Our Executive Vice President, Mergers & Acquisitions, Chief Legal and Human Resources Officer and Corporate Secretary ("CHRO"(“CLO”) determines for purposes of the policy whether a proposed transaction is a Related Person Transaction that must be approved by the Nominating and Governance Committee.
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:
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■ | the benefits to the Company; |
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■ | 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, stockholder or executive officer; |
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■ | the availability of other sources for comparable products or services; |
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■ | the terms of the transaction; and |
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■ | 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, our best interests and the best interests of our stockholders, as the Nominating and Governance Committee determines in good faith.
Related Party Transactions
During 20182021 the Company entered into Related Party Transactionsa related party transaction with Automated Technology (Phil.), Inc., EB Tech Co., Ltd., Securepush Ltd. and VTOOL Ltd., as described below. In addition, in connection with the Company's acquisition of IXYS Corporation, we entered into the Related Party Transactions with Dr. Zommer as described on page 17 under the heading titled "IXYS Acquisition - Dr. Zommer."
The below Related Party Transactions have beenThis transaction was reviewed by our Nominating and Governance Committee, and it has beenwas determined that each such transactionit is not inconsistent with the best interests of the Company and its stockholders.
Automated Technology (Phil.), Inc.
The Company owns approximately 24% of the outstanding common shares of Automated Technology (Phil.), Inc. ("ATEC"(“ATEC”), a supplier located in the Philippines that provides assembly and test services. For the year ended December 29, 2018,January 1, 2022, ATEC rendered assembly and test services to the Company totaling approximately $9.9$12.6 million. As of December 29, 2018,January 1, 2022, the Company'sCompany’s accounts payable balance to ATEC was $0.5$1.8 million. In addition, our director Dr. Zommer currently serves as a director of ATEC.
EB Tech Co., Ltd.
The Company owns approximately 20% of the outstanding equity of EB Tech Ltd. ("EB Tech"), a company with expertise in radiation technology based in South Korea. For the year ended December 29, 2018, EB Tech rendered processing services for the Company totaling approximately $0.5 million. As of December 29, 2018, the Company's accounts payable balance to EB Tech was $0.1 million. In addition, Dr. Zommer currently serves as a director of EB Tech.
Securepush Ltd.
Securepush Ltd. is a technology company based in Israel that offers secure IoT platforms. On November 29, 2016, one of our IXYS subsidiaries that was acquired by the Company pursuant to the IXYS Corporation acquisition in January 2018, entered into a $2,000,000 convertible bridge financing agreement with Securepush Ltd. Effective June 15, 2018, the Company's subsidiary entered into a Second Addendum to the Convertible Bridge Financing Agreement, under which the loan was converted into ordinary shares, representing 17.5% equity ownership of Securepush Ltd. on a fully-diluted, as-converted basis.
Our director, Dr. Zommer, is currently a director of Securepush Ltd. and effective January 21, 2019 agreed to make a personal investment of $400,000 in Securepush Ltd. for a 16% equity ownership interest. The investment is expected to close in March 2019.
VTOOL Ltd.
VTOOL Ltd. is a technology company based in Israel that offers comprehensive microchip functional verification automation and debug platforms. On August 30, 2016, one of our IXYS subsidiaries that was acquired by the Company pursuant to the IXYS Corporation acquisition in January 2018, entered into an agreement to invest $2,000,000 into VTOOL Ltd. in exchange for Series A Preferred Shares in VTOOL Ltd. The preferred shares represent approximately 16% of the outstanding equity of VTOOL, Ltd. on a fully-diluted, as-converted basis.
Our director, Dr. Zommer, is currently a director of VTOOL Ltd. and effective March 12, 2018 entered into a $500,000 Convertible Loan Agreement with VTOOL Ltd. Effective December 9, 2018, the loan was converted into Series A Preferred Shares, representing 9.6% of the outstanding equity of VTOOL, Ltd. on a fully-diluted, as-converted basis.
IXYSAcquisition – Dr. Zommer
On January 17, 2018, the Company completed its acquisition of IXYS Corporation ("IXYS"), pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 25, 2017, as amended on December 4, 2017. Pursuant to the Merger Agreement, effective January 17, 2018, the Board increased the number of members of the Board at that time from eight to nine and appointed IXYS founder Dr. Nathan Zommer to fill the resulting vacancy.
Employment Agreement
Upon the completion of the acquisition of IXYS, Dr. Zommer was party to a Seventh Amended Executive Employment Agreement, dated as of August 25, 2017, with IXYS (the "Zommer Employment Agreement"), which became effective on January 17, 2018. The Zommer Employment Agreement had an initial three-year term ending on the third anniversary of the effective date, and automatically renewed for successive one-year periods thereafter unless either party elected not to renew the term of the agreement by notifying the other party in writing of such election at least 90 days prior to the commencement of any renewal period.
