(c) $1,040,832(c) $1,021,040(c)
Disability $1,399,832(d) $1,254,108(d) $ 352,240(d) $ 342,332(d) $ 353,140(d)
Retirement $ -- $ 666,298(e) $ -- $ -- $ --
(a) The figure shown represents one year of annual base salary plus one year
AIP target bonus plus the cost of one year of continued coverage under the
Company's group health, dental and life insurance plans plus the cost of
outplacement services (at the maximum of $25,000). In addition, Mr. Hunter
is entitled to a pro-rata portion of his AIP bonus for the year of his
termination, which in this case is his full 2006 AIP bonus. The full 2006
AIP bonus is included in the figure shown. These additional benefits and
payments are conditioned upon Mr. Hunter signing a waiver and release of
claims agreement.
(b) The figure shown represents two years of annual base salary plus two times
the highest recent AIP bonus plus the value of all unvested options and
shares under the equity-based plans (assuming full vesting and exercise on
December 30, 2006) plus the cost of two years of continued coverage under
the Company's group health plan plus the cost of outplacement services for
up to two years (at the maximum of 15% of annual base salary) plus an
excise tax gross-up. The Named Executive Officer is also entitled to a
pro-rata portion of his AIP bonus for the year of his termination, with
that bonus assumed to be no less than the highest recent annual bonus paid
to him, which in this case is his full 2006 AIP bonus. The full 2006 AIP
bonus is included in the figure shown. In addition, Mr. Franklin is
entitled to two additional years' allocation to the SERP. The full SERP
account balance as of December 30, 2006 plus the two additional years'
allocations are included in the figure shown. In addition to the above
additional benefits and payments, the Named Executive Officer is no longer
bound by any non-compete agreements.
(c) The figure shown represents life insurance coverage equal to three times
annual base salary + $10,000, plus the value of all unvested options under
the stock option plans and shares under the equity-based plans (assuming
full vesting and exercise on December 30, 2006). In addition, Mr. Hunter is
entitled to a pro-rata portion of his AIP bonus for the year of his death,
which in this case is his full 2006 AIP bonus. The full 2006 AIP bonus is
included in the figure shown. For Mr. Franklin, the figure shown also
includes the full value as of December 30, 2006 of his SERP account.
(d) The figure shown represents the value of all unvested options under the
stock option plans and shares under the equity-based plans (assuming full
vesting and exercise on December 30, 2006). In addition, Mr. Hunter is
entitled to a pro-rata portion of his AIP bonus for the year in which he
became disabled, which in this case is his full 2006 AIP bonus. The full
2006 AIP bonus is included in the figure shown. For Mr. Franklin, the
figure shown also includes the full value as of December 30, 2006 of his
SERP account.
(e) As of December 30, 2006 Mr. Franklin is 80% vested in his SERP account
balance. The figure shown represents 80% of the value of Mr. Franklin's
SERP account as of December 30, 2006, although he will not be eligible to
receive payment of the vested portion of his SERP account until his Normal
Retirement Date of October 31, 2013.
VOLUNTARY RESIGNATION FOR GOOD REASON OR INVOLUNTARY TERMINATION OTHER THAN
FOR CAUSE
Other than as provided for in Mr. Hunter's Employment Agreement (as
described in "-- Gordon Hunter's Employment Agreement Post-Employment
Provisions" below), the Named Executive Officers are not entitled to any
benefits or payments (beyond those provided under the benefit plans
covering all salaried employees of Littelfuse) in the event of their
voluntary resignation for Good Reason or their involuntary termination
other than for Cause.
VOLUNTARY RESIGNATION OTHER THAN FOR GOOD REASON OR INVOLUNTARY TERMINATION
FOR CAUSE
The Named Executive Officers are not entitled to any benefits or payments
(beyond those provided under the benefit plans covering all salaried
employees of Littelfuse) in the event of their voluntary resignation other
than for Good Reason or their involuntary termination for Cause.
VOLUNTARY RESIGNATION FOR GOOD REASON OR INVOLUNTARY TERMINATION OTHER THAN
FOR CAUSE WITHIN TWO YEARS OF A CHANGE OF CONTROL
The Named Executive Officers are entitled to additional benefits and
payments (beyond those provided under the benefit plans covering all
salaried employees of Littelfuse) in the event of their voluntary
termination for Good Reason or their involuntary termination other than for
Cause within two years of a Change of Control. The additional benefits and
payments they are entitled to are described in "-- Change of Control
Agreements Post-Employment Provisions" below.
DEATH
In the event of the death of a Named Executive Officer, he shall be
entitled to a payout under the Company's life insurance plan equal to three
times annual base salary + $10,000 and, as described in "-- Equity-based
Compensation Plans Post-Employment Provisions" below, any unvested stock
options shall fully vest. As described in "Gordon Hunter's Employment
Agreement Post-Employment
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Provisions" below, Mr. Hunter is also entitled to a pro-rata portion of his
bonus for the year of his death. In addition, Mr. Franklin would become
fully vested in his SERP account and his benefit would commence
immediately.
DISABILITY
In the event a Named Executive Officer becomes disabled, his unvested stock
options shall fully vest, as described in "-- Equity-based Compensation
Plans Post-Employment Provisions" below. As described in "Gordon Hunter's
Employment Agreement Post-Employment Provisions" below, Mr. Hunter is also
entitled to a pro-rata portion of his bonus for the year in which he became
disabled. In addition, Mr. Franklin would become fully vested in his SERP
account and his benefit would commence immediately.
RETIREMENT
As of December 30, 2006, none of the Named Executive Officers had satisfied
both the age and service requirements to be eligible for Retirement under
the Pension Plan or equity-based compensation plans. As such, if any of the
Named Executive Officers were to separate from service, he would not be
eligible for immediate commencement of benefits under the Pension Plan nor
would be eligible for any accelerated vesting under the equity-based
compensation plans. With regard to the SERP, Mr. Franklin is the only Named
Executive Officer eligible to participate in the plan. Mr. Franklin is
currently 80% vested. If he were to terminate service and retain his right
to a benefit, the vested portion of his SERP account would not be payable
until his Normal Retirement Date of October 31, 2013.
EQUITY-BASED COMPENSATION PLANS POST-EMPLOYMENT PROVISIONS
Under the provisions of the 1993 Stock Plan for Employees and Directors of
Littelfuse, Inc. (the "1993 Equity Plan") and the Stock Plan for Employees and
Directors of Littelfuse, Inc. (the "Original Equity Plan"), all participants,
including Messrs. Hunter, Franklin, Samyn, Heinzmann and Ferbert, will have all
of their unvested stock options fully vest upon their death, Total Disability or
Eligible Retirement (as such terms are defined under these plans) and upon a
Change of Control (as such term is defined under these plans). Upon any such
termination of employment or Change of Control, the stock option holder may
exercise his or her vested stock options (including those which become vested as
described above) until the earlier of (i) the date on which the stock options
would otherwise terminate in accordance with the terms of their grants or (ii)
the expiration of three months after the Change of Control or date of
termination (twelve months in the case of death). Under all other termination of
employment events, all unvested stock options are forfeited upon termination and
the holder has three months after termination to exercise his or her stock
options which were vested immediately prior to termination.
Under the provisions of the 2006 Equity Plan, all participants, including
Messrs. Hunter, Franklin, Samyn, Heinzmann and Ferbert, will have all of their
unvested stock options fully vest upon their death or Disability (as such terms
are defined under this plan) and upon any termination of employment following a
Change of Control (as such term is defined under this plan). Upon any such
termination of employment, the stock option holder may exercise his or her
vested stock options (including those which become vested as described above)
until the earlier of (i) the date on which the stock options would otherwise
terminate in accordance with the terms of their grants or (ii) the expiration of
three months after the date of termination (twelve months in the case of death).
If the employment with the Company of any participant, including Messrs. Hunter,
Franklin, Samyn, Heinzmann and Ferbert, terminates by reason of Eligible
Retirement (as such term is defined under the 2006 Equity Plan), all stock
options held by the participant shall vest on the same dates, and shall remain
exercisable for the same periods, as if the participant were still employed.
Under all other termination of employment events, all unvested stock options are
forfeited upon termination and the holder has three months after termination to
exercise his or her stock options which were vested immediately prior to
termination.
-41-
Performance share awards which have been granted under the 1993 Plan and
the 2006 Equity Plan have an initial three-year performance period during which
the Company must attain certain specified financial targets and a subsequent
three-year continued employment period. Any participant, including Messrs.
