KONINKLIJKE PHILIPS ELECTRONICS NV, PREN14A, 1999-03-12

KONINKLIJKE PHILIPS ELECTRONICS NV
PREN14A, 1999-03-12
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP)

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SCHEDULE 14A

(Rule 14a-101)
INFORMATION REQUIRED IN CONSENT STATEMENT

SCHEDULE 14A INFORMATION
Consent Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant [ ]

Filed by a Party other than the Registrant [X]

Check the appropriate box:

<TABLE>
<S> <C>
[X] Preliminary Consent Statement [ ] Confidential, For Use of the Commission
Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Consent Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

VLSI TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)

KPE ACQUISITION INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Consent Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)1 and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

PRELIMINARY COPY -- SUBJECT TO COMPLETION

CONSENT STATEMENT
TO
STOCKHOLDERS OF VLSI TECHNOLOGY, INC.
BY
KPE ACQUISITION INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)

This Consent Statement is being furnished by KPE Acquisition Inc. ("KPE"),
a Delaware corporation and an indirect wholly owned subsidiary of Koninklijke
Philips Electronics N.V., a company incorporated under the laws of The
Netherlands ("Royal Philips"), to the holders (the "Stockholders") of shares of
common stock, par value $0.01 per share (the "Common Stock"), of VLSI
Technology, Inc., a Delaware corporation ("VSLI" or the "Company"), in
connection with the solicitation by KPE of the consent of Stockholders to the
actions described below (the "Consent Solicitation"). This Consent Statement and
the accompanying WHITE consent card are first being sent to Stockholders on or
about March , 1999.

THIS SOLICITATION IS BEING MADE BY KPE AND NOT ON BEHALF OF THE BOARD OF
DIRECTORS OF VLSI.

THE CONSENT SOLICITATION

Stockholder consent is being solicited to take the following actions
(collectively, the "Proposals") without a Stockholders' meeting, as permitted by
Delaware law and as further described herein:

Proposal No. 1. Remove each of the 6 current members of the Board of
Directors of VLSI (the "Board") and any other person or persons who may be
members of the Board at the time the Proposals become effective (other than
the persons elected as a result of the adoption of Proposal No. 4 set forth
below);

Proposal No. 2. Amend Section 3.13 of the Bylaws of VLSI (the "Bylaws") to
provide for the filling of vacancies resulting from the removal of
directors pursuant to Section 3.13 by adding the following sentences to the
end of Section 3.13: "In the event that one or more directors are removed
pursuant to this Section 3.13, the vacancy or vacancies created thereby may
be filled by the stockholders acting at a meeting or by written consent. If
less than all of the vacancies created following the removal of directors
pursuant to this Section 3.13 are filled by action of the stockholders, a
majority of the directors elected by the stockholders shall have the power
to fill any remaining vacancy."

Proposal No. 3. Amend Section 3.2 of the Bylaws to fix the number of
directors of VLSI at three, by adding and by replacing the phrase "shall
consist of six (6) persons" with the phrase "shall consist of three (3)
persons";

Proposal No. 4. Elect each of John T. Losier and Barry Singer (together,
the "Nominees") as a member of the Board, to serve until the next annual
meeting of Stockholders and until his successor has been elected and
qualified; and

Proposal No. 5. Repeal each amendment of the Bylaws (whether effected by
supplement to, deletion from or revision of the Bylaws) adopted subsequent
to March 12, 1996 and at or prior to the time the Proposals become
effective (other than (i) the March 7 Amendments (as defined herein) and
(ii) the amendments adopted as a result of the adoption of Proposal Nos. 2
and 3 set forth above).

All the Proposals are designed to expedite the prompt consummation of KPE's
proposed acquisition of the Company. On March 5, 1999, KPE commenced an offer to
purchase all outstanding shares of Common Stock of the Company, together with
the associated rights to purchase preferred stock (the "Rights") issued
<PAGE> 3

pursuant to the First Amended and Restated Rights Agreement, dated as of August
2, 1992 (together with any subsequent amendments thereto, the "Rights
Agreement"), between the Company and The First National Bank of Boston, as
Rights Agent (the Common Stock, together (unless the context otherwise requires)
with the associated Rights, being herein referred to as the "Shares"), at $17.00
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated March 5, 1999 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which, together with
any amendments or supplements thereto, collectively constitute the "Offer").

The purpose of the Offer is to acquire for cash as many outstanding Shares
as possible as a first step in acquiring the entire equity interest in the
Company. KPE currently intends, as soon as practicable upon consummation of the
Offer, to propose and seek to have the Company effect a merger or some similar
business combination (the "Proposed Merger") between the Company and KPE or an
affiliate thereof, pursuant to which each then outstanding Share (other than
Shares held by the Company in treasury, or owned by Royal Philips, KPE or any
other direct or indirect wholly owned subsidiary of Royal Philips or Shares, if
any, that are held by Stockholders who are entitled to and who properly exercise
dissenters' rights under the Delaware General Corporation Law (the "DGCL")),
would be converted pursuant to the terms of the Proposed Merger into the right
to receive an amount in cash equal to the per Share price paid pursuant to the
Offer, without interest.

THIS CONSENT STATEMENT IS NEITHER A REQUEST FOR THE TENDER OF SHARES NOR AN
OFFER WITH RESPECT THERETO. THE OFFER IS BEING MADE ONLY BY MEANS OF THE OFFER
TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL.

The Offer is conditioned upon, among other things, (i) the Rights having
been redeemed by the Board or KPE being satisfied, in its sole discretion, that
the Rights have been invalidated or are otherwise inapplicable to the Offer and
the Proposed Merger (the "Rights Condition") and (ii) the acquisition of Shares
pursuant to the Offer and the Proposed Merger having been approved pursuant to
Section 203 of the DGCL ("Section 203") or KPE being satisfied, in its sole
discretion, that the provisions of Section 203 are otherwise inapplicable to the
acquisition of Shares pursuant to the Offer and the Proposed Merger (the
"Section 203 Condition"). Based upon prior correspondence between management of
Royal Philips and management of VLSI, KPE believes that the current Board may be
unwilling to redeem the Rights (or to amend the Rights Agreement to make the
Rights inapplicable to the Offer and the Proposed Merger) and to approve the
Offer and the Proposed Merger under Section 203 and thus to permit the Offer and
the Proposed Merger to be consummated.

Accordingly, pursuant to the Proposals, KPE is seeking to elect to the
Board persons who intend to redeem the Rights (or amend the Rights Agreement to
make the Rights inapplicable to the Offer and the Proposed Merger) and approve
the Offer and the Proposed Merger under Section 203, which would satisfy the
Rights Condition and the Section 203 Condition, and take such other actions as
may be required to expedite the prompt consummation of the Offer and the
Proposed Merger. Therefore, adoption of the Proposals is expected to expedite
the prompt consummation of the Offer and the Proposed Merger. In considering the
Offer and the Proposed Merger (or any other alternative transaction that may be
proposed to the Board), the Nominees intend to fulfill the fiduciary duties that
they would have as directors of VLSI in accordance with the requirements of the
DGCL.

Stockholders are being asked to express their consent to the Proposals on
the accompanying WHITE consent card. Each Proposal will become effective when
properly completed, unrevoked and effective consent cards (or other forms of
consent) indicating consent to such Proposal, signed by the holders of record on
[March , 1999] [the record date for this Consent Solicitation] (the "Record
Date") of a majority of the Shares then outstanding, are delivered to VLSI.

Each of Proposal Nos. 2-5 is conditioned upon the approval of Proposal No.
1. Proposal No. 1 is conditioned upon at least one of the Nominees listed in
Proposal No. 4 being elected as a member of the Board. None of Proposal Nos. 2-5
is conditioned upon the approval of any other of Proposal Nos. 2-5.

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<PAGE> 4

Because a Proposal will not become effective unless executed consents to
adopt such Proposal are returned by holders of record on the Record Date of a
majority of the Shares then outstanding, the following actions will have the
same effect as voting against such Proposal: (a) failing to execute and return a
consent with respect to such Proposal or (b) executing and returning a consent
marked "ABSTAINS" or "WITHHOLDS CONSENT" with respect to such Proposal.
Executing and returning a consent marked to indicate the withholding of consent
to the election of any Nominee will have the effect of a vote against the
election of such Nominee.