Pursuant to the Zommer Employment Agreement, Dr. Zommer received an annual base salary of $525,000 and was eligible for a discretionary annual performance bonus, stock options, restricted stock and/or other equity award grants in the Company’s discretion. He was also eligible to participate in the Company’s retirement, health and welfare benefit plans and programs generally made available to similarly situated executives from time to time. Under the Zommer Employment Agreement, Dr. Zommer was entitled to (i) payment or reimbursement for reasonable costs of a yearly medical exam, (ii) company-maintained life insurance, (iii) payment or reimbursement for personal tax and/or investment advisor services, and (iv) either (a) a company-provided car and reimbursement for the costs incurred in connection with the use of such car for business purposes or (b) payment of a monthly car allowance. In addition, under the Zommer Employment Agreement, all IXYS stock options held by Dr. Zommer became vested upon the acquisition of IXYS by Littelfuse.
Employment Separation
Effective March 31, 2018, Dr. Zommer separated as an employee of the Company. Pursuant to the Zommer Employment Agreement, Dr. Zommer received the following payments and benefits: (i) his regular wages through March 31, 2018, including payout of his accrued paid time off in the amount of $167,380, (ii) a lump-sum payment equal to three times his average annual cash compensation over the three prior years in the amount of $2,197,433 which included a cash equivalent payment for continued employee health and welfare benefits for 18 months, until September 30, 2019; (iii) imputed income related to transfer of ownership of Dr. Zommer's company car in the amount of $75,413, including car insurance; (iv) imputed income related to tax and estate planning in the amount of $9,338; and (v) imputed income related to annual medical exam in the amount of $506. The Company paid Dr. Zommer the total amount of $2,450,070 in 2018. In addition, per the terms of Dr. Zommer's Employment Agreement, the Company accelerated the vesting of 948 converted Littelfuse stock options. Dr. Zommer also received $30,000 imputed income related to the ownership transfer of a second company car.
The Zommer Employment Agreement also provided that, to the extent that any payment, distribution or other benefit provided in connection with a change in control would be subject to an excise tax under Section 4999 of the Internal Revenue Code, such payments, distributions and/or benefits will be subject to a "best pay cap" reduction if such reduction would result in Dr. Zommer receiving a greater net after-tax amount than receiving the full amount of such payments after payment by Dr. Zommer of such excise tax. None of the above payments triggered such excise tax payment, therefore no reductions were made to Dr. Zommer's payout.
Consulting Agreement
Effective August 1, 2018, the Company entered into a Consulting Agreement with Dr. Zommer (the "Consulting Agreement"). The Consulting Agreement has a one-year term through July 31, 2019, and states that Dr. Zommer will provide general advisory services related to the IXYS business as requested by our Chief Executive Officer, for up to a maximum of 10 hours per week. Pursuant to the Consulting Agreement, Dr. Zommer receives a Consulting Fee of $8,333 per month and reimbursement of reasonable business expenses related to his performance under the Consulting Agreement.
The Consulting Agreement may be terminated at any time for any reason, including no reason, by either party providing 30 days' advance written notification of such termination.
Compensation Committee Interlocks and Insider Participation
T.J.Tzau-Jin Chung, Cary T. Fu, William P. Noglows, and Ronald L. SchubelKristina A. Cerniglia served on the Compensation Committee during 2018the 2021 fiscal year, and none of them is now or ever was an employee of the Company. None of our executive officers served as a member of the compensation committee, or on a board of directors performing equivalent functions, of any entity that had one or more of its executive officers serving as a director or member of our Compensation Committee.
Board Communication
Stockholders wishing to communicate directly with the Board or individual directors should communicate in writing at the following address:
Littelfuse, Inc.
8755 West Higgins Road, Suite 500
Chicago, Illinois 60631
Attention: Corporate Secretary
All written communications are received and processed by the Corporate Secretary prior to being forwarded to the chairmanChairman of the boardBoard or other appropriate members of the Board. Directors generally will not be forwarded communications that are primarily commercial in nature, relate to improper or irrelevant topics, or request general information about the Company.
In addition to internal reporting procedures, the Audit Committee has established communication procedures through an independent Ethics Helpline that can be accessed globally. The Ethics Helpline provides for communication, either anonymously or identified, from employees, vendors, and other interested parties to communicate concerns, including concerns with respect to our accounting, internal controls or financial reporting, to the Audit Committee and CHRO.CLO. Concerns may be reported via telephone in the U.S. at 1-800-803-4135 or online at https://littelfusehelpline.alertline.com.littelfuse.ethicspoint.com.