Hunter, Franklin, Samyn, Heinzmann and Ferbert, whose employment with the
Company terminates for any reason prior to the expiration of the three-year
performance period respecting a performance share award shall be deemed to
forfeit the performance share award. If termination occurs after the expiration
of the three-year performance period but prior to the expiration of the
subsequent three-year continued employment period, all of the remaining
restrictions on any restricted shares of Company common stock issued with
respect to a performance share award shall lapse upon the death, Total
Disability or Eligible Retirement of the participant or upon a Change in
Control. Any other termination of employment prior to the expiration of the
three-year continued employment period will cause all restricted shares of
Company common stock issued pursuant to a performance share award and which are
still subject to restrictions to be forfeited and cancelled.
GORDON HUNTER'S EMPLOYMENT AGREEMENT POST-EMPLOYMENT PROVISIONS
If the employment of Mr. Hunter is terminated for Cause (as such term is
defined in his employment agreement), or if Mr. Hunter terminates his employment
other than for Good Reason (as such term is defined in his employment agreement)
his employment agreement provides that he is entitled to receive his
compensation and benefits accrued up to the date of termination.
If Mr. Hunter's employment terminates due to death or disability, his
employment agreement provides that he is entitled to receive his compensation
and benefits accrued up to the date of termination plus his annual incentive
bonus for the performance period in which the date of termination occurs based
on actual performance for the entire period but subject to a pro rata reduction
to reflect the portion of the performance period following the date of
termination.
If Mr. Hunter's employment is terminated by the Company other than for
Cause, or he terminates his employment for Good Reason (as such term is defined
in his employment agreement) his employment agreement provides that Mr. Hunter
is entitled to receive his compensation and benefits accrued up to the date of
termination. In addition, the Company will (i) continue to pay him his base
salary during the twelve months following the date of termination at the rate in
effect on the date of termination (ii) pay him his annual incentive bonus at
target payable in twelve monthly equal installments; (iii) if Mr. Hunter elects
to exercise his COBRA rights to continue his Company sponsored group health and
dental plan benefits, continue to contribute to the premium cost for Mr. Hunter
and his eligible dependents for up to twelve months; (iv) pay him an incentive
bonus for the performance period in which the date of termination occurs subject
to a pro-rata reduction to reflect the portion of the performance period
following the date of termination; (v) continue to contribute to the premium
cost of Mr. Hunter's participation in the Company's group life insurance plan
for up to twelve months; and (vi) pay up to $25,000 for costs and expenses of
outplacement services.
-42-
CHANGE OF CONTROL AGREEMENTS POST-EMPLOYMENT PROVISIONS
Messrs. Hunter, Franklin, Samyn, Heinzmann and Ferbert each have a Change
of Control Employment Agreement with the Company (the "Change of Control
Agreements"). If a Change of Control (as such term is defined in the Change of
Control Agreements) occurs at any time on or before January 1, 2009, the Company
has agreed to continue to employ Messrs. Hunter, Franklin, Samyn, Heinzmann and
Ferbert, and each of them has agreed to remain an employee of the Company, for
two years after the occurrence of the Change of Control (the "Employment
Period"). During the Employment Period, the Company will provide them with
compensation and benefits which are no less than the compensation and benefits
provided to them by the Company prior to the Change of Control.
In the event that the Company terminates the employment of Messrs. Hunter,
Franklin, Samyn, Heinzmann or Ferbert during the Employment Period other than
for Cause, death or Disability (as such terms are defined in the Change of
Control Agreements) or if any of them terminate their employment for Good Reason
(as such term is defined in the Change of Control Agreements):
(i) the Company will pay to the terminated executive his accrued base
salary, a prorated bonus (assuming his bonus would have been no less than
any previous recent bonus paid to him), any deferred compensation and any
accrued vacation pay (the "Accrued Obligations") plus an amount equal to
two times the sum of his annual base salary and his highest recent annual
bonus;
(ii) during the two years following the date of termination, the
Company will continue to provide medical insurance benefits to the
terminated executive and his family at least equal to those which would
have been provided to them in accordance with the medical insurance
benefits to which the terminated executive was entitled if the terminated
executive's employment had not been terminated;
(iii) for a period of up to two years after the date of termination,
the Company will provide outplacement services to the terminated executive
for the purpose of assisting the terminated executive to seek new
employment at a cost to the Company not to exceed fifteen percent of the
terminated executive's annual base salary;
(iv) any option or right granted to the terminated executive under any
of the Company's equity-based plans shall be exercisable by the terminated
executive until the earlier of the date on which the option or right
terminates in accordance with the terms of its grant or the expiration of
twelve months after the date of termination;
(v) the Company will pay or provide to the terminated executive any
other amounts or benefits required to be paid or provided or which the
terminated executive is eligible to receive under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (the "Other Benefits"); and
-43-
(vi) on and after the date of termination the terminated executive
shall not be bound or prejudiced by any non-competition agreement
benefiting the Company or its subsidiaries.
(vii) the Company shall credit as of the date of the termination the
SERP account of Mr. Franklin with an amount equal to the sum of the two
respective amounts which would have been credited to his account on the two
valuation dates next following his date of termination assuming he had (1)
continued to be employed by the Company up to and including these valuation
dates, (2) his Compensation (as defined in the Plan) during the assumed
employment period equaled his Compensation for the most recently ended plan
year prior to his termination and (3) the Company would continue the SERP
up to and including these valuation dates. No amount shall be credited to
his SERP account, however, for any valuation date occurring after his
attainment of age 62.
If the terminated executive's employment is terminated by reason of his
death or disability during the Employment Period, the Company will pay to the
terminated executive or his legal representative the Accrued Obligations and the
Other Benefits which shall include, in the case of death, benefits at least
equal to the most favorable benefits provided by the Company to the estates and
beneficiaries of peer executives of the Company and which shall include, in the
case of disability, disability and other benefits at least equal to the most
favorable of those generally provided by the Company to disabled executives
and/or their families.
If the terminated executive's employment is terminated for Cause during the
Employment Period, the Company will pay to the terminated executive his annual
base salary through the date of termination, the amount of any compensation
previously deferred by the terminated executive, and shall provide the Other
Benefits. If the terminated executive voluntarily terminates his employment
during the Employment Period, excluding a termination for Good Reason, the
Company shall pay him the Accrued Obligations and the Other Benefits.
In the event it is determined that any payment or distribution by the
Company to Messrs. Hunter, Franklin, Samyn, Heinzmann or Ferbert would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
or any interest or penalties are incurred by any of them with respect to such
excise tax (collectively, the "Excise Tax"), then they will be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that,
after payment of all taxes, they retain an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the payments. Additionally, if it is subsequently
determined that any of them are subject to the additional tax and interest
provided in Section 409A(a)(1)(B) of the Internal Revenue Code with respect to
any portion of any payment made to them, then they shall also be entitled to
receive an additional payment calculated in the same manner as a Gross-Up
Payment.
PENSION PLAN POST-EMPLOYMENT PROVISIONS
The Pension Plan does not distinguish between voluntary resignations (for
Good Reason or otherwise) and involuntary terminations (for Cause or otherwise).
The Plan also offers no special provisions for terminations due to a Change of
Control. Normal Retirement is the first of the month coincident with or next
following the attainment of age 65 and completion of five
-44-
years of service, and participants are eligible for Early Retirement upon
attaining age 55 and completing ten years of service. Participants who terminate
employment after completing five years of service earn a non-forfeitable right
to a benefit.
SERP POST-EMPLOYMENT PROVISIONS
The Plan's Normal Retirement Date is the last day of the month coincident
with or next following the date the participant attains age 62, and Early
Retirement Date means the last day of the month coincident with or next
following the date the participant attains age 55 and completes ten years of
service. Participants become 30% vested upon completion of three years of
service, and earn an additional 10% vesting for each subsequent year of service
until becoming 100% vested after ten years of service. Participants also become
vested upon death, total disability and the attainment of age 62 regardless of
their length of service. Participants who are terminated for cause or who are
employed by a competitor within two years of their termination of employment
forfeit their benefit under the plan.
As of December 31, 2006, Mr. Franklin is the only NEO eligible to
participate in the SERP. Although he is 80% vested in his benefit, were he to
terminate service and retain his right to a benefit, said benefit would not be
payable until his Normal Retirement Date, October 31, 2013.