As is described below in "THE PROPOSALS -- Proposal No. 4", KPE believes
that cumulative voting will apply in the case of Proposal No. 4. Under
cumulative voting, in order to be elected, each Nominee will need to receive a
Cumulative Majority (as defined herein). If you sign and return but do not mark
the enclosed WHITE consent card your votes will be distributed in a way that
will maximize the votes that you cast for the Nominees.

ADOPTION OF THE PROPOSALS, INCLUDING THE REMOVAL OF THE CURRENT MEMBERS OF
THE BOARD AND ELECTION OF THE NOMINEES, IS AN IMPORTANT STEP TOWARD PROMPT
CONSUMMATION OF THE OFFER AND THE PROPOSED MERGER. ACCORDINGLY, KPE URGES YOU TO
PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED WHITE CONSENT CARD. YOU MUST
SEPARATELY TENDER YOUR SHARES PURSUANT TO THE OFFER IF YOU WISH TO PARTICIPATE
IN THE OFFER. EXECUTING A CONSENT DOES NOT OBLIGATE YOU TO TENDER YOUR SHARES
PURSUANT TO THE OFFER, AND YOUR FAILURE TO EXECUTE A CONSENT DOES NOT PREVENT
YOU FROM TENDERING YOUR SHARES PURSUANT TO THE OFFER.

IMPORTANT

Only Stockholders of record on the Record Date are entitled to give their
consent to the Proposals. Thus:

1. If your shares of Common Stock are held in your own name, please sign,
date and mail the enclosed WHITE consent card in the postage-paid
envelope provided.

2. If your shares of Common Stock are held in "Street-name", only your bank
or broker can execute a consent on your behalf and only upon receipt of
your specific instructions. Please sign, date and return today the
enclosed WHITE form of consent. To ensure your consent is expressed,
please contact the person at your bank or broker who is responsible for
your account and instruct that person to execute a consent on your
behalf.

If you have any questions or require any assistance in executing your
consent, please call:

Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Bankers and Brokers Call Collect: (212) 750-5833
All Others Call Toll-Free: (888) 750-5834

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REASONS FOR THE SOLICITATION

KPE is soliciting written consents to the Proposals in order to expedite
the prompt consummation of the Offer and the Proposed Merger. The purpose of the
Offer is to acquire for cash as many outstanding Shares as possible as a first
step in acquiring the entire equity interest in the Company. KPE currently
intends, as soon as practicable upon consummation of the Offer, to propose and
seek to have the Company effect the Proposed Merger. AS DESCRIBED BELOW, THE
NOMINEES, IF ELECTED, INTEND TO SUPPORT THE OFFER AND THE PROPOSED MERGER.

KPE believes that the Offer and the Proposed Merger are in the best
interests of the Stockholders because, among other things, the consideration
that would be received by Stockholders in the Offer and the Proposed Merger
reflects a substantial premium over the unaffected trading price of the Shares
on February 25, 1999, the date immediately preceding the first public
announcement of Royal Philips' proposal to acquire the Company. See "THE OFFER".

The Nominees intend to remove the impediments to the consummation of the
Offer and the Proposed Merger by, among other things, (a) redeeming the Rights
(or amending the Rights Agreement to make the Rights inapplicable to the Offer
and the Proposed Merger) and approving the Offer and the Proposed Merger under
Section 203 of the DGCL, which would have the effect of satisfying the Rights
Condition and the Section 203 Condition, and taking such other actions as may be
required to expedite the prompt consummation of the Offer and the Proposed
Merger. Therefore, adoption of the Proposals is expected to expedite the prompt
consummation of the Offer and the Proposed Merger. In considering the Offer and
the Proposed Merger (or any other alternative transaction that may be proposed
to the Board), the Nominees intend to fulfill the fiduciary duties that they
would have as directors of VLSI in accordance with the requirements of the DGCL.

THE PROPOSALS

Set forth below is a description of the Proposals for which consents are
solicited hereby:

PROPOSAL NO. 1 -- REMOVAL OF DIRECTORS

Proposal No. 1 provides for the removal of the six current members of the
Board of VLSI, Pierre S. Bonelli, Robert P. Dilworth, William G. Howard, Jr.,
Paul R. Low, Alfred J. Stein and Horace H. Tsiang, and any other person or
persons who may be members of the Board at the time the Proposals become
effective (other than the persons elected as a result of the adoption of
Proposal No. 4, which is described below).

PROPOSAL NO. 2 -- BYLAWS AMENDMENT FOR FILLING VACANCIES RESULTING FROM
REMOVAL OF DIRECTORS

Amend Section 3.13 of the Bylaws to provide for the filling of vacancies
resulting from the removal of directors pursuant to Section 3.13 by adding the
following sentences to the end of Section 3.13: "In the event that one or more
directors are removed pursuant to this Section 3.13, the vacancy or vacancies
created thereby may be filled by the stockholders acting at a meeting or by
written consent. If less than all of the vacancies created following the removal
of directors pursuant to this Section 3.13 are filled by action of the
stockholders, a majority of the directors elected by the stockholders shall have
the power to fill any remaining vacancy."

PROPOSAL NO. 3 -- BYLAWS AMENDMENT FIXING NUMBER OF DIRECTORS AT THREE

The Bylaws currently provide that the Board shall consist of six directors.
Proposal No. 3 provides for the amendment of Section 3.2 of the Bylaws to fix
the number of directors of VLSI at three. In particular, the amendment would
replace the phrase "shall consist of six (6) persons" in such Section 3.2, with
the phrase "shall consist of three (3) persons".

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PROPOSAL NO. 4 -- ELECTION OF NOMINEES

Proposal No. 4 provides for the election of the Nominees named in the table
below as two of the three directors of VLSI, to serve until the next annual
meeting of Stockholders and until their successors have been elected and
qualified.

Paragraph 9 of the Company's Certificate of Incorporation provides that the
Stockholders shall be entitled to cumulate votes in "all elections of
directors". Therefore, KPE believes that cumulative voting will apply with
respect to the proposed election of the Nominees pursuant to Proposal No. 4 of
the Consent Solicitation. Cumulative voting entitles each Stockholder to cast,
distributed among any one or more nominees (but not among more nominees than the
number of directors to be elected), total votes equal to the number of shares of
common stock held of record on the applicable record date by such Stockholder
multiplied by the number of directors to be elected. In the context of the
Consent Solicitation, cumulative voting means that (i) the number of votes that
each Stockholder is entitled to cast is equal to three times the number of
Shares held of record by such Stockholder on the Record Date and (ii) such
Stockholder is entitled to distribute such votes among up to three persons. KPE
URGES STOCKHOLDERS TO SIGN, DATE AND MAIL THE WHITE CONSENT CARD WITHOUT
ALTERATION IN ORDER TO DISTRIBUTE ALL OF YOUR VOTES BETWEEN THE NOMINEES,
THEREBY MAXIMIZING THE NUMBER OF VOTES CAST FOR THE NOMINEES.

If Stockholders owning a majority of the outstanding Shares on the Record
Date execute, deliver and do not revoke consents, distributing their votes in
the manner currently set forth on the WHITE consent card, the requisite majority
will be obtained and, accordingly, a number of consents sufficient to elect the
Nominees will be obtained.

If cumulative voting does not apply to the Consent Solicitation, the
receipt of consents from the holders of a majority of the Shares outstanding on
the Record Date shall be sufficient to elect the Nominees.

If the Nominees are the only directors elected pursuant to the Consent
Solicitation, the Nominees currently intend to appoint another individual to
fill the one vacancy on the Board that would remain. Subject to the fiduciary
duties that they would have as directors of VLSI, the Nominees anticipate that
they would appoint an officer of Royal Philips or one of its affiliates as the
third director.

KPE's primary purpose in seeking to elect the Nominees to the Board is to
obtain the redemption of the Rights (or the amendment of the Rights Agreement to
make the Rights inapplicable to the Offer and the Proposed Merger) and the
approval of the Offer and the Proposed Merger under Section 203, thereby
facilitating the consummation of KPE's acquisition of VLSI. However, if elected,
the Nominees would be responsible for managing the business and affairs of the
Company. Each director of the Company has an obligation under the DGCL to
discharge his or her duties as a director on an informed basis, in good faith,
with the care an ordinarily careful and prudent person in a like position would
exercise under similar circumstances and in a manner the director honestly
believes to be in the best interests of the Company. In this context,
circumstances may arise in which the interests of KPE and its affiliates, on the
one hand, and the interests of other Stockholders, on the other hand, may
differ. In any such case, the Nominees intend to discharge fully the obligations
owing to the Company and the Stockholders under the DGCL.

