<PAGE>
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- --------------------------------------------------------------------------------
SCHEDULE 14A (RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934.
Filed by the Registrant /X/
Filed by a Party Other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Material
/ / Soliciting Material Pursuant to Sections 240 14a-11 (c) or Sections 240
14a-12
GENERAL SEMICONDUCTOR, INC.
------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement. If Other Than Registrant)
<TABLE>
<S> <C> <C>
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 O-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 of other underlying value of transaction computed
pursuant to Exchange Act Rule O-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
O-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:
</TABLE>
- --------------------------------------------------------------------------------
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<PAGE>
[LOGO]
April 1, 1998
Dear Fellow Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of General Semiconductor, Inc., which is our first annual meeting as an
independent public company, to be held on Thursday, May 21, 1998, at 10:00 a.m.,
local time, at the Chase Manhattan Bank, 270 Park Avenue -- 11th Floor, New
York, New York 10017.
At the meeting, we will review General Semiconductor's activities over the
past year, as well as the outlook for 1998. The Secretary's formal notice of the
meeting and the Proxy Statement appear on the following pages and describe the
matters to be acted upon at the meeting.
We hope that you will be able to attend the meeting in person. However,
whether or not you plan to attend, please fill in, sign, date and return your
proxy in the enclosed envelope as soon as possible so that your vote will be
counted.
Sincerely,
/s/ Ronald A. Ostertag
Ronald A. Ostertag
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<PAGE>
GENERAL SEMICONDUCTOR, INC.
TEN MELVILLE PARK ROAD
MELVILLE, NEW YORK 11747
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1998
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of General
Semiconductor, Inc. (the "Company") will be held at 10:00 a.m., local time, on
May 21, 1998 at Chase Manhattan Bank, 270 Park Avenue -- 11th Floor, New York,
New York 10017 for the following purposes:
1. To elect six directors of the Company to serve until the next annual
meeting of stockholders and until the election and qualification of their
respective successors;
2. To approve the adoption of the General Semiconductor, Inc. 1998
Long-Term Incentive Plan;
3. To ratify the appointment of Deloitte & Touche LLP, independent
certified public accountants, as the Company's auditor for the fiscal
year ending December 31, 1998; and
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only holders of record of the Company's common stock at the close of
business on March 31, 1998 are entitled to notice of, and to vote at, the
meeting and any adjournments thereof. Such stockholders may vote in person or by
proxy.
Stockholders who find it convenient are cordially invited to attend the
meeting in person. Whether or not you plan to attend the meeting, please fill
in, sign, date and return the accompanying proxy in the enclosed envelope. No
postage is required if mailed in the United States.
By Order of the Board of Directors,
/s/ Stephen B. Paige
Stephen B. Paige
SECRETARY
Melville, New York
April 1, 1998
<PAGE>
GENERAL SEMICONDUCTOR, INC.
TEN MELVILLE PARK ROAD
MELVILLE, NEW YORK 11747
---------------------------------
PROXY STATEMENT
----------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of General Semiconductor, Inc., a Delaware
corporation, (the "Company"), to be used at the 1998 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at 10:00 a.m., local time on
Thursday, May 21, 1998, at Chase Manhattan Bank, 270 Park Avenue -- 11th Floor,
New York, New York, 10017 and at any adjournments thereof. If proxy cards in the
accompanying form are properly executed and returned, the shares of Common Stock
represented thereby will be voted as instructed on the proxy.
Holders of record of the Company's common stock, par value $0.01 per share
(the "Common Stock"), as of the close of business on March 31, 1998 (the "Record
Date") will be entitled to vote at the Annual Meeting or any adjournments
thereof. As of the Record Date, there were 36,804,632 shares of Common Stock
outstanding and entitled to vote and a majority, or 18,402,317 of these shares,
will constitute a quorum for the transaction of business. Each share of Common
Stock entitles the holder thereof to one vote on all matters to come before the
Annual Meeting, including election of directors. This proxy statement and the
accompanying form of proxy are first being mailed on or about April 14, 1998 to
stockholders entitled to vote at the Annual Meeting.