If Mr. Franklin were to be terminated for Good Reason, or be terminated by
the Company other than for Cause, within two years of a Change of Control, as of
the date of the termination, Mr. Franklin's SERP account would be credited with
two additional years' allocations (as described in "-- Change of Control
Agreements Post-Employment Provisions") and two additional years of service. The
additional years of service would fully vest Mr. Franklin in the amount in his
SERP account and allow him to satisfy the service requirement for immediate
commencement of his SERP account balance.
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933 or the Exchange Act
that might incorporate by reference filings, including this Proxy Statement, in
whole or in part, the following Report of the Audit Committee shall not be
incorporated by reference into any such filings.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process and
compliance with the Sarbanes-Oxley Act on behalf of the Board of Directors.
Management has the primary responsibility for the financial statements and the
reporting process including the systems of internal controls. In fulfilling its
oversight responsibilities, the Audit Committee reviewed the audited financial
statements in the Annual Report with management, including a discussion of the
quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the clarity of disclosures in the
financial statements.
-45-
The Audit Committee also reviewed and discussed the audited financial
statements with the independent auditors and discussed the matters requiring
discussion pursuant to SAS 61, including the accounting methods used in the
audit. In addition, the Audit Committee has discussed with the independent
auditors the auditor's independence from management and the Company, including
the matters in the written disclosures and letter received by the Audit
Committee from the independent auditors as required by the Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees,
and considered the compatibility of non-audit services with auditor's
independence.
The Audit Committee discussed with the independent auditors the overall
scope and plans for their audits. The Audit Committee meets with the independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting. The Audit Committee held
nine meetings during fiscal 2006.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 30, 2006 for filing with the Commission. The
Audit Committee and the Board have also recommended, subject to stockholder
approval, the selection of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ended December 29, 2007.
AUDIT COMMITTEE
Anthony Grillo (Chairman)
John E. Major
Ronald L. Schubel
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company did not enter into any Related Person Transactions in 2006.
PROPOSAL NO. 2
APPROVAL AND RATIFICATION OF
APPOINTMENT OF INDEPENDENT AUDITORS
Subject to approval of the stockholders, the Board of Directors has
appointed Ernst & Young LLP, an independent registered public accounting firm,
as independent auditors to examine the annual consolidated financial statements
of the Company and its subsidiary companies for the fiscal year ending December
29, 2007. The stockholders will be asked at the meeting to approve and ratify
such appointment.
-46-
AUDIT AND NON-AUDIT FEES
The following table presents the approximate fees for professional audit
services rendered by Ernst & Young LLP for the audit of the Company's financial
statements for the fiscal year ended December 30, 2006, as well as the
approximate fees billed for other services rendered by Ernst & Young LLP:
2006 2005
---------- ----------
Audit fees (1) $1,662,000 $2,477,000
Audit-related fees (2) 126,000 115,000
Tax advisory services (3) 710,000 381,000
Other (4) 2,000 0
(1) Includes fees related to statutory audits of foreign subsidiaries,
Sarbanes-Oxley compliance and review of financial statements included in
the Company's Forms 10-Q.
(2) Includes fees related to audits of employee benefit plans and acquisition
activity during 2006 and 2005.
(3) Includes fees related to tax compliance, tax advice and tax planning.
(4) Includes fees related to the Ernst & Young LLP on-line research tool.
A representative of Ernst & Young LLP will be present at the meeting to
make a statement, if such representative so desires, and to respond to
stockholders' questions.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
All audit and non-audit services are pre-approved by the Audit Committee,
which considers, among other things, the possible effect of the performance of
such services on the registered public accounting firm's independence. The Audit
Committee pre-approves the annual engagement of the principal independent
registered public accounting firm, including the performance of the annual
audit, statutory audits at foreign locations, quarterly reviews and tax
services. The Audit Committee has considered the role of Ernst & Young LLP in
providing services to the Company and has concluded that such services are
compatible with such firm's independence.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
FOLLOWING RESOLUTION, WHICH WILL BE PRESENTED AT THE MEETING:
RESOLVED: That the appointment by the Board of Directors of the Company of
Ernst & Young LLP as the Company's independent auditors for the fiscal year of
the Company ending December 29, 2007, be approved and ratified.
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PROPOSAL NO. 3
APPROVAL OF THE LITTELFUSE OUTSIDE DIRECTORS' EQUITY PLAN
The Board of Directors has approved and recommends to the stockholders the
approval of an amendment, restatement and renaming of the Outside Directors'
Stock Option Plan (the "Existing Directors Plan") which, if approved, would
become effective on April 27, 2007, and would rename the Outside Directors'
Stock Option Plan the "Outside Directors' Equity Plan" (the "Amended and
Restated Directors Plan").
The Compensation Committee and the Board of Directors have proposed the
Amended and Restated Directors Plan because they believe that, it in order to
attract and retain qualified directors for the Company, the Company should have
the ability to provide equity-based compensation to the outside directors which
is more comparable to the equity-based compensation that is provided to the
employees of the Company. The Existing Directors Plan, approved at the 2006
Annual Meeting of Stockholders, only provides for automatic annual grants of
5,000 non-qualified stock options to each outside director. The Amended and
Restated Plan will provide more flexibility and discretion regarding the type of
equity-based compensation which may be provided to outside directors.
The Compensation Committee, with the assistance of Towers Perrin, undertook
a survey of director compensation practices at similarly situated companies. The
survey showed that our director compensation practices resulted in below median
compensation for our directors, mainly due to the limitation imposed by the
5,000 share annual formula option grant. The Amended and Restated Plan will
provide the Board of Directors with additional flexibility to grant equity-based
awards that should both align the interests of the directors with the
stockholders and incentivize our qualified directors to work with management of
the Company over the long-term to grow our stockholder value. The Amended and
Restated Plan should allow us to achieve our objectives of attracting and
retaining the most highly qualified director candidates possible.
The Amended and Restated Directors Plan does not provide for an increase in
the number of shares of Common Stock currently authorized under the Existing
Directors Plan. The Existing Directors Plan provides a pool of 250,000 shares of
Common Stock to be used for the annual grant of 5,000 options to each outside
director. Currently, stock options relating to 25,000 shares of Common Stock
have been granted under the Existing Directors Plan, which will leave 225,000
shares available for awards under the Amended and Restated Directors Plan if
approved.
Management believes that adoption of the Amended and Restated Directors
Plan will further promote the Company's goals of enhancing the long-term
profitability and stockholder value of the Company by attracting and retaining
the services of outside directors of outstanding talent. The primary purpose of
the Amended and Restated Directors Plan is to give the Company more flexibility
to provide equity-based compensation to its outside directors on a non-formula
basis more comparable to the equity-based compensation awards made to the
Company's employees in order to allow the Company to achieve its goal of
attracting and retaining qualified directors.
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The full text of the Amended and Restated Directors Plan appears as Exhibit
A to this Proxy Statement to which reference is made for a full statement of its
terms and provisions. Capitalized terms used but not defined below shall have
the meanings ascribed to them in the Amended and Restated Directors Plan. A
summary of the major provisions of the Amended and Restated Directors Plan is
set forth below:
MAXIMUM NUMBER OF SHARES. As discussed above, the total number of shares
available for the grant of awards under the Amended and Restated Directors Plan
is 250,000 (subject to adjustment as described below), of which only 225,000 are
currently available for awards since stock options relating to 25,000 shares
were granted in 2006 under the Existing Directors Plan. Generally, any shares
that are subject to an award that expires or is forfeited without exercise under
the Amended and Restated Directors Plan will become available for subsequent
awards under the Amended and Restated Directors Plan.
TERMS AND CONDITIONS OF AWARDS. Unlike the Existing Directors Plan, the
Amended and Restated Directors Plan provides for a number of different types of
awards which may be granted to the outside directors. The awards may include
stock options, stock appreciation rights, restricted stock and restricted stock
units. The stock appreciation rights may be granted alone or in tandem with a
stock option.
The option price for each stock option shall be equal to the fair market
value of the Common Stock on the date the stock option is granted and the option
price may not be the subsequently reduced. The term of each stock option shall
be ten years, subject to earlier termination in the event a director terminates
his or her service as a director. The number of stock options included in each
award, the vesting of the stock options and the extent to which stock options
may be exercised after the a director ceases to be a director shall be
determined by the Board of Directors and be specified in the individual award
agreements which will be signed in connection with each award granted under the
Amended and Restated Directors Plan.