Each of the Nominees has consented to being named herein as a nominee for
director of the Company and has agreed to stand for election as such a director.
Although KPE has no reason to believe that either of the Nominees will be unable
to serve as directors, if either Nominee is not available to serve, KPE expects
that the remaining Nominee, upon taking office, would fill the vacancy with an
individual willing to consider and implement acquisition proposals in the manner
described herein.

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The information below concerning age, business address, principal
occupation, employment history, directorships and beneficial ownership of Common
Stock of the Nominees has been furnished by the respective Nominees.

<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME, AGE AND AND FIVE-YEAR EMPLOYMENT
BUSINESS ADDRESS HISTORY; DIRECTORSHIPS
- ---------------- ----------------------------
<S> <C>
John T. Losier, 45..................... Since 1996, President and Chief Executive Officer of
1251 Avenue of the Americas Philips Electronics North America Corporation. From
New York, NY 10020 1996-1998, Senior Vice President-Worldwide Sales,
Marketing, Services and Support, Tandem Computers, Inc.
Prior to that time, President of the Large Business
Services Group, and Chairman of the Bell Atlantic Network
Integration, of the Bell Atlantic Corporation. Member of
the IT Advisory Board of Prism Venture Partners.

Barry M. Singer, 59.................... Since 1998, President, Philips Research-U.S.A. From
345 Scarborough Rd. 1995-1997, Vice President and Chief Scientist, Philips
Briarcliff Manor, NY 10510 Research-U.S.A. Prior to that time, Senior Vice
President-Chief Technical Officer, Philips Lighting.
</TABLE>

Except as disclosed in this Consent Statement, none of Royal Philips, KPE,
their directors or executive officers, the Nominees or the other representatives
of KPE or Royal Philips named in Schedule II, other than Royal Philips which,
together with its affiliates, is the beneficial owner of 1,235,000 Shares, owns
any securities of the Company or any parent or subsidiary of the Company,
beneficially or of record; has purchased or sold any such securities within the
past two years; or is or was within the past year a party to any contract,
arrangement or understanding with any person with respect to such securities.
Except as disclosed in this Consent Statement, to the best knowledge of KPE,
Royal Philips, their directors or executive officers, the Nominees and the other
representatives of KPE or Royal Philips named in Schedule II, none of their
associates beneficially owns, directly or indirectly, any securities of the
Company or any parent or subsidiary of the Company.

Except as disclosed in this Consent Statement, none of KPE, Royal Philips,
their directors or executive officers, the Nominees, the other representatives
of KPE or Royal Philips named in Schedule II, or, to their best knowledge, their
associates has any arrangement or understanding with any person (1) with respect
to any future employment by the Company or its affiliates or (2) with respect to
future transactions to which the Company or any of its affiliates will or may be
a party, nor any material interest, direct or indirect, in any transaction that
has occurred since January 1, 1998, or any currently proposed transaction, or
series of similar transactions, which the Company or any of its affiliates was
or is to be a party and in which the amount involved exceeds $60,000. Certain
Nominees, directors and executive officers of Royal Philips or KPE and/or their
respective associates may also be directors or officers of other companies and
organizations that have engaged in transactions with the Company or its
subsidiaries in the ordinary course of business since January 1, 1998, but Royal
Philips and KPE believe that the interest of such persons in such transactions
is not material.

KPE has agreed to reimburse each Nominee for out-of-pocket expenses
incurred in connection with the Consent Solicitation. In addition, KPE has
agreed to indemnify each Nominee, to the fullest extent permitted by applicable
law, from and against any and all expenses, liabilities, damages or losses of
any kind arising out of any threatened or filed action, suit or proceeding,
whether civil, criminal, administrative or investigative, asserted against or
incurred by the Nominee as a result of such Nominee's involvement in the Consent
Solicitation or such Nominee's role as a director of VLSI in connection with
considering all proposals to acquire VLSI submitted directly or indirectly as
the result of the Proposed Merger and implementing any such proposal. In
addition, it is anticipated that each Nominee, if elected, would be entitled to
receive an appropriate pro rata portion of directors' fees paid consistent with
VLSI's past practices. According to VLSI's

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Proxy Statement dated April 16, 1998, nonemployee directors of VLSI are paid an
annual retainer for Board service of $10,000, and an attendance fee of $2,000
and $500 for each Board and committee meeting (if such meeting is not held
within one day of a Board meeting) attended, respectively. Directors are also
reimbursed for certain expenses incurred in connection with attendance at
regular or special meetings of the Board or any of its committees.

As is described above under "THE CONSENT SOLICITATION" and "REASONS FOR THE
SOLICITATION", the Nominees intend to expedite the prompt consummation of the
Offer and the Proposed Merger by, among other things, taking action to satisfy
the Rights Condition and the Section 203 Condition. In considering the Offer and
the Proposed Merger (or any other alternative transaction that may be proposed
to the Board), the Nominees intend to fulfill the fiduciary duties that they
would have as directors of VLSI in accordance with the requirements of the DGCL.

PROPOSAL NO. 5 -- REPEAL OF BYLAWS ADOPTED SUBSEQUENT TO MARCH 12, 1996

Proposal No. 5 provides for the repeal of each amendment of the Bylaws
(whether effected by supplement to, deletion from or revision of the Bylaws)
adopted subsequent to March 12, 1996 and at or prior to the time the Proposals
become effective (other than (i) the amendments adopted by the Board on March 7,
1999 to the extent such amendments were disclosed in the Company's Current
Report on Form 8-K dated March 7, 1999 (the "March 7 Amendments") and (ii) the
amendments adopted as a result of the adoption of Proposal Nos. 2 and 3, which
is described above). The Bylaws filed as an exhibit to VLSI's Annual Report on
Form 10-K for the year ended December 26, 1997 (the most recent publicly
available version of the Bylaws) state that such Bylaws reflect all amendments
adopted through March 12, 1996. Accordingly, this Proposal No. 4 would not
repeal any provision of the Bylaws in effect as of March 12, 1996 (although, as
noted above, Proposal No. 3 would amend Section 3.2 of the Bylaws). If, however,
the Board has adopted since March 12, 1996, or adopts at or prior to the time
the Proposals become effective, any amendment to the Bylaws, this Proposal would
repeal such amendment so as to prevent the Board from creating new obstacles to
the effectiveness of the Proposals or the consummation of an acquisition of VLSI
(pursuant to the Offer and the Proposed Merger or otherwise) and to remove any
existing undisclosed obstacles to the consummation of the effectiveness of the
Proposals or an acquisition of VLSI (pursuant to the Offer and the Proposed
Merger or otherwise).

THE OFFER

On March 5, 1999, KPE commenced the Offer. On February 25, 1999, the last
full trading day prior to the public disclosure that Royal Philips had made a
proposal to acquire the Company for $17.00 a Share, the reported closing bid
price per Share reported on the Nasdaq National Market was $10 3/4. On March 4,
1999, the last full trading day prior to commencement of the Offer, the reported
closing bid price per Share reported on the Nasdaq National Market was $18 5/16.
On March , 1999, the last trading day prior to the date of this Consent
Statement, the reported closing bid price per Share reported on the Nasdaq
National Market was $ . STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE SHARES.

Complete information about the Offer is contained in the Offer to Purchase,
which is available upon request from Innisfree M&A Incorporated, the Information
Agent for the Offer, by calling (212) 750-5833 or
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(888) 750-5834 and in the Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1"), which was filed with the Securities and Exchange Commission
(the "SEC") on March 5, 1999. The Schedule 14D-1 and any amendments thereto,
including exhibits, should be available for inspection and copies should be
obtainable in the manner set forth under "CERTAIN INFORMATION CONCERNING ROYAL
PHILIPS and KPE". For a description of the background of the Offer, see Schedule
I hereto.

PURPOSE OF THE OFFER

The purpose of the Offer is to acquire for cash as many outstanding Shares
as possible as a first step in acquiring the entire equity interest in the
Company. KPE currently intends, as soon as practicable upon consummation of the
Offer, to propose and seek to have the Company effect the Proposed Merger
between the Company and KPE or an affiliate thereof, pursuant to which each then
outstanding Share (other than Shares held by the Company in treasury, or owned
by Royal Philips, KPE or any other direct or indirect wholly owned subsidiary of
Royal Philips or Shares, if any, that are held by Stockholders who are entitled
to and who properly exercise dissenters' rights under Delaware law), would be
converted pursuant to the terms of the Proposed Merger into the right to receive
an amount in cash equal to the per Share price paid pursuant to the Offer,
without interest.