1997 COMPANY RESTRUCTURING
On January 7, 1997 the Board of Directors of General Instrument Corporation
("GI") approved a plan to divide GI into three separate public companies. To
effect the transaction, GI (i) transferred all the assets and liabilities
relating to the manufacture and sale of broadband communications products used
in the cable television, satellite, and telecommunications industries, and all
rights to the related GI trademarks, to its wholly-owned subsidiary NextLevel
Systems, Inc, and all the assets and liabilities relating to the manufacture and
sale of coaxial, fiber optic and other electric cable used in the cable
television, satellite and other industries to its wholly-owned subsidiary
CommScope, Inc. and (ii) distributed all of the outstanding shares of capital
stock of each of NextLevel Systems, Inc. and CommScope, Inc. to GI's
stockholders on a pro rata basis as a dividend (the "Distribution") in a
transaction that was finalized on July 28, 1997 (the "Distribution Date"). On
the Distribution Date, NextLevel Systems, Inc. and CommScope, Inc. began
operating as independent entities with publicly traded common stock. GI retained
no ownership interest in either NextLevel Systems, Inc. or CommScope, Inc.
Concurrent with the Distribution, GI changed its name to General Semiconductor,
Inc. and effected a one-for-four reverse stock split (the "Stock Split"). Unless
otherwise specifically indicated to the contrary, all share and per share
information set forth in this Proxy Statement gives effect to the Stock Split.
On February 2, 1998 NextLevel Systems, Inc. changed its name to General
Instrument Corporation.
VOTING AND REVOCATION OF PROXIES
VOTING
If the enclosed proxy is executed and returned in time and not revoked, all
shares represented by the proxy will be voted. Each proxy will be voted in
accordance with the stockholder's instructions. If no instructions are
specified, signed proxies will be voted FOR the election of each person
nominated for election as a director, FOR the approval of the General
Semiconductor, Inc. 1998 Long-Term Incentive Plan (the "1998 Long-Term Incentive
Plan"), and FOR the ratification of the appointment by the Board of Directors of
Deloitte & Touche LLP as the Company's auditors for the fiscal year ending
December 31, 1998.
<PAGE>
The holders of a majority of the shares of Common Stock entitled to vote at
the meeting, present in person or by proxy, constitutes a quorum. If a quorum is
present: (i) the affirmative vote of the holders of a plurality of the shares
present, in person or by proxy, and entitled to vote thereon will be required
for election of directors; (ii) the affirmative vote of the holders of a
majority of the shares present, in person or by proxy, and entitled to vote
thereon will be required to ratify the appointment by the Board of Directors of
Deloitte & Touche LLP as the Company's auditor; and (iii) the affirmative vote
of a majority of the votes cast on the proposal, provided that the total vote
cast thereon represents a majority of all shares entitled to vote on such
proposal, will be required to approve the 1998 Long-Term Incentive Plan. An
automated system administered by the Company's transfer agent tabulates the
votes. For purposes of determining the number of votes cast with respect to any
voting matter, only those cast "for" or "against" are included; abstentions and
broker non-votes are excluded. For purposes of determining whether the
affirmative vote of a majority of the shares present at the meeting and entitled
to vote on a proposal has been obtained, abstentions will be included in, and
broker non-votes will be excluded from, the number of shares present and
entitled to vote. Accordingly, abstentions will have the effect of a vote
"against" the matter (other than the election of directors) and broker non-votes
will have the effect of reducing the number of affirmative votes required to
achieve the majority vote.
REVOCATION
A stockholder giving a proxy may revoke it at any time before it is voted by
delivery to the Company's Secretary of a subsequently executed proxy or a
written notice of revocation. In addition, returning your completed proxy will
not prevent you from voting in person at the Annual Meeting should you be
present and wish to do so.
ANNUAL REPORT
The Company's Annual Report to Stockholders for the year ended December 31,
1997 is being mailed with this Proxy Statement and the accompanying form of
proxy to stockholders entitled to vote at the Annual Meeting. Stockholders are
referred to that report for financial and other information about the activities
of the Company. The Annual Report is not incorporated by reference into this
Proxy Statement and is not deemed to be a part of it.
2
<PAGE>
ELECTION OF DIRECTORS
The following table sets forth names and information as to the nominees for
election as directors of the Company. Unless otherwise directed, proxies will be
voted FOR the nominees listed below. If any one or more of the nominees is
unable to serve for any reason or withdraws from nomination, proxies will be
voted for the substitute nominee or nominees, if any, proposed by the Board of
Directors (the "Board"). The Board has no knowledge that any nominee will or may
be unable to serve or will or may withdraw from nomination. All of the nominees
are presently serving as directors of the Company and have served since July 25,
1997, except Mr. Klinsky who has served as a director since 1992.
<TABLE>
<CAPTION>
NAME, AGE AND CURRENT
PRINCIPAL OCCUPATION INFORMATION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Steven B. Klinsky, 41................................... Steven B. Klinsky served as a director of General
General Partner, Forstmann Instrument Corporation of Delaware from August 1990 to
Little & Co. March 1992, when he was elected to serve as a director
of GI. He has been a General Partner of FLC Partnership,
L.P., the General Partner of Forstmann Little & Co.,
since December 1986.