A stock appreciation right ("SAR") entitles the holder to a cash payment
equal to the increase in the market price of a share of Common Stock over the
market price of a share of Common Stock on the grant date of the SAR. The Board
of Directors will determine the amount of SARs included in each SAR award. The
term of each SAR shall be ten years, subject to earlier termination in the event
a director terminates his or her service as a director. A tandem SAR may be
exercised for all or part of the shares subject to the related stock option,
which exercise shall result in a surrender of the right to exercise the
equivalent portion of the related stock option. A tandem SAR may only be
exercised with respect to the shares of Common Stock for which its related stock
option is then exercisable. A non-tandem SAR may be exercised for all or part of
the shares subject to the SAR at such time as may be determined by the Board of
Directors and specified in the award agreement.
Restricted stock awards provide that shares of Common Stock will be issued
in the name of the recipient outside director but will be subject to such
restrictions as the Board of Directors shall determine and which will be
specified in the award agreement. The number of shares of restricted stock, the
vesting and the length of the period of restriction applicable to the restricted
stock shall also be determined by the Board of Directors and specified in the
award agreement.
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Restricted stock unit awards provide that each holder of a restricted stock
unit will receive one share of Common Stock as soon as practical after the
restricted stock unit vests. The Board of Directors will determine and the award
agreement will specify the number of restricted stock units granted and the time
at which the restricted stock units shall vest.
VESTING. Vesting of all awards shall be based solely upon continued
membership of the Board of Directors for a specified period of time. If an award
agreement does not specify a vesting period, then one-third of the award shall
vest on each of the first three anniversaries of the grant date.
In the event that an outside director's membership on the Board of
Directors terminates by reason of death or disability or following a Change of
Control, all of his or her awards shall immediately become fully vested and, in
the case of a stock option or SAR, shall remain exercisable until the earlier of
(i) the remainder of the term of the stock option or SAR or (ii) three months
(12 months in the case of death) after the date of termination.
In the event that an outside director's membership on the Board of
Directors terminates prior to a Change of Control for any reason other than
death or disability, his or her stock options and SARs, to the extent vested on
the date of termination, shall remain exercisable until and earlier of (i) the
remainder of the term of the stock option or SAR or (ii) three months after the
date of termination.
In the event that an outside director's membership on the Board of
Directors terminates (other than by removal from the Board of Directors for
cause, determined by the Board of Directors) after serving as a member of the
Board for at least five years, all awards shall immediately become fully vested
and, in the case of a stock option or SAR, shall remain exercisable until the
earlier of (i) the remainder of the term of the stock option or SAR, or (ii)
twelve months from the date of termination.
TERM OF DIRECTORS PLAN. The Amended and Restated Directors Plan will become
effective upon approval by the stockholders on April 27, 2007, and has no fixed
expiration date.
ADMINISTRATION. The Amended and Restated Directors Plan will be
administered by the Compensation Committee of the Board of Directors, except
that the Board of Directors shall approve all grants of awards and the terms of
all award agreements.
ELIGIBILITY. Participation in the Amended and Restated Directors Plan is
limited to members of the Board of Directors of the Company who are not
employees of the Company or any of its subsidiaries.
ANTI-DILUTION. The Compensation Committee may, in the event of any stock
dividend, stock split, recapitalization, merger, consolidation or other change
in the capitalization of the Company or similar corporate transaction or event
affecting the Common Stock, in such manner as it deems equitable, adjust, among
other things, (i) the maximum number of shares that may be issued under the
Amended and Restated Directors Plan; (ii) the number and class of shares that
may be subject to awards that have not been settled; (iii) the exercise price or
grant price for
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unexercised stock options or stock appreciation rights; and (iv) the share value
used to determine the amount or value of any award under the Amended and
Restated Directors Plan. In addition, in the event of any offer to holders of
Common Stock generally relating to the acquisition of their shares, the
Compensation Committee may make such adjustment as it deems equitable in respect
of outstanding awards, including in the Compensation Committee's discretion
revision of outstanding awards so that they may be exercisable for or payable in
the consideration payable in the acquisition transaction.
PROHIBITION ON REPRICING. Any reduction in the exercise price of a stock
option or grant price of a SAR after it is granted (except pursuant to an
anti-dilution adjustment as described above) is specifically prohibited.
TRANSFER OF AWARDS. In general, awards may be exercisable only by the
outside director during the outside director's lifetime, and awards shall not be
transferable other than by will or the laws of descent and distribution, except
as otherwise permitted by the Compensation Committee.
AMENDMENTS. The Board of Directors may suspend, terminate, modify or amend
the Amended and Restated Directors Plan at any time, but if any such amendment
requires stockholder approval in order to meet the requirements of any
applicable law or regulation, or the rules of any exchange or automated
quotation system on which the Company's shares are listed, such amendment may
not be effected without obtaining stockholder approval. The Board of Directors
may terminate the Amended and Restated Directors Plan, but the terms of the
Amended and Restated Directors Plan will continue to apply to awards granted
prior to such termination. No suspension, termination, modification or amendment
of the Amended and Restated Directors Plan may adversely affect the rights of a
recipient under previously granted awards.
FEDERAL INCOME TAX CONSEQUENCES. The following is a general summary of
certain of the principal federal income tax consequences applicable to the
Company and to an outside director who is a citizen or a resident of the United
States for federal income tax purposes upon the receipt, exercise and
disposition of awards under the Amended and Restated Directors Plan. This
summary is not intended as a complete description of all federal income tax
consequences, and any outside director should consult his own tax advisor with
respect to the federal, state and local tax consequences of any transaction
involving an award under the Amended and Restated Directors Plan.
No tax will be payable by the recipient of a stock option under the Amended
and Restated Directors Plan at the time of grant or the time of vesting. Upon
exercise of a non-qualified option, the excess, if any, of the fair market value
of the shares with respect to which the option is exercised over the total
exercise price of such shares will be treated for Federal tax purposes as
ordinary income. Any gain or loss realized on the sale or exchange of any share
actually received will be treated as a capital gain or loss, and the recipient's
tax basis for purposes of determining the gain or loss will include the amount
of ordinary income realized upon exercise of the option.
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The Company will be entitled to deduct the amount of ordinary income that
an outside director realizes upon the exercise of a stock option, subject to
general limitations on the deductibility of corporate business expenses.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
FOLLOWING RESOLUTION, WHICH WILL BE PRESENTED AT THE MEETING:
RESOLVED: That the Littelfuse, Inc. Outside Directors' Stock Option Plan be
amended, restated and renamed as set forth in Exhibit A to the Proxy Statement
prepared by the management of the Company for the 2007 annual meeting of the
stockholders of the Company.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the 2008 annual
meeting of the Company's stockholders must be received at the principal
executive offices of the Company by November 22, 2007, in order to be considered
for inclusion in the Company's proxy materials relating to that meeting. The
Company's bylaws require that in order to nominate persons to the Company's
Board of Directors or to present a proposal for action by stockholders at an
annual meeting of stockholders, a stockholder must provide advance written
notice to the secretary of the Company, which notice must be delivered to or
mailed and received at the Company's principal executive offices not later than
the close of business on the 60th day nor earlier than the close of business on
the 90th day prior to the first anniversary of the preceding year's annual
meeting of stockholders; provided that in the event that the date of the annual
meeting to which such stockholder's notice relates is more than 30 days before
or more than 60 days after such anniversary date, for notice by the stockholder
to be timely it must be so delivered not earlier than the close of business on
the 90th day prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to such annual meeting or the 10th
day following the day on which public announcement of the date of such annual
meeting is first made by the Company. In the event that the number of Directors
to be elected to the Board of Directors is increased and there is no public
announcement by the Company naming all of the nominees for Director or
specifying the size of the increased Board of Directors at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice will be considered timely, but only with respect to nominees for any new
positions created by such increase, if it is delivered to or mailed and received
at the Company's principal executive offices not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Company. The stockholder's notice must contain detailed
information specified in the Company's bylaws. As to any proposal that a
stockholder intends to present to stockholders without inclusion in the
Company's proxy statement for the Company's 2008 annual meeting of the Company's
stockholders, the proxies named in management's proxy for that meeting will be
entitled to exercise their discretionary authority on that proposal by advising
stockholders of such proposal and how they intend to exercise their discretion
to vote on such matter, unless the stockholder making the proposal solicits
proxies with respect to the proposal to the extent required by Rule 14a-4(c)(2)
under the Exchange Act.
-52-
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no matters to
be brought before the meeting other than the matters referred to in this Proxy
Statement.
By order of the Board of Directors,
/s/ Mary S. Muchoney
----------------------------------------
Mary S. Muchoney
Secretary
March 22, 2007
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EXHIBIT A
The text of the Littelfuse, Inc. Outside Directors' Equity Plan, as it is
proposed to be amended, restated and renamed, is as set forth below:
LITTELFUSE, INC.