CERTAIN TERMS AND CONDITIONS OF THE OFFER

The Offer is subject to the terms and conditions set forth in the Offer to
Purchase and the Letter of Transmittal. Certain terms of the Offer are
summarized below:

Upon the terms and subject to the conditions set forth in the Offer, KPE
will accept for payment, and pay $17.00 per Share for, all Shares validly
tendered on or prior to the Expiration Date (as defined herein) and not
withdrawn as permitted. The term "Expiration Date" means 12:00 Midnight, New
York City time, on April 1, 1999, unless and until KPE shall, in its sole
discretion, have extended the period for which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date on which the
Offer, as so extended by KPE, shall expire.

In addition to the Rights Condition and the Section 203 Condition described
above, the Offer is conditioned, among other things, upon the following:

Minimum Tender Condition. The minimum tender condition conditions the
Offer upon there being validly tendered prior to the Expiration Date and not
withdrawn a number of Shares (the "Minimum Number of Shares") which, together
with the shares beneficially owned by KPE and its affiliates, will constitute a
majority of the outstanding Shares on a fully diluted basis as of the date the
Shares are accepted for payment pursuant to the Offer (the "Minimum Tender
Condition"). KPE reserves the right (subject to the applicable rules and
regulations of the SEC) to waive or reduce the Minimum Tender Condition and to
elect to purchase, pursuant to the Offer, fewer than the Minimum Number of
Shares.

The Antitrust Condition. The Offer is conditioned on any waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the regulations thereunder and any laws of foreign jurisdictions and under any
laws of the European community applicable to the purchase of Shares pursuant to
the Offer having expired or been terminated.

The Offer is not conditioned upon Royal Philips or KPE obtaining financing.

Certain other conditions to the Offer are described in the Offer to
Purchase. KPE reserves the right (but shall not be obligated) to waive any or
all such conditions.

CERTAIN OTHER INFORMATION ABOUT THE OFFER

Although the adoption of the Proposals is an important step toward
satisfying the conditions of the Offer, Stockholders are not being asked to
tender their Shares pursuant to this Consent Solicitation. KPE has reserved the
right to amend the terms of the Offer and the Proposed Merger in light of future
developments.

8
<PAGE> 10

Such developments could include, without limitation, actions which VLSI or the
Board may take and material adverse changes in VLSI's business.

For information concerning a complaint filed by KPE in the Delaware
Chancery Court relating to certain of VLSI's anti-takeover devices, see
"LITIGATION" below.

9
<PAGE> 11

THE CONSENT PROCEDURE

GENERAL; EFFECTIVENESS OF CONSENTS

Section 228 of the DGCL provides that, unless otherwise provided in the
certificate of incorporation of a corporation, any action required to be or that
may be taken at meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if written consents setting forth the action so
taken, are signed and delivered to the corporation by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to take such action at a meeting at which all shares entitled to vote thereon
were present and voted. The Certificate of Incorporation of VLSI, as amended,
does not prohibit stockholder action by written consent.

Under the DGCL and the Company's Bylaws, as amended by the March 7
Amendments, the Board may, upon proper notice from KPE, fix a record date for
the purposes of determining which Stockholders are entitled to consent to the
Proposals in this Consent Statement. Such notice will require KPE to disclose
certain information, including, but not limited to, the text of the Proposals,
the reasons for soliciting consents and, to the extent the Proposals relate to
the election of directors, specified information regarding the Nominees. If the
Board elects to set a record date, it must do so within 10 days of receipt of
notice, and the record date must be no more than 10 days after the date on which
the Board sets the record date. On March , 1999, KPE sent a letter to the
Secretary of the Company requesting that the Board fix a record date for this
Consent Solicitation. [As of the date of this Consent Statement, the Board had
not fixed a Record Date. If no record date is fixed by the Board, the record
date for determining Stockholders entitled to express consent in this Consent
Solicitation will be the first date on which a signed written consent is
delivered to VLSI by delivery to its registered office in the State of Delaware
or to the Secretary of VLSI at VLSI's principal place of business. KPE will
publish the Record Date as soon as it is available.]

Each Proposal will become effective when properly completed, unrevoked and
effective consent cards (or other forms of consent) indicating consent to such
Proposal, signed by the holders of record on the Record Date of a majority of
the shares of Common Stock then outstanding, are delivered to VLSI, provided
that the requisite number of consents is delivered within 60 days of the
earliest dated consent delivered to VLSI. If the Proposals are adopted pursuant
to this Consent Solicitation, prompt notice will be given pursuant to Section
228(d) of the DGCL to eligible Stockholders who have not executed and returned
consent cards.

PROCEDURAL INSTRUCTIONS

If a Stockholder is a record holder of Shares as of the close of business
on the Record Date, such Stockholder may elect to consent to, withhold consent
to or abstain with respect to each Proposal by marking the "CONSENTS",
"WITHHOLDS CONSENT" or "ABSTAINS" box, as applicable, underneath each such
Proposal on the accompanying WHITE consent card and signing, dating and
returning it promptly in the enclosed envelope. In addition, a Stockholder may
withhold consent to the removal of any individual member of the Board or to the
election of any individual Nominee by writing such person's name on the consent
card. However, the effectiveness of each of the Proposal Nos. 2-5 is subject to,
and conditioned upon, the receipt of consents from the holders of record on the
Record Date of a majority of the Shares then outstanding to the removal of each
member of the Board pursuant to Proposal No. 1. In addition, Proposal No. 1 is
conditioned upon at least one of the Nominees listed in Proposal No. 4 being
elected as a member of the Board. If a Stockholder returns a consent card that
is signed and not marked with respect to any Proposal, such Stockholder will
thereby consent to that Proposal in its entirety, except that such Stockholder
will not thereby

10
<PAGE> 12

consent to the removal of any member of the Board or the election of any Nominee
whose name is written in on the consent card.

UNDER THE DGCL, ONLY STOCKHOLDERS OF RECORD ON THE RECORD DATE ARE ELIGIBLE
TO GIVE THEIR CONSENT TO THE PROPOSALS. THEREFORE, KPE URGES EACH STOCKHOLDER,
EVEN IF SUCH STOCKHOLDER HAS SUBSEQUENTLY SOLD ITS SHARES, TO GRANT ITS CONSENT
PURSUANT TO THE ENCLOSED WHITE CONSENT CARD WITH RESPECT TO ALL SHARES HELD AS
OF THE RECORD DATE. A STOCKHOLDER'S FAILURE TO CONSENT MAY ADVERSELY AFFECT
THOSE WHO CONTINUE TO BE STOCKHOLDERS. IN ADDITION, ANY STOCKHOLDER OWNING
SHARES BENEFICIALLY (BUT NOT OF RECORD), SUCH AS A PERSON WHOSE OWNERSHIP OF
SHARES IS THROUGH A BROKER, BANK OR OTHER FINANCIAL INSTITUTION, SHOULD CONTACT
THAT BROKER, BANK OR FINANCIAL INSTITUTION WITH INSTRUCTIONS TO EXECUTE THE
WHITE CONSENT CARD ON SUCH STOCKHOLDER'S BEHALF OR TO HAVE THE BROKER, BANK OR
FINANCIAL INSTITUTION'S NOMINEE EXECUTE THE CONSENT. EACH STOCKHOLDER IS URGED
TO ENSURE THAT THE RECORD HOLDER OF SUCH STOCKHOLDER'S SHARES SIGNS, DATES AND
RETURNS THE ENCLOSED WHITE CONSENT CARD AS SOON AS POSSIBLE. EACH STOCKHOLDER IS
FURTHER URGED TO CONFIRM IN WRITING ANY INSTRUCTIONS GIVEN AND PROVIDE A COPY
THEREOF TO KPE IN CARE OF INNISFREE M&A INCORPORATED, SO THAT KPE MAY ALSO
ATTEMPT TO ENSURE SUCH INSTRUCTIONS ARE FOLLOWED.