Ronald A. Ostertag, 57.................................. Ronald A. Ostertag has been Chairman, President and
Chairman, President, and Chief Chief Executive Officer of General Semiconductor, Inc.
Executive Officer of the Company since July 25, 1997. Previously he held the position of
Vice President of GI since February 1989 and President
of GI's Power Semiconductor Division since September
1990.
Ronald Rosenzweig, 60................................... Ronald Rosenzweig is President, Chief Executive Officer
President, Chief Executive Officer and a director of Anadigics, Inc., an electronics
and Director of Anadigics, Inc. company, positions he has held since co-founding the
company in 1985.
Peter A. Schwartz, 54................................... Peter A. Schwartz has been Senior Vice President and
Senior Vice President and Chief Chief Financial Officer of Computer Associates
Financial Officer of Computer International, Inc., a business software company, since
Associates International, Inc. 1987.
Samuel L. Simmons, 68................................... Samuel L. Simmons was Senior Vice President and
Retired Director-Corporate Development of ITT Corporation from
1987 until his retirement in 1994.
Dr. Gerard T. Wrixon, 57................................ Dr. Gerard T. Wrixon is a Founder and Director of
Director of National National Microelectronics Research Centre, a research
Microelectronics Research Centre facility sponsored by industry and the European Union.
He is also a Professor of Microelectronics at University
College, Cork, Ireland. Dr. Wrixon has held teaching and
research positions at a number of leading educational
institutions and research facilities, including Loyola
University, Los Angeles, and Bell Telephone
Laboratories. He is a director of DII Group, Inc.,
Farron Technology and Telcom Eireann.
</TABLE>
3
<PAGE>
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company directs the management of the business
and affairs of the Company and conducts its business through meetings of the
Board and three standing committees: Executive, Audit and Compensation. In
addition special committees may be established under the direction of the Board
when necessary to address specific issues. The Company has no nominating or
similar committee.
BOARD MEETINGS; COMMITTEES OF THE BOARD
In 1997 the Board of Directors held seven meetings prior to the Distribution
and two meetings subsequent to the Distribution. Each incumbent director
attended 75% or more of the aggregate of (i) meetings of the Board held during
the period for which he served as a director and (ii) meetings of all committees
held during the period for which he served on those committees.
The EXECUTIVE COMMITTEE has the authority, between meetings of the Board, to
exercise all powers and authority of the Board in the management of the business
and affairs of the Company that may be lawfully delegated to it under Delaware
law and the Company's By-Laws. The Executive Committee consists of: Ronald A.
Ostertag, Chairman; Steven B. Klinsky; Ronald Rosenzweig; and Dr. Gerard T.
Wrixon. The Executive Committee did not hold any meetings subsequent to the
Distribution in 1997.
The AUDIT COMMITTEE's principal functions are to review the scope of the
annual audit of the Company by its independent auditor, review the annual
financial statements of the Company and the related audit report of the Company
as prepared by the independent auditor, recommend the selection of the
independent auditor each year and review audit and any non-audit fees paid to
the Company's independent auditor. The audit reports of the Internal Audit
Department are available for review by the Audit Committee. The head of the
Internal Audit Department is expected to attend Audit Committee meetings and
give reports to and answer inquiries from the Audit Committee. The Audit
Committee reports its findings and recommendations to the Board for appropriate
action. The Audit Committee is comprised of three non-employee directors: Peter
A. Schwartz, Chairman; Ronald Rosenzweig and Dr. Gerard T. Wrixon. The Audit
Committee held one meeting subsequent to the Distribution in 1997.
The COMPENSATION COMMITTEE is responsible for executive compensation,
including recommending to the Board of Directors the base salary to be paid to
the Chief Executive Officer and determining the compensation for all other
executive officers, administering and granting awards under the Company's
equity-based incentive plans and bonus plans, making recommendations to the
Board with respect to the Company's overall compensation policies and employee
benefit plans, and performs such duties as the Board may from time to time
request. The Compensation Committee is comprised of three non-employee
directors: Samuel L. Simmons, Chairman; Steven B. Klinsky; and Peter A.
Schwartz. The Compensation Committee held two meetings subsequent to the
Distribution in 1997.