OUTSIDE DIRECTORS' EQUITY PLAN
AMENDED AND RESTATED EFFECTIVE APRIL 27, 2007
SECTION 1.
ESTABLISHMENT, OBJECTIVES AND DURATION
1.1. Establishment and Restatement. The Littelfuse, Inc. Outside
Directors' Stock Option Plan (the "Plan") was established by Littelfuse, Inc.
(the "Corporation"), effective as of March 1, 2006, and was approved by the
stockholders of the Corporation at the annual meeting held May 5, 2006. The Plan
superseded and replaced the Stock Plan for New Directors of Littelfuse, Inc.,
and, to the extent such plans provided for grants to outside Directors, the
Stock Plan for Employees and Directors of Littelfuse, Inc., adopted effective
December 16, 1991, and the 1993 Stock Plan for Employees and Directors of
Littelfuse, Inc., adopted effective February 12, 1993 (the "Prior Plans"),
except that the Prior Plans shall remain in effect with respect to awards
granted under such Prior Plans until such awards have been exercised, forfeited,
canceled, expired or otherwise terminated in accordance with the terms of such
awards. Subject to approval of the stockholders, the Plan is hereby amended and
restated in its entirety, and the name of the Plan changed to the Littelfuse,
Inc. Outside Directors' Equity Plan, effective as of April 27, 2007 (or such
later date as the amendment and restatement may be approved by the stockholders
pursuant to Section 1.4).
1.2. Purpose. The purpose of the Plan is to enhance stockholder value
by attracting and retaining the services of outside directors of outstanding
talent. To accomplish the foregoing, the Plan provides for grants of Awards to
Outside Directors.
1.3. Duration. The Plan shall remain in effect, subject to the right
of the Board to amend or terminate the Plan at any time pursuant to Section 11,
until all Shares subject to the Plan shall have been purchased or granted
according to the Plan's provisions.
1.4. Approval by Stockholders. This amendment and restatement of the
Plan has been adopted by the Board subject to approval by the stockholders of
the Corporation at the first annual meeting of stockholders held following the
adoption by the Board, or any special meeting of the stockholders of the
Corporation duly called; provided, however, that such approval must occur on or
before December 31, 2007. The Plan as originally adopted as of March 1, 2006,
shall remain in effect until such time as the approval of the stockholders of
the Corporation is obtained, and if the approval of the stockholders is not
obtained the Plan shall continue as if the amendment and restatement had never
been adopted by the Board.
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SECTION 2.
DEFINITIONS
Whenever used in the Plan, the following capitalized terms shall have the
meanings set forth below:
2.1. "Award" means, individually or collectively, a grant under the
Plan of Options, Stock Appreciation Rights, Restricted Stock, or Restricted
Stock Units.
2.2. "Award Agreement" means a written agreement between the
Corporation and each Outside Director that sets forth the terms and provisions
applicable to an Award granted to the Outside Director under the Plan, and is a
condition to the grant of an Award hereunder.
2.3. "Board" means the Board of Directors of the Corporation.
2.4. "Change in Control" means, unless the Board otherwise determines,
the occurrence of any of the following events:
(a) a business combination, including a merger or consolidation, of
the Corporation and the stockholders of the Corporation prior to the
combination do not continue to own, directly or indirectly, more than
fifty-one percent (51%) of the equity of the combined entity;
(b) a sale, transfer, or other disposition in one or more transactions
(other than in transactions in the ordinary course of business or in the
nature of a financing) of the assets or earning power aggregating more than
forty-five percent (45%) of the assets or operating revenues of the
Corporation to any person or affiliated or associated group of persons (as
defined by Rule 12b-2 of the Exchange Act in effect as of the date hereof);
(c) the liquidation of the Corporation;
(d) one or more transactions which result in the acquisition by any
person or associated group of persons (other than the Corporation or any
employee benefit plan whose beneficiaries are Employees of the Corporation
or any of its Subsidiaries of the beneficial ownership (as defined in Rule
13d-3 of the Exchange Act, in effect as of the date hereof) of forty
percent (40%) or more of the Common Stock of the Corporation, securities
representing forty percent (40%) or more of the combined voting power of
the voting securities of the Corporation which affiliated persons owned
less than forty percent (40%) prior to such transaction or transactions;
(e) the election or appointment, within a twelve (12) month period, of
any person or affiliated or associated group, or its or their nominees, to
the Board, such that such persons or nominees, when elected or appointed,
constitute a majority of the Board and whose appointment or election was
not approved by a majority of those persons who were directors at the
beginning of such period or whose election or appointment was made at the
request of an Acquiring Person; or
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(f) any occurrence of any transaction or event, or series of
transactions or events, designated by the Board in the Award Agreement. For
purposes of this definition, an "Acquiring Person" is any person who, or
which, together with all affiliates or associates of such person, is the
beneficial owner of twenty percent (20%) or more of the Common Stock of the
Corporation then outstanding, except that an Acquiring Person does not
include the Corporation or any employee benefit plan of the Corporation or
any of its Subsidiaries or any person holding Common Stock of the
Corporation for or pursuant to such plan. For the purpose of determining
who is an Acquiring Person, the percentage of the outstanding shares of the
Common Stock of which a person is a beneficial owner shall be calculated in
accordance with Rule 13d-e of the Exchange Act.
2.5. "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor legislation thereto.
2.6. "Committee" means the Committee appointed to administer the Plan,
as provided in Section 3.
2.7. "Corporation" means Littelfuse, Inc., a Delaware corporation, and
any successor to such entity as provided in Section 13.
2.8. "Disability" means the inability of the Outside Director to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death, or which has lasted or can be expected to last for a continuous period of
not less than 12 months, as determined by the Committee, based upon medical
evidence.
2.9. "Effective Date" of the Plan as herein amended and restated means
the later of April 27, 2007, or the date the Plan as herein amended and restated
is approved by the stockholders of the Corporation.
2.10. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
2.11. "Fair Market Value" means if the Shares are duly listed on a
national securities exchange or on The NASDAQ National Stock Market, the closing
price of the Shares for the date on which the Award is granted, or, if there are
no sales on such date, on the next preceding day on which there were sales, or
if the Shares are not so listed, the fair market value of the Shares for the
date on which the Award is granted, as determined by the Committee in good
faith. Such price shall be subject to adjustment as provided in Section 4.3.
2.12. "Non-Tandem SAR" means a SAR that is granted independently of
any Options, as described in Section 6.
2.13. "Option" means a nonqualified option to purchase Shares granted
to an Outside Director, as described in Section 5.
A-3
2.14. "Option Price" means the per share purchase price of a Share
purchased pursuant to an Option.
2.15. "Outside Director" means any member of the Board who is not an
employee of the Corporation or any Subsidiary.
2.16. "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is limited in some way, and the Shares
are subject to a substantial risk of forfeiture, as provided in Section 7.
2.17. "Plan" means the Littelfuse, Inc. Outside Directors' Equity
Plan, as amended and restated herein and as subsequently amended.
2.18."Restricted Stock" means an Award granted to an Outside Director
pursuant to Section 7.
2.19. "Restricted Stock Unit" means an Award granted to an Outside
Director pursuant to Section 8 that represents the right to receive a Share in
the future upon satisfaction of the Award's vesting requirements.
2.20. "Share" or "Shares" means shares of common stock of the
Corporation.
2.21. "Stock Appreciation Right" or "SAR" means an Award, granted
alone or in connection with a related Option, designated as an SAR, pursuant to
the terms of Section 6.
2.22. "Subsidiary" means any corporation, partnership, joint venture,
affiliate, or other entity in which the Corporation is at least a majority-owner
of all issued and outstanding equity interests or has a controlling interest.
2.23. "Tandem SAR" means an SAR that is granted in connection with a
related Option pursuant to Section 6, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall similarly be
forfeited).
SECTION 3.
ADMINISTRATION
3.1. Plan Administration. The Compensation Committee, or any other
committee appointed by the Board, shall administer the Plan, except that the
Board shall approve all grants of Awards, and the terms of all Award Agreements.
The Committee or other committee appointed to administer the Plan shall consist
of not fewer than two Outside Directors who are Non-Employee Directors of the
Corporation, within the meaning of Rule 16b-3 of the Exchange Act. The Board
may, from time to time, remove members from, or add members to, the Committee.
Any vacancies on the Committee shall be filled by members of the Board.