CUMULATIVE VOTING

REVOCATION OF CONSENTS

A Proposal will not become effective unless executed consents to adopt such
Proposal are returned by holders of record on the Record Date of a majority of
the Shares then outstanding. Executed consents with respect to any Proposal may
be revoked at any time prior to the time that such Proposal becomes effective,
provided that a written, dated revocation which clearly identifies the consent
being revoked is executed and delivered either to (a) KPE in care of Innisfree
M&A Incorporated, at 501 Madison Avenue, 20th Floor, New York, New York 10022,
or (b) the principal executive offices of VLSI at 1109 McKay Drive, San Jose,
California 95131. A revocation may be in any written form validly signed by the
record holder as long as it clearly states that the consent previously given is
no longer effective. KPE requests that a copy of any revocation sent to VLSI be
sent to KPE in care of Innisfree M&A Incorporated at the above address so that
KPE may more accurately determine if and when consents to the Proposals have
been received from the holders of record on the Record Date of a majority of the
Shares then outstanding.

APPRAISAL RIGHTS

Holders of Shares do not have appraisal rights as a result of the Offer.
However, if the Proposed Merger is consummated, each holder of Shares whose
Shares are to be converted in the Proposed Merger and who has neither voted in
favor of the Proposed Merger nor consented thereto in writing will be entitled
to an appraisal by the Delaware Court of Chancery of the fair value of such
Stockholder's Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Proposed Merger, together with a fair rate
of interest, if any, to be paid. In determining such fair value, the Court may
consider all relevant factors. The value so determined could be more or less
than the consideration to be paid in the Offer and the Proposed Merger. Any
judicial determination of the fair value could be based upon considerations
other than or in addition to the market value of the Shares, including, among
other things, asset values and earning capacity.
11
<PAGE> 13

If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses such stockholder's right to
appraisal as provided in the DGCL, the Shares of such Stockholder will be
converted into the right to receive the merger consideration pursuant to the
Proposed Merger.

The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL.

FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.

ROYAL PHILIPS AND KPE

Royal Philips is a company incorporated under the laws of The Netherlands
and is the parent company of the Royal Philips Electronics group. Royal Philips'
principal executive offices are located at Rembrandt Tower, Amstelplein 1, 1096
HA Amsterdam, The Netherlands. Royal Philips is one of the world's biggest
electronics companies and Europe's largest, with sales of US$33.9 billion in
1998. The activities of the Royal Philips group are organized in product
divisions which are responsible for Royal Philips' worldwide business policy.
Royal Philips has manufacturing and sales organizations in over 60 countries.
Royal Philips delivers products, systems and services in the fields of
semiconductors, lighting, consumer electronics and communications, domestic
appliances and personal care, components, medical systems, business electronics
and information technology.

Additional information concerning Royal Philips is set forth in Royal
Philips' Annual Report on Form 20-F (the "Royal Philips Form 20-F") for the
fiscal year ended December 31, 1997, a copy of which may be obtained from the
SEC upon payment of the SEC's customary charges, by writing to its principal
office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and
can be obtained electronically on the SEC's website at http://www.sec.gov.
Copies of the Schedule 14D-1, including the Offer to Purchase that forms a part
thereof, may be obtained in the same manner.

KPE is a Delaware corporation and to date has engaged in no activities
other than those incident to its formation and the commencement of the Offer.
KPE is an indirect wholly owned subsidiary of Royal Philips. KPE owns 100 Shares
which were purchased by Neglin Lamp B.V. ("Neglin Lamp"), a company incorporated
under the laws of The Netherlands and a wholly owned subsidiary of Royal
Philips, and were thereafter transferred to KPE pursuant to a broker-dealer
journal transfer transaction. The principal executive offices of KPE are located
at 1251 Avenue of the Americas, 20th Floor, New York, New York 10020.

As of March 5, 1999, Royal Philips was the indirect beneficial owner of an
aggregate of 1,235,000 Shares or approximately 2.7% of the Shares reported by
the Company to be outstanding as of September 25, 1998. Royal Philips owns all
but 100 of such Shares indirectly through its indirect wholly owned subsidiary
Neglin Lamp. A broker-dealer purchased such shares in open-market purchases for
the account of Neglin Lamp. Schedule III hereto sets forth with respect to such
Shares (i) each date of purchase, (ii) the number of Shares purchased each such
day and (iii) the average price paid therefor.

KPE is the beneficial owner of 100 Shares. On March 3, 1999, Royal Philips
transferred to KPE 100 Shares through a broker-dealer journal transfer
transaction. Except as described in this Consent Statement (including Schedule
III hereto), none of KPE, Royal Philips or, to the best knowledge of KPE, any of
the persons listed in Schedule II hereto, or any associate or majority owned
subsidiary of KPE, Royal Philips or any of the persons so listed, beneficially
owns any equity security of the Company, and none of KPE, Royal Philips or, to
the best knowledge of KPE, any of the other persons referred to above, or any of
the respective directors, executive officers or subsidiaries of any of the
foregoing, has effected any transaction in any equity security of the Company
during the past 60 days. KPE and Royal Philips disclaim beneficial ownership of
any Shares owned by any pension plan of Royal Philips or any affiliate of Royal
Philips.

Certain information about certain directors, executive officers, employees
and other representatives of KPE, who, in each case, may also assist in
soliciting proxies, is set forth in the attached Schedule II.

12
<PAGE> 14

Schedule III sets forth certain information relating to Shares owned by KPE,
certain individuals and KPE Nominees and certain transactions between any of
them and VLSI. Schedule IV sets forth certain information, as made available in
public documents, regarding Shares held by VLSI's directors and executive
officers.

LITIGATION

On March 5, 1999, Royal Philips and KPE commenced a lawsuit in the Court of
Chancery of the State of Delaware (Civil Action No. 16992-NC) against the
Company and the Board seeking, among other things, to compel the Board to redeem
the Rights outstanding under the Rights Agreement or to otherwise take action to
render the Rights inapplicable to the Offer and to invalidate the provision in
the Rights Agreement providing that during the 10-day period following an
announcement that a party has triggered the Rights by acquiring 20% or more of
the Shares, the Rights can only be redeemed by the Continuing Directors of the
Company.

On March 7, 1999, the Board amended the Rights Agreement with the effect
of, among other things, removing the Continuing Director redemption requirement,
providing that the Rights may be redeemed only prior to the triggering of the
Rights and lowering the threshold for triggering the Rights from 20% to 10%.

OWNERSHIP OF COMMON STOCK

Except as provided below, each share of Common Stock is entitled to one
vote, and the Common Stock is the only class of securities of VLSI currently
entitled to vote. According to VLSI's Annual Report on Form 10-K for the fiscal
year ended December 26, 1997, there were approximately 1,667 holders of record
of Shares, and according to the Quarterly Report on Form 10-Q for the period
ending September 25, 1998, there were 45,701,934 Shares outstanding as of
September 25, 1998. KPE believes that Stockholders have cumulative voting rights
for the election of directors upon compliance with certain notification
provisions outlined in the Bylaws.

The following table sets forth the share ownership of all persons who own
beneficially more than 5% of VLSI's outstanding Shares as reported in a Schedule
13G dated February 16, 1997.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF APPROXIMATE
BENEFICIAL OWNERSHIP OF PERCENT OF
SHARES OF COMMON OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK(1) COMMON STOCK
- ------------------------------------ ----------------------- ------------
<S> <C> <C>
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10020................................. 3,117,022 6.8%
</TABLE>

- ---------------
(1) As reported in a Schedule 13G, dated February 16, 1999, Lazard Freres & Co.
LLC ("Lazard Freres"), an investment adviser registered under Section 203 of
the Investment Advisers Act of 1940 (the "1940 Act"), is the beneficial
owner of 3,117,022 Shares, as a result of acting as investment adviser to
various investment companies registered under Section 8 of the 1940 Act.
Lazard Freres has sole power to dispose of the 3,117,022 Shares owned by
Lazard Freres. Lazard Freres has sole voting power for 2,487,210 of the
Shares.

For information relating to the ownership of Common Stock by the current
directors and executive officers of VLSI, see Schedule IV hereto.

The information concerning VLSI contained in this Consent Statement has
been taken from or is based upon documents and records on file with the SEC and
other publicly available information. KPE has no knowledge that would indicate
that statements relating to VLSI contained in this Consent Statement in reliance
upon publicly available information are inaccurate or incomplete. KPE, however,
has not been given access to the books and records of VLSI, was not involved in
the preparation of such information and

13
<PAGE> 15

statements, and is not in a position to verify, or make any representation with
respect to the accuracy of, any such information or statements.

The proxy statement of VLSI dated April 16, 1998 contains additional
information concerning the Shares, beneficial ownership of the Shares by, and
other information concerning, VLSI's directors and executive officers,
compensation paid to executive officers, and the principal holders of the
Shares. Such information, which KPE has not independently verified, is
incorporated by reference in this Consent Statement, upon reliance on VLSI.

14
<PAGE> 16

SOLICITATION OF CONSENTS

Consents will be solicited by mail, telephone, telegraph, telex, telecopier
and advertisement and in person. Solicitation may be made by directors,
officers, investor relations personnel and other regular employees of Royal
Philips and its subsidiaries, including KPE, and by the Nominees. No such
employees will receive additional compensation for such solicitation.

Banks, brokerage houses and other custodians, nominees and fiduciaries will
be requested to forward the solicitation materials to the beneficial owners of
Shares for which they hold of record and KPE will reimburse them for their
reasonable out-of-pocket expenses.

In addition, KPE has retained Innisfree M&A Incorporated ("Innisfree") to
assist and to provide advisory services in connection with this Consent
Solicitation for which Innisfree will be paid a fee of not more than $-- and
will be reimbursed for reasonable out-of-pocket expenses. It is anticipated that
approximately -- persons will be employed by Innisfree to solicit Stockholders.
KPE will indemnify Innisfree against certain liabilities and expenses in
connection with the Consent Solicitation, including liabilities under the
federal securities laws.

Credit Suisse First Boston Corporation ("CSFB") is acting as KPE's
exclusive financial advisor in connection with KPE's effort to acquire VLSI and
as Dealer Manager in connection with the Offer. Royal Philips and KPE have
agreed to pay CSFB as compensation for its services as financial advisor and
Dealer Manager as follows: a financial advisory fee of $80,000 per month for a
maximum of three months, fully creditable against the transaction fee; an
announcement fee of $1,000,000 payable upon the public announcement by Royal
Philips of a firm bid, fully creditable against the transaction fee; a
transaction fee of $4,500,000 payable upon the completion of an acquisition.
Royal Philips has agreed to consider, at its sole discretion, increasing such
transaction fee. Royal Philips and KPE have agreed to reimburse CSFB for its
reasonable out-of-pocket expenses (including the fees and expenses of counsel),
in connection with the Offer, and have agreed to indemnify CSFB and against
certain liabilities and expenses in connection with the Offer and the Proposed
Merger, including liabilities under the federal securities laws.

In connection with CSFB's engagement as exclusive financial advisor, KPE
anticipates that certain employees of CSFB may communicate in person, by
telephone or otherwise with institutions, brokers or other persons who are
Stockholders for the purpose of assisting in the solicitation of consents. CSFB
will not receive any fee for or in connection with such solicitation activities
apart from the fees which it is otherwise entitled to receive as described
above.

The expenses related directly to the Consent Solicitation are expected to
aggregate $ and will be borne by KPE. These expenses include any fees
and expenses for attorneys, public relations and financial advisers, solicitors,
advertising, printing, transportation, litigation and other costs incidental to
the solicitation, but exclude costs represented by salaries and wages of regular
employees and officers of KPE and expenses related primarily to the Proposed
Merger. Of the above stated amount, approximately $ has been spent to
date. KPE does not intend to seek reimbursement of its expenses related to the
Consent Solicitation from VLSI whether or not the Consent Solicitation is
successful.

IF YOU HAVE ANY QUESTIONS CONCERNING THIS CONSENT SOLICITATION OR THE
PROCEDURES TO BE FOLLOWED TO EXECUTE AND DELIVER A CONSENT, PLEASE CONTACT
INNISFREE AT THE ADDRESS OR PHONE NUMBER SPECIFIED BELOW.

KPE ACQUISITION INC.

March , 1999

15
<PAGE> 17

IMPORTANT

Only Stockholders of record on the Record Date are entitled to give their
consent to the Proposals. Thus:

1. If your shares of Common Stock are held in your own name, please sign,
date and mail the enclosed WHITE consent card in the postage-paid
envelope provided.

If you have any questions or require any assistance in executing your
consent, please call:

INNISFREE M&A INCORPORATED LOGO
501 MADISON AVENUE, 20TH FLOOR
NEW YORK, NEW YORK 10022
BANKERS AND BROKERS CALL COLLECT: (212) 750-5833
ALL OTHERS CALL TOLL-FREE: (888) 750-5834

16
<PAGE> 18

SCHEDULE I

BACKGROUND OF THE OFFER

In the ordinary course of its business, Royal Philips is engaged in the
ongoing evaluation of potential candidates for acquisitions and strategic
transactions. Through that process, in the summer of 1998 Royal Philips
identified the Company as a candidate with which it might pursue an acquisition
or other strategic transaction.

On September 2, 1998, Arthur van der Poel, Chairman of the Philips
Semiconductors division ("Philips Semiconductors") of Royal Philips, called
Alfred J. Stein, Chairman and Chief Executive Officer of the Company, to
communicate Royal Philips' interest in pursuing a strategic transaction with the
Company, including an acquisition or joint venture arrangement. Mr. Stein
responded that he did not wish to entertain such discussions at that time. It
was suggested by Mr. Stein that in the next few months Mr. Stein and Mr. Van der
Poel should meet at a mutually convenient time in either Europe or the United
States.

In October of 1998, Philips retained Credit Suisse First Boston Corporation
to act as its financial advisor and Sullivan & Cromwell to act as its legal
counsel in connection with its exploration of a possible strategic transaction
with the Company.

On November 4, 1998, Mr. Van der Poel called Mr. Stein and set up a meeting
for November 23, 1998 so that the two of them could continue their previous
discussions regarding a possible transaction between Royal Philips and the
Company. On November 20, 1998, Mr. Van der Poel had a conference call with Mr.
Stein and Robert P. Dilworth, a member of the Board of Directors of the Company,
regarding the agenda for the November 23 meeting. Mr. Stein and Mr. Dilworth
asked Mr. Van der Poel to confirm that he would not be bringing a written
proposal to acquire the Company to the November 23 meeting. Mr. Van der Poel
confirmed that he would not bring such a written proposal. On November 23, 1998,
Mr. Van der Poel met with Mr. Stein in San Jose, California and informed Mr.
Stein that Royal Philips wished to conduct a due diligence investigation of the
Company and to commence to attempt to negotiate mutually agreeable terms
pursuant to which Royal Philips would acquire the Company. Mr. Stein reiterated
that he did not believe it was an appropriate time to negotiate the sale of the
Company, and suggested that he and Mr. Van der Poel take up the subject again in
another three to six months. Mr. Stein and Mr. Van der Poel did agree to
consider areas in which the Company and Philips Semiconductors might cooperate.

On December 3, 1998, Mr. Van der Poel sent Mr. Stein a letter to follow-up
on the November 23 meeting. In that letter Mr. Van der Poel outlined three areas
in which he believed Philips Semiconductors and the Company could
cooperate -- manufacturing, technology and cellular telephony
applications -- and suggested that representatives of the two companies should
meet to discuss a possible cooperation arrangement. Responding to Mr. Van der
Poel's proposal, Mr. Stein called and said that he believed cooperation in
manufacturing and technology was worth exploration and agreed that the
appropriate representatives should meet.

Following up on the agreement of Messrs. Stein and Van der Poel, on January
23, 1999, Stuart McIntosh, Chief Operations Officer of Philips Semiconductors,
traveled to the Company's manufacturing facility in San Antonio, Texas, where he
met with David Ledvina, an officer of the Company with responsibility for
manufacturing, and discussed with him ways in which the two companies could
cooperate in terms of manufacturing. On February 16, 1999, Theo Claassen, Chief
Technology Officer of Philips Semiconductors, and Rob Horbach, Strategy Officer
of Philips Semiconductors, met with Rajeeva Lahri, Senior Vice President
Corporate Research and Development, C. Clifford Roe, Vice President Corporate
Strategic Programs, and Bob Payne, Vice President Strategic Technology to
discuss the ways in which the two companies could cooperate in the technology
area.

On February 17, 1999, Mr. Van der Poel contacted Mr. Stein by e-mail
suggesting that they meet on the afternoon of February 25, 1999, when Mr. Van
der Poel planned to be in California. By reply e-mail, Mr. Stein confirmed that
he would be available to meet that afternoon.