A-4
If and to the extent that no committee exists that has the authority to
administer the Plan, the Board shall administer the Plan. Acts of a majority of
the Committee (or the Board, if applicable) at which a quorum is present, or
acts reduced to or approved in writing by unanimous consent of the members of
the Committee (or the Board, as the case may be), shall be valid acts of the
Committee (or the Board, as the case may be).
3.2. Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Corporation, and subject to the
provisions herein, the Committee shall have full power to construe and interpret
the Plan and any agreement or instrument entered into under the Plan and
establish, amend, or waive rules and regulations consistent with the terms of
the Plan for the Plan's administration; provided that the Committee shall not
have the authority to amend any Option to reduce its exercise price except
pursuant to Section 4.3. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration of the
Plan. As permitted by law, the Committee may delegate the authority granted to
it herein.
3.3. Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Corporation, its stockholders, Outside Directors, and their
respective heirs, personal representatives, successors and assigns.
SECTION 4.
GRANTS OF AWARDS; SHARES SUBJECT TO THE PLAN
4.1. Grant of Awards. Each Outside Director shall receive a grant of
Awards at the first meeting of the Board after each annual meeting of the
stockholders of the Corporation, beginning with the annual meeting held in 2007,
and at such other times as may be determined by the Board. The Board, acting
upon the recommendation of the Committee, shall determine the type of Awards to
be granted, the number of Shares covered by the Awards, and the terms and
conditions of the Award Agreements.
4.2. Shares Available for Awards. The Shares available for Awards may
be either authorized and unissued Shares or Shares held in or acquired for the
treasury of the Corporation. The aggregate number of Shares that may be issued
or used for reference purposes under the Plan or with respect to which Awards
may be granted shall not exceed two hundred fifty thousand (250,000) Shares,
subject to adjustment as provided in Section 4.3. The number of Shares reserved
for issuance under this Plan as set forth above shall include all reserved but
unissued shares under the Stock Plan for New Directors of Littelfuse, Inc. and
no additional awards shall be granted to Outside Directors under the Stock Plan
for New Directors of Littelfuse, Inc. For avoidance of doubt, the amendment and
restatement of the Plan effective April 27, 2007, shall have no effect on the
total number of Shares available for Awards.
Upon a cancellation, termination, expiration without exercise, forfeiture,
or lapse for any reason of any Award, or any option issued under the Stock Plan
for New Directors of Littelfuse,
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Inc., the number of Shares underlying any such Award that were not issued as a
result of any of the foregoing actions shall again be available for the purposes
of Awards under the Plan. All Shares issued in settlement of an Award, or
withheld for payment of the Exercise Price or any tax imposed upon the exercise
or settlement of the Award, shall reduce the total number of Shares available
under the Plan and shall not again be available for the grant of any Award
hereunder. When a SAR is exercised, the number of Shares available for issuance
shall be reduced by the total number of Shares subject to the SAR, regardless of
whether the SAR is settled in stock or cash and, in the case of a stock-settled
SAR, regardless of the number of Shares used to settle the SAR.
4.3. Adjustments. Notwithstanding any other provision of the Plan, the
Committee shall make or provide for such adjustments to the Plan, to the number
and class of Shares available thereunder or to any outstanding Awards as it
shall deem appropriate to prevent dilution or enlargement of rights, including
adjustments in the event of distributions to holders of Shares other than a
normal cash dividend, changes in the outstanding Shares by reason of stock
dividends, split-ups, recapitalizations, mergers, consolidations, combinations,
or exchanges of shares, separations, reorganizations, liquidations, and the
like. In the event of any offer to holders of Shares generally relating to the
acquisition of their Shares, the Committee shall make such adjustment as it
deems equitable in respect of outstanding Awards, including in the Committee's
discretion revision of outstanding Awards so that they may be exercisable for or
payable in the consideration payable in the acquisition transaction. Any such
determination by the Committee shall be conclusive. No adjustment shall be made
in the minimum number of Shares with respect to which an Option may be exercised
at any time. Any fractional Shares resulting from such adjustments to Awards
shall be eliminated.
4.4. Prohibition on Repricing. Anything else contained herein to the
contrary notwithstanding, except as provided in Section 4.3, the Committee shall
not amend any Option or SAR to reduce its Option Price or grant price, and shall
not issue to any Outside Director a new Award in exchange for the surrender and
cancellation of any other Award, if such new Award has an Option Price or grant
price lower than that of the Award for which it is exchanged, or take any other
action that would have the effect of reducing the Option Price of an Option or
the grant price of a SAR.
SECTION 5.
STOCK OPTIONS
5.1. Grant of Options and Award Agreement. Outside Directors may be
granted Options in accordance with the provisions of this Section 5. The
Corporation and each Outside Director to whom an Option is granted shall execute
an Award Agreement, effective as of the grant date, which shall specify the
Option Price, the term of the Option, the number of Shares subject to the
Option, the time at which the Option shall vest, and such other provisions as
the Board shall determine, which are not inconsistent with the terms and
provisions of the Plan.
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5.2. Option Price. The Option Price for each Option shall be equal to
the Fair Market Value of Shares subject to an Option on the date the Option is
granted, and which Option Price may not be subsequently reduced by the Committee
except pursuant to Section 4.3.
5.3. Term and Vesting of Options. The term of each Option granted to
an Outside Director pursuant to this Plan shall be ten (10) years, subject to
earlier termination in the event of a termination of the Outside Director's
service as provided in Section 9.2, and in no event shall any Option be
exercisable more than ten (10) years after the date of grant. The vesting of
each Option, and the extent to which Options may be exercised after the Outside
Director ceases to be a member of the Board, shall be as provided in the Award
Agreement, subject to Section 9.
5.4. Exercise and Payment. Options granted under this Plan shall be
exercised by the delivery of a written notice of exercise to the Corporation,
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment of the Option Price for the Shares. The
Option Price upon exercise of any Option shall be payable to the Corporation in
full either:
(a) in cash or its equivalent,
(b) by tendering previously acquired Shares that have been held for at
least six months (or such longer period as shall be required to avoid a
charge to earnings of the Corporation for financial reporting purpose) and
having an aggregate Fair Market Value at the time of exercise equal to the
total Option Price, or
(c) a combination of (a) and (b).
In addition, payment of the Option Price may be payable by one or more
of the following methods either upon written consent from the Committee or if
one or more of the following methods will not result in a charge to earnings of
the Corporation for financial reporting purposes:
(d) by withholding Shares that otherwise would be acquired on exercise
having an aggregate Fair Market Value at the time of exercise equal to the
total Option Price, or
(e) by cashless exercise through delivery of irrevocable instructions
to a broker to promptly deliver to the Corporation the amount of proceeds
from a sale of Shares having a Fair Market Value equal to the total Option
Price.
As soon as practicable after receipt of a written notification of exercise
and full payment, the Corporation shall deliver to the Outside Director, in the
Outside Director's name, Share certificates in an appropriate amount based upon
the number of Shares purchased under the Option(s). No Outside Director shall
have any rights of a stockholder with respect to Shares subject to an Option,
including any right to receive dividends, to vote, or to participate in the
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equity of the Company, until such Option has been exercised and payment made in
full as provided herein.
5.5. Prohibition on Deferrals. No Outside Director shall have the
right to defer the receipt of Shares upon the exercise of any Option.
SECTION 6.
STOCK APPRECIATION RIGHTS
6.1. Grant of SARs and Award Agreement. Outside Directors may be
granted either Tandem or Non-Tandem SARs in accordance with the provisions of
this Section 6. The Corporation and each Outside Director to whom an SAR is
granted shall execute an Award Agreement, effective as of the grant date, which
shall specify the grant price, the term of the SAR, the number of Shares subject
to the SAR, the time at which the SAR shall vest, and such other provisions as
the Board shall determine, which are not inconsistent with the terms and
provisions of the Plan.
6.2. Grant Price of SARs. The grant price of a Tandem SAR shall be the
same as the Option Price of the related Option. The grant price of a Non-Tandem
SAR, shall be as set forth in the Award Agreement, which grant price shall be at
least equal to the Fair Market Value of a Share on the grant date of the SAR.
6.3. Term and Vesting of SARs. The term of each SAR granted to an
Outside Director pursuant to this Plan shall be ten (10) years, subject to
earlier termination in the event of a termination of the Outside Director's
service as provided in Section 9.2, and in no event shall any SAR be exercisable
more than ten (10) years after the date of grant. The vesting of each SAR, and
the extent to which each SAR may be exercised after the Outside Director ceases
to be a member of the Board, shall be as provided in the Award Agreement,
subject to Section 9.