On February 25, 1999, Mr. Van der Poel, joined by Cor Boonstra, President
and Chief Executive Officer
<PAGE> 19

of Royal Philips, met with Mr. Stein at the offices of the Company in San Jose,
California. At that meeting, Mr. Boonstra and Mr. Van der Poel informed Mr.
Stein of Royal Philips' intention to propose to the Board of Directors of the
Company that the two companies negotiate an agreement whereby Royal Philips
would acquire, in a merger transaction, all the shares of the Company. Mr.
Boonstra and Mr. Van der Poel discussed with Mr. Stein the business rationale
and strategic benefits of such a business combination. Mr. Stein responded that
he understood the strategic rationale of such a business combination, but did
not wish to pursue a combination at this time or within the next six months. Mr.
Boonstra and Mr. Van der Poel reiterated that Royal Philips aimed at a much
faster time schedule. Mr. Stein responded that he would discuss the matter with
the Company's Board of Directors at a regularly scheduled board meeting on
Wednesday March 3, 1998. In conclusion, Mr. Boonstra and Mr. Van der Poel said
that they would confer among themselves regarding what had been discussed and
would get back to Mr. Stein regarding how Royal Philips would propose to
proceed. On February 25, 1999, the closing bid for the Shares on the Nasdaq
National Market was $10 3/4.

Later that day, Mr. Van der Poel called Mr. Stein to inform him that they
would be sending him shortly a letter outlining Royal Philips' proposal. Shortly
thereafter, on the evening of February 25, 1999, the following letter was
delivered to Mr. Stein:

Mr. A. J. Stein
Chairman & CEO
VLSI Technology, Inc.
1109 McKay Drive
San Jose, CA 95131
February 25, 1999

Dear Mr. Stein,

Thank you for meeting with Arthur van der Poel and myself to discuss a
possible strategic business combination between our companies. As you know
from our recent conversations, Philips has for some time studied the
possibility of a combination of our Semiconductors division and VLSI. Those
conversations and our meeting today have convinced us that we should
progress with our discussions on a fast time track. We have therefore
summarized our proposal in this letter so that you can discuss it with your
Board of Directors and advisors.

Based upon our work to date, which has been limited to public sources,
Philips would propose to enter into an agreement to acquire VLSI in a
merger transaction in which your stockholders would receive $17 in cash for
each share of VLSI common stock.

We believe our proposal, which represents a premium of approximately
60% to the closing VLSI market price on February 25th, offers an extremely
attractive opportunity for your stockholders. Philips would propose to
finance the transaction primarily through existing cash balances and thus
would not require any contingency or delay traditionally associated with
raising capital.

As we told you, we have the highest regard for your company and your
employees, as well as your many innovations in the semiconductor field. We
believe that the combined business of VLSI and Philips Semiconductors will
be positioned as a global leader in many of the most exciting semiconductor
growth markets. Furthermore, we are convinced that the strategic,
operational and financial merits of such a combination are compelling and
will provide significant benefits to your shareholders, employees,
customers, and other stakeholders.

We plan to use VLSI as a cornerstone of our growth strategy for
Philips Semiconductors in North America as a platform for further
expansion. As a result, we recognize that VLSI's management and employees
are essential to the success of our proposed business combination. We are
therefore very interested in discussing with you the ways in which we can
properly offer incentives and retain those managers and employees.
2
<PAGE> 20

As you can appreciate, with a proposal of this type, time is of the
essence, and we are prepared to move accordingly. We would be happy to meet
with you and other members of your Board of Directors, senior management
and with your advisers as soon as practical to discuss our proposal and to
answer any questions you or they may have. We believe it would be mutually
desirable if you would give us the opportunity to conduct customary due
diligence in parallel with the negotiation of a definitive acquisition
agreement.

We realize that your Board of Directors will want to carefully
consider our proposal, but we do ask that you get back to us with a
response as soon as possible, but in no event later than the close of
business on Wednesday, March 3rd.

We have discussed the highly sensitive nature of the market
information contained in this letter with our legal counsel, Sullivan &
Cromwell. Based upon those discussions, we have decided to publicly
disclose our acquisition proposal. I hope that VLSI will respond favorably
to this proposal, and that a combination of our related businesses can be
accomplished in an amicable and mutually beneficial fashion. We look
forward to your response.

Sincerely,

Cor Boonstra

President & CEO
Royal Philips Electronics

cc: Board of Directors VLSI Technology, Inc.

Also on the evening of February 25, 1999, Royal Philips issued a press
release, which announced that Royal Philips had made the proposal to Mr. Stein
and the Company's Board of Directors and set forth the foregoing letter.

On February 26, 1999, the Company issued a press release acknowledging
receipt of Royal Philips' proposal and including a statement from Mr. Stein
indicating that the Company's Board of Directors would evaluate the proposal
with the Company's financial and legal advisors.

On March 3, 1999, the Company's Board of Directors convened for a regularly
scheduled meeting. Later that day, the Company issued a press release
indicating, among other things, that the Company had scheduled a special meeting
of its Board of Directors for March 23, 1999, at which it would consider the
results of an evaluation conducted by its advisors of the proposal set forth in
Royal Philips' February 25 letter.

On March 4, 1999, Royal Philips issued a press release indicating that it
would commence the Offer on March 5, 1999. The release stated that Royal Philips
was encouraged that the Company's Board of Directors was considering Royal
Philips' proposal with an open mind. However, Royal Philips explained that given
the compelling nature of the transaction with the Company, Royal Philips desired
to quickly complete a mutually beneficial transaction and therefore took its
offer directly to the Company's Stockholders. In doing so, Royal Philips
repeated its preference for a negotiated transaction with the Company.

3
<PAGE> 21

Also on March 4, 1999, Mr. Boonstra sent the following letter to Mr. Stein:

By Facsimile

Mr. A. J. Stein
Chairman & CEO
VLSI Technology, Inc.
1109 McKay Drive
San Jose, CA 95131 March 4, 1999

Dear Mr. Stein,

We were encouraged to hear that your Board of Directors has an open
mind about Philips' proposal to acquire VLSI in a merger transaction in
which your stockholders would receive $17 in cash for each share of VLSI
common stock.

We have the highest regard for your company and your employees, as
well as your many innovations in the semiconductor field. Combining VLSI
with Philips Semiconductors presents both a compelling strategic and
operational opportunity for our businesses and compelling financial
benefits to your shareholders. The market's response to our proposal
confirms this belief.

Given the compelling nature of this transaction, time is of the
essence. Accordingly, to keep this transaction on a fast time track and to
demonstrate that we are committed to pursuing it, we plan to commence
tomorrow a $17 per share tender offer for all the outstanding shares of
VLSI.

As you are aware, the Company's rights plan is at the present time an
impediment to consummation of our offer. Accordingly, in order that your
stockholders can receive the benefits of our offer, we request that the
Board of Directors redeem the rights outstanding pursuant to the rights
plan or otherwise take action to render the rights inapplicable to our
offer. If your Board of Directors does not dismantle the rights plan, in
order to pursue our offer it would be our intention to seek to replace your
Board of Directors with nominees who, subject to their fiduciary duties,
would allow the offer to proceed. This is not our preferred course, but we
are prepared to take it, should it be necessary in order for us to accept
the tenders of the stockholders that respond to our offer.

We want you, your Board of Directors, your management and your
employees to know that we would prefer to negotiate a definitive
acquisition agreement with you. We and our advisors are prepared to start
the process immediately. In that regard, please contact me or Arthur van
der Poel at any time should you wish to discuss our proposal prior to your
scheduled Board meeting on March 23, 1999.

Sincerely,

Cor Boonstra

President & CEO
Royal Philips Electronics

cc: Board of Directors VLSI Technology, Inc.

On March 5, 1999, Royal Philips and KPE commenced the Offer.

4
<PAGE> 22

SCHEDULE II

INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS, AND CERTAIN REPRESENTATIVES, OF ROYAL PHILIPS

The following table sets forth the name and the present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is carried on, of (1)
the Directors and executive officers of Royal Philips, (2) the Directors and
executive officers of KPE Acquisition Inc. and (3) certain representatives of
Royal Philips who may assist Innisfree M&A Incorporated, the Information Agent,
in soliciting proxies from VLSI Stockholders. Unless otherwise indicated, the
principal business address of each Director or executive officer of Royal
Philips, and each Director or executive officer of KPE Acquisition Inc., named
below is Rembrand Tower, Amstelplein 1, 1096 HA Amsterdam, The Netherlands.