6.4. Exercise of SARs. Tandem SARs may be exercised for all or part of
the Shares subject to the related Option, which exercise shall result in a
surrender of the right to exercise the equivalent portion of the related Option.
A Tandem SAR may be exercised only with respect to the Shares for which its
related Option is then exercisable. A Non-Tandem SAR may be exercised for all or
part of the Shares subject to the SAR, at such time as may be specified in the
Award Agreement.
6.5. Payment of SAR Amount. Upon exercise of a SAR, an Outside
Director shall be entitled to receive payment from the Corporation in an amount
determined by multiplying:
(a) The excess of the Fair Market Value of a Share on the date of
exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
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As provided in the Award Agreement, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.
6.6. Prohibition on Deferrals. No Outside Director shall have the
right to defer the receipt of payment or Shares upon the exercise of any SAR.
SECTION 7.
RESTRICTED STOCK
7.1. Grant of Restricted Stock and Award Agreement. Outside Directors
may be granted shares of Restricted Stock in accordance with the provisions of
this Section 7. The Corporation and each Outside Director to whom Restricted
Stock is granted shall execute an Award Agreement that shall specify the Period
or Periods of Restriction, the number of Shares of Restricted Stock granted, and
such other provisions as the Board shall determine which shall not be
inconsistent with the terms and provisions of the Plan.
7.2. Transferability. Except as provided in this Section 7, the Shares
of Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily,
until the end of the applicable Period of Restriction specified in the Award
Agreement (subject to Section 9). All rights with respect to the Restricted
Stock granted to an Outside Director under the Plan shall be available during
his or her lifetime only to such Outside Director.
7.3. Vesting and Transfer Restrictions. The vesting of each Share of
Restricted Stock, and the length of the Period of Restriction, shall be as
provided in the Award Agreement, subject to Section 9. The Corporation shall
retain the certificates representing Shares of Restricted Stock in the
Corporation's possession until such time as all conditions and/or restrictions
applicable to such Shares have been satisfied. Except as otherwise provided in
Section 14.6 or in any Award Agreement, Shares of Restricted Stock covered by
each Restricted Stock grant made under the Plan shall become freely transferable
by the Outside Director after the last day of the applicable Period of
Restriction.
7.4. Voting Rights. Unless otherwise specified in the Award Agreement,
Outside Directors to whom Shares of Restricted Stock have been granted hereunder
may exercise full voting rights with respect to those Shares during the Period
of Restriction.
7.5. Dividends and Other Distributions. Unless specified in the Award
Agreement, Outside Directors holding Shares of Restricted Stock granted
hereunder shall be credited with regular cash dividends paid with respect to the
underlying Shares while they are so held during the Period of Restriction, which
amount shall be paid to him or her after the last day of the applicable Period
of Restriction.
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SECTION 8.
RESTRICTED STOCK UNITS
8.1. Grant of Restricted Stock Units and Award Agreement. Outside
Directors may be granted Restricted Stock Units in accordance with the
provisions of this Section 8. The Corporation and each Outside Director to whom
a Restricted Stock Unit is granted shall execute an Award Agreement that shall
specify the number of Restricted Stock Units granted, the time at which the
Restricted Stock Units shall vest and the time at which Shares will be
transferred in settlement of the Restricted Stock Units, and such other
provisions as the Board shall determine, which shall not be inconsistent with
the terms and provisions of the Plan.
8.2. Vesting and Settlement of Restricted Stock Units. The vesting of
each Share of Restricted Stock shall be as provided in the Award Agreement,
subject to Section 9. Except as otherwise provided below, each holder of a
Restricted Stock Unit shall receive one Share as soon as practical after the
Restricted Stock Unit vests. In lieu of settlement upon vesting, the Board may
provide in the Award Agreement that the holder of a Restricted Stock Unit shall
receive upon the termination of his or her membership on the Board one Share for
each Restricted Stock Unit that has previously vested, or that vests upon the
termination, provided that if the termination of the Outside Director's
membership on the Board does not constitute a "separation from service" as
defined in Section 409A of the Code, the transfer of Shares shall be deferred
until the Outside Director incurs a separation from service. The Committee may
also permit Outside Directors to elect to defer the transfer of Shares following
the vesting of their Restricted Stock Units, either until the termination of
their membership on the Board (provided that such termination constitutes a
separation from service as described above) or until a specific date, provided
that any such election must be made either prior to the beginning of the year in
which the Award is received, or at such other time as may be permitted by final
regulations issued pursuant to Section 409A of the Code, and shall thereafter be
irrevocable.
8.3. Transfer of Shares. As soon as practical after the date on which
a Restricted Stock Unit vests (or otherwise becomes payable pursuant to Section
8.2), the Corporation shall transfer one Share to the Outside Director for each
such Restricted Stock Unit, and shall issue a certificate representing such
Shares to the Outside Director. Such Shares shall be deemed to be fully paid and
nonassessable for all purposes, and, except as otherwise provided in Section
14.6 or in the Award Agreement, shall become freely transferable.
8.4. Status as Stockholders. The holder of a Restricted Stock Unit
shall not be considered a stockholder, and shall not have any of the rights of a
stockholder (including without limitation the right to vote or receive dividends
or other equivalents), until such time as Shares have been transferred to him or
her in settlement of the Restricted Stock Unit.
8.5. Dividend Equivalents. Unless otherwise specified in the Award
Agreement, Outside Directors holding Restricted Stock Units shall be credited
with an amount equal to all regular cash dividends paid with respect to the
underlying Shares during the period that the Restricted Stock Units are held,
which amount shall be paid to the Outside Director at the same time that the
Shares are transferred to him or her in settlement of the Restricted Stock Unit.
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SECTION 9.
VESTING AND FORFEITURE
9.1. Vesting. As part of making any Award, the Board shall determine
the time and conditions under which the Award will vest, which shall be
specified in the Award Agreement. Vesting shall be based solely upon continued
membership on the Board for a specified period of time. For all purposes of this
Plan, "vesting" of an Award shall mean:
(a) In the case of an Option or SAR, the time at which the Outside
Director has the right to exercise the Award.
(b) In the case of Restricted Stock, the end of the Restriction
Period.
(c) In the case of a Restricted Stock Unit, the time at which the
Outside Director has the right to receive a Share in settlement of the
Restricted Stock Unit, although actual transfer of the Share may be
deferred as provided in Section 8.2.
Vesting requirements shall be set forth in the applicable Award Agreement. If an
Award Agreement does not specify a vesting period, then 33-1/3% of the Award
shall vest on each of the first three anniversaries of the grant date.
9.2. Termination of Membership on Board. Unless otherwise determined
by the Board and set forth in an applicable Award Agreement, the following
provisions shall govern the extent to which an Outside Director's Awards shall
vest and, if applicable, the period for which the Award remains exercisable, if
his or her membership on the Board is terminated before the Award would
otherwise have vested:
(a) Death, Disability, or Change in Control. In the event that an
Outside Director's membership on the Board terminates by reason of death or
Disability, or following a Change in Control, all Awards shall immediately
become fully vested and, in the case of an Option or SAR, shall remain
exercisable until the earlier of (i) the remainder of the term of the
Option or SAR, or (ii) three months (or twelve months in the case of death)
from the date of such termination. In the case of the Outside Director's
death, the Outside Director's beneficiary or estate may exercise the Option
or SAR.
(b) Termination after Five Years of Service. In the event that an
Outside Director's membership on the Board terminates after he or she has
served as a member of the Board for at least five years (other than by
removal from the Board for cause, as determined by the Board), all Awards
shall immediately become fully vested and, in the case of an Option or SAR,
shall remain exercisable until the earlier of (i) the remainder of the term
of the Option or SAR, or (ii) twelve months from the date of such
termination.
(c) Other Termination. In the event that an Outside Director's
membership on the Board terminates prior to a Change in Control for any
reason other than death or Disability, his or her Options and SARs, to the
extent vested on the date of the termination, shall remain exercisable
until the earlier of (i) the remainder of the term of
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the Option or SAR, or (ii) three months from the date of such termination.
In such circumstance, the Option or SAR shall only be exercisable to the
extent that it was exercisable as of such termination date and shall not be
exercisable with respect to any additional Shares.
(d) Employment of Outside Director. An Outside Director who becomes an
employee of the Company or any Subsidiary shall not forfeit any Awards
granted hereunder by reason of such employment regardless of whether he or
she continues to be a member of the Board. Such person's Awards shall
continue to vest under the schedule provided in the Award Agreement and, if
such person's employment with the Company and all Subsidiaries is
terminated while any portion of his or her Awards remains unvested, the
provisions of paragraphs (a), (b) and (c) above shall be applied by
reference to his or her termination of employment.
(e) Changes to Vesting and Exercise Periods of Outstanding Awards. The
Board may accelerate the time at which an outstanding Award will vest, and
may extend the period of time during which an outstanding Option or SAR may
be exercised, provided that any change to an existing Option or SAR shall
not permit the Option or SAR to be exercised after the later of the last
day of the year in which, or the fifteenth day of the third month following
the date on which, the Option or SAR would otherwise have expired.
SECTION 10.
TRANSFERABILITY OF AWARDS;
BENEFICIARY DESIGNATION
10.1. Limits on Transferability of Awards. (a) Except as otherwise
provided below, Awards may be exercisable only by the Outside Director during
the Outside Director's lifetime, and Awards shall not be transferable other than
by will or the laws of descent and distribution. Any purported transfer of any
Award or any interest therein that does not comply with the terms of this Plan
shall be null and void and confer no rights of any kind upon the purported
transferee.
(b) The Committee may, in its discretion, permit an Outside Director to
transfer any Award to any family member of such Outside Director, subject to
such restrictions and limitations as the Committee may provide; provided,
however, that any such Award shall remain subject to all vesting, forfeiture,
and other restrictions provided herein and in the Award Agreement to the same
extent as if it had not been transferred; and provided further that in no event
shall any transfer for value be permitted. For purposes of this Section 10.1(b),
the terms "family member" and "transfer for value" have the same meaning as in
the General Instructions to SEC Form S-8, or such other form as the SEC may
promulgate in replacement thereof.
(c) To the maximum extent permitted by law, no Award shall be subject, in
whole or in part, to attachment, execution or levy of any kind; provided,
however, that nothing contained
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herein shall affect the right of the Corporation to setoff any amount owed to it
by an Outside Director against any Award.
(d) Nothing contained in this Section 10.1 shall preclude a Outside
Director from transferring Restricted Shares that have vested, or Shares that
are issued in settlement of an Option, SAR, or Restricted Stock Unit, subject to
the remaining provisions of this Plan and applicable law.
10.2. Designation of Beneficiary. Each Outside Director under the Plan
may, from time to time, name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
in case of his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by the same
Outside Director, shall be in a form prescribed by the Corporation, and will be
effective only when filed by the Outside Director in writing with the Secretary
of the Corporation during the Outside Director's lifetime. In the absence of any
such designation, benefits remaining unpaid at the Outside Director's death
shall be paid to the Outside Director's estate.
SECTION 11.
AMENDMENT, MODIFICATION, AND TERMINATION
11.1. Amendment, Modification, and Termination. The Board may amend,
suspend or terminate the Plan without the consent of stockholders; provided,
however, that any amendment to the Plan shall be submitted to the Corporation's
stockholders for approval not later than the earliest annual meeting for which
the record date thereof is after the date of such Board action if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the
Shares may then be listed or quoted and the Board may otherwise, in its sole
discretion, determine to submit other amendments to the Plan to the
Corporation's stockholders for approval. Any amendment to the Plan which
requires stockholder approval as aforesaid shall not be effective until such
approval is obtained.
11.2. Awards Previously Granted. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the Outside
Director holding such Award.
SECTION 12.
WITHHOLDING
12.1. Tax Withholding. The Corporation shall have the power and the
right to deduct or withhold, or require an Outside Director to remit to the
Corporation, an amount sufficient to satisfy Federal, state, and local taxes,
domestic or foreign, required by law or regulation to be withheld with respect
to any taxable event arising as a result of an Award or the Plan.
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12.2. Share Withholding. With respect to withholding required upon the
exercise of Awards, Outside Directors may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Corporation withhold Shares having a Fair Market Value on the date
the tax is to be determined equal to the minimum statutory total tax which would
be imposed on the transaction. All such elections shall be irrevocable, made in
writing, signed by the Outside Director, and shall be subject to any
restrictions or limitations that the Committee, in its sole discretion, deems
appropriate.
SECTION 13.
SUCCESSORS
All obligations of the Corporation under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Corporation.
SECTION 14.
MISCELLANEOUS
14.1. Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash or other property shall be issued or paid in lieu of such
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
14.2. Directors Outside the United States. The Board may modify the
terms of any Award under the Plan made to or held by an Outside Director who is
then resident or primarily employed outside of the United States in any manner
deemed by the Committee to be necessary or appropriate in order that such Award
shall conform to laws, regulations, and customs of the country in which the
Outside Director is then resident or primarily employed, or so that the value
and other benefits of the Award to the Outside Director, as affected by foreign
tax laws and other restrictions, applicable as a result of the Outside
Director's residence or employment abroad shall be comparable to the value of
such an Award to an Outside Director who is resident or primarily employed in
the United States. An Award may be modified under this Section 14.2 in a manner
that is inconsistent with the express terms of the Plan, so long as such
modifications will not contravene any applicable law or regulation or result in
actual liability under Section 16(b) of the Exchange Act for the Outside
Director whose Award is modified.
14.3. Gender and Number; Headings. Except where otherwise indicated by
the context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
Headings are included for the convenience of reference only and shall not be
used in the interpretation or construction of any such provision contained in
the Plan.
14.4. Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan,
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and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
14.5. Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
14.6. Additional Restrictions on Transfers. The Committee may impose
such restrictions on any Shares acquired pursuant to exercise or settlement of
an Award as it may deem advisable. Such restrictions may include, without
limitation, restrictions under applicable Federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares. As a condition of any issuance of Shares deliverable under the
Plan, the Corporation may place legends on the shares, issue stop-transfer
orders and require such agreements or undertakings from the Outside Director as
the Committee may deem necessary or advisable to assure compliance with any such
restriction.
14.7. Governing Law. To the extent not preempted by Federal law, the
Plan, and all Awards and agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of Delaware.
SIGNATURE PAGE FOLLOWS
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* * *
WHEREAS, the Corporation has adopted this Amended and Restated Plan
effective as of April 27, 2007, but subject to the approval of the stockholders
of the Corporation.
LITTELFUSE, INC.
------------------------
Date Signed
By:
---------------------------------
Its:
---------------------------------
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PROXY CARD
PROXY LITTELFUSE, INC.
PROXY CARD FOR ANNUAL MEETING ON APRIL 27, 2007
The undersigned hereby appoints Philip G. Franklin and Mary S. Muchoney,
jointly and severally, with full power of substitution, to vote all shares of
Common Stock which the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held at the offices of the Company located at 800 East
Northwest Highway, Des Plaines, Illinois, on Friday, April 27, 2007, at 9:00
a.m. local time, and at any adjournment thereof, with all powers the undersigned
would possess if personally present, as follows:
(1) Election of six nominees to the Board of Directors to serve terms of
one year or until their successors are elected.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
below (Except as marked vote for all nominees
to the contrary below) listed below
John P. Driscoll, Anthony Grillo, Gordon Hunter, John E. Major,
William P. Noglows and Ronald L. Schubel
(Instruction: To withhold authority to vote for any individual
nominee, strike a line through that nominee's name)
(2) Approval and ratification of the Directors' appointment of Ernst &
Young LLP as the Company's independent auditors for the fiscal year
ending December 29, 2007.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Approval of the amendment, restatement and renaming of the Littelfuse,
Inc. Outside Directors' Stock Option Plan to the Littelfuse, Inc.
Outside Directors' Equity Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed on the other side)
The Board of Directors unanimously recommends a vote "FOR" the proposals
set forth in (1) through (3) above.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
Account ______________ No. of Shares ______________ Proxy No. ______________
This proxy will be voted as directed, or if no instructions are given, it
will be voted "FOR" election of all nominees as Directors of the Company, "FOR"
approval and ratification of the appointment of independent auditors, "FOR"
approval of the amendment, restatement and renaming of the Littelfuse, Inc.
Outside Directors' Stock Option Plan, and in the discretion of the named proxies
upon such other matters as may properly come before the Annual Meeting or an
adjournment thereof.
Dated: _________________, 2007
----------------------------------------
(Signature)
----------------------------------------
(Signature)
Please sign exactly as name appears on stock certificate(s). Executors,
administrators, trustees, guardians, attorneys-in-fact, etc., should give their
full titles. If signer is a corporation, please give full corporate name and
have a duly authorized officer sign, stating title. If a partnership, please
sign in partnership name by authorized person. If a limited liability company,
please sign in limited liability company name by authorized person. If stock is
registered in two names, both should sign.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.