DIRECTORS AND EXECUTIVE OFFICERS OF ROYAL PHILIPS

<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRESENT OFFICE OR OTHER
BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
------------------ ----------------------------------
<S> <C>
Cor Boonstra................................. President; Chairman of the Board of
Management and Group Management Committee
Dudley G. Eustace............................ Executive Vice-President; Vice-Chairman of
the Board of Management and the Group
Management Committee
Jan H.M. Hommen.............................. Executive Vice-President; Member of the Board
of Management and the Group Management
Committee; Chief Financial Officer
Adri Baan.................................... Executive Vice-President; Member of the Board
of Management and the Group Management
Committee; Chairman of the Consumer
Electronics Division
Y.C. Lo...................................... Executive Vice-President; Member of the Board
of Management and the Group Management
Committee
Arthur P.M. van der Poel..................... Executive Vice-President; Member of the Board
of Management and the Group Management
Committee; Chairman of the Semiconductors
Division
John W. Whybrow.............................. Executive Vice-President; Member of the Board
of Management and the Group Management
Committee; Chairman of the Lighting Division
R. Pieper.................................... Executive Vice-President; Member of the Board
of Management and the Group Management
Committee
Ad H.A. Veenhof.............................. Member of the Group Management Committee;
Chairman of the Domestic Appliances and
Personal Care Division
Kees Bulthuis................................ Member of the Group Management Committee;
Senior Managing Director of Corporate
Research
J. M. Barella................................ Member of the Group Management Committee;
Chairman of the Medical Systems Division
A.B. Bok..................................... Member of the Group Management Committee;
Chairman of the Business Electronics Division
G.J. Kleisterlee............................. Member of the Group Management Committee;
Chairman of the Components Division
J.P. Oosterveld.............................. Member of the Group Management Committee;
Senior Director of Corporate Strategy
</TABLE>
<PAGE> 23

<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRESENT OFFICE OR OTHER
BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
------------------ ----------------------------------
<S> <C>
A. Westerlaken............................... Member of the Group Management Committee;
General Secretary; Chief Legal Officer;
Secretary to the Board of Management
N.J. Bruijel................................. Member of the Group Management Committee
responsible for Corporate Human Resources
Management
F.A. Maljers................................. Chairman of the Supervisory Board
A. Leysen.................................... Member of the Supervisory Board
W. Hilger.................................... Member of the Supervisory Board
L.C. van Wachem.............................. Member of the Supervisory Board
C.J. Oort.................................... Member of the Supervisory Board
L. Schweitzer................................ Member of the Supervisory Board
34 Quai du Point du Jour
BP 103 92109
Boulogne Bilancourt
Cedex, France
Sir Richard Greenbury........................ Member of the Supervisory Board
W. de Kleuver................................ Member of the Supervisory Board
</TABLE>

DIRECTORS AND EXECUTIVE OFFICERS OF KPE ACQUISITION INC.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRESENT OFFICE OR OTHER
BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
------------------ ----------------------------------
<S> <C>
William E. Curran............................ President; Chief Executive Officer; Director
1251 Avenue of the Americas
New York, NY 10020
United States
Guido R.C. Dierick........................... Vice President; Treasurer; Director
Belinda Chew................................. Vice President; Secretary
1251 Avenue of the Americas
New York, NY 10020
United States
</TABLE>

CREDIT SUISSE FIRST BOSTON CORPORATION AND CERTAIN OF ITS EMPLOYEES
WHO MAY ALSO ASSIST IN THE SOLICITATION OF CONSENTS

<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRESENT OFFICE OR OTHER
BUSINESS ADDRESS(1) PRINCIPAL OCCUPATION OR EMPLOYMENT
------------------- ----------------------------------
<S> <C>
REPRESENTATIVES EMPLOYED BY CREDIT SUISSE FIRST BOSTON
CORPORATION ("CSFB")(2)
George Boutros.............................................. Managing Director
Jason DiLullo............................................... Vice President
</TABLE>

- ---------------
(1) The principal business address of all representatives who are employees of
CSFB named above is: Credit Suisse First Boston Corporation, 2400 Hanover
Street, Palo Alto, California 94304.

(2) CSFB engages in a full range of investment banking, securities trading,
market-making and brokerage services for institutional and individual
clients. In the normal course of its business, CSFB may trade securities of
VLSI for its own account and the account of its customers and, accordingly,
may at any time hold a long or short position in such securities. CSFB
informed Royal Philips that as of March 9, 1999, CSFB held a net long
position of 1,440 VLSI Shares.

2
<PAGE> 24

SCHEDULE III

SHARES HELD BY ROYAL PHILIPS, KPE, CERTAIN OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER REPRESENTATIVES AND THE KPE NOMINEES AND
CERTAIN TRANSACTIONS BETWEEN ANY OF THEM AND VLSI

As of March 5, 1999, Royal Philips was the indirect beneficial owner of an
aggregate of 1,235,000 Shares or approximately 2.7% of the Shares reported by
the Company to be outstanding as of September 25, 1998. Royal Philips owns all
but 100 of such Shares indirectly through its indirect wholly owned subsidiary
Neglin Lamp. A broker-dealer purchased such Shares in open-market purchases for
the account of Neglin Lamp. Each date of purchase, the number of Shares
purchased each such day and the average price paid therefor are set forth below.

<TABLE>
<CAPTION>
DATE OF PURCHASE NO. OF SHARES AVERAGE PRICE PER SHARE
- ---------------- ------------- -----------------------
<S> <C> <C>
February 17, 1999........................... 40,000 $10.15
February 18, 1999........................... 235,000 $10.07
February 19, 1999........................... 575,000 $10.01
February 22, 1999........................... 25,000 $ 9.96
February 26, 1999........................... 360,000 $15.34
</TABLE>

Except as disclosed in this Consent Statement, none of KPE, Royal Philips,
or, to the best knowledge of KPE, any of the persons named in Schedule I or KPE
Nominees owns any securities of VLSI or any subsidiary of VLSI, beneficially or
of record, has purchased or sold any of such securities with the past two years
or is or was within the past year a party to any contract, arrangement or
understanding with any person with respect to any such securities. Except as
disclosed in this Proxy Statement, to the best knowledge of KPE, such directors,
officers, employees and other representatives and KPE Nominees, none of their
associates beneficially owns, directly or indirectly, any securities of VLSI.

In the ordinary course of its business, CSFB engages in securities trading
and brokerage activities and may trade or otherwise effect transactions in debt
or equity securities of VLSI for its own account and the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. As of March 9, 1999, CSFB held a net long position of 1,440
Shares.

Except as disclosed in this Consent Statement, none of KPE, Royal Philips,
their respective directors, officers, employees or other representatives named
in Schedule I or KPE Nominees or, to their best knowledge, their associates has
any arrangement or understanding with any person (1) with respect to any future
employment by the Company or its affiliates or (2) with respect to future
transactions to which the Company or any of its affiliates will or may be a
party, other than sales of products and services in the ordinary course of
business.
<PAGE> 25
FORM OF
CONSENT TO ACTION OF STOCKHOLDERS WITHOUT A MEETING
SOLICITED BY KPE ACQUISITION INC.

Unless otherwise specified below, the undersigned, a holder of record of
shares of Common Stock, par value $0.01 per share (the "Common Stock"), of VLSI
Technology, Inc. ("VLSI") on March __, 1999 (the "Record Date"), hereby consents
pursuant to Section 228 of the Delaware General Corporation Law, with respect to
all of the shares of Common Stock held by the undersigned, to the taking of the
following actions (collectively, the "Proposals") without a meeting of the
stockholders of VLSI:

/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.

IT IS RECOMMENDED THAT YOU CONSENT TO ALL OF THE FOLLOWING ACTIONS.

(IF A SIGNED CARD IS RETURNED, THE UNDERSIGNED WILL BE DEEMED TO HAVE CONSENTED
TO EACH PROPOSAL WITH RESPECT TO WHICH THERE IS NO MARK INDICATING EITHER THAT
CONSENT IS WITHHELD OR THAT THE UNDERSIGNED HAS ABSTAINED.)

Proposal No. 1. The removal of each of the 6 current members of the Board of
Directors of VLSI (the "Board"), Pierre S. Bonelli, Robert P.
Dilworth, William G. Howard, Jr., Paul R. Low, Alfred J. Stein
and Horace H. Tsiang, and any other person or persons who may
be members of the Board at the time the Proposals become
effective (other than the persons elected as a result of the
adoption of Proposal No. 4 set forth below).