COMPENSATION OF DIRECTORS
Employee directors (and non-employee directors who are general partners in
partnerships affiliated with Forstmann Little & Co.) do not receive additional
compensation for serving on the Board. Non-employee directors receive an annual
retainer of $25,000 and committee chairpersons receive an additional $5,000. The
non-employee directors' remuneration is paid quarterly. In addition, each
non-employee director, upon election to the Board on July 25, 1997, received
1,000 shares of Common Stock which vested immediately and was granted an option
to purchase 20,000 shares of Common Stock at an exercise price per share of
$14.9375, the fair market value on the date of grant, which option becomes
exercisable with respect to one-third of the underlying shares on each of the
first three anniversaries of the grant date. If a non-employee director remains
in office, a similar option is expected to be granted every three years.
4
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since the Distribution, the Compensation Committee has administered the
Company's cash and non-cash compensation. The Compensation Committee is
comprised entirely of non-employee directors none of whom has ever been an
officer or employee of the Company.
Nicholas C. Forstmann served as President of GI from June 30, 1990 through
March 30, 1992 (prior to GI's initial public offering in June 1992), but
received no compensation from GI for services rendered in such capacity. Mr.
Forstmann served as a member of the Compensation Committee of the GI Board of
Directors in 1997, prior to the Distribution. Steven B. Klinsky is on the
Compensation Committee of the Company's Board of Directors. Mr. Forstmann and
Mr. Klinsky are each General Partners of FLC Partnership, L.P., the General
Partner of Forstmann Little & Co. Prior to the Distribution, an affiliate of
Forstmann Little & Co. provided aircraft maintenance services to GI and charged
GI approximately $1.3 million for services in 1997. GI believes that the terms
of these transactions were no less favorable to GI than the terms which could be
obtained from an unrelated third party.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF THE COMPANY
The following table sets forth certain information known by the Company
regarding the beneficial ownership of the Common Stock as of March 31, 1998
(except as otherwise specified) by each beneficial owner of more than five
percent of the outstanding Common Stock, by each of the Company's directors, by
each of the executives named in the Summary Compensation Table and by all
current directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBERS OF
SHARES
BENEFICIALLY PERCENTAGE
NAME OWNED(1) OF CLASS
- ---------------------------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
MBO-IV(2)......................................................................... 2,540,414 6.9
Instrument Partners(2)............................................................ 2,886,752 7.8
Brinson Partners, Inc.(3)......................................................... 3,053,483 8.3
FMR Corp.(4)...................................................................... 2,318,550 6.3
J.P. Morgan(5).................................................................... 1,841,184 5.0
J. & W. Seligman & Co. Incorporated(6)............................................ 1,991,570 5.4
Mellon Bank Corporation(7)........................................................ 1,968,922 5.3
Reich & Tang Asset Management LP(8)............................................... 2,153,400 5.9
Schneider Capital Management Corporation(9)....................................... 1,917,000 5.2
State of Wisconsin Investment Board(10)........................................... 2,338,900 6.4
Vanguard/Windsor Funds, Inc.(11).................................................. 2,912,500 7.9
Wellington Management Company, LLP(11)............................................ 2,913,700 7.9
Andrew M. Caggia(12)(18).......................................................... 77,258 *
Nicholas C. Forstmann(2).......................................................... 5,427,166 14.7
Theodore J. Forstmann(2).......................................................... 5,427,166 14.7
Richard S. Friedland.............................................................. 19,835 *
Vincent M. Guercio(13)(18)........................................................ 70,877 *
Winston W. Hutchins(2)............................................................ 5,427,166 14.7
Steven B. Klinsky(2)(14).......................................................... 5,477,166 14.9
Wm. Brian Little(2)............................................................... 2,886,752 7.8
W. John Nelson(15)(18)............................................................ 130,929 *
Ronald A. Ostertag(16)(18)........................................................ 299,049 *
John P. Phillips(17)(18).......................................................... 59,946 *
Ronald Rosenzweig................................................................. 1,125 *
Peter A. Schwartz................................................................. 7,000 *
Samuel L. Simmons................................................................. 1,025 *
John A. Sprague(2)................................................................ 2,886,752 7.8
Dr. Gerard T. Wrixon.............................................................. 1,000 *
All current directors and executive officers of the Company as a group
(14 persons)(2)(19)............................................................. 6,207,444 16.9
</TABLE>
- ------------------------
* The percentage of shares of Common Stock beneficially owned does not exceed
one percent of the shares of Common Stock.
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares of Common Stock which such person has
the right to acquire within 60 days following March 31, 1998. For purposes
of computing the percentage of outstanding shares of Common Stock held by
each person or group of persons named above, any security which such person
or persons has or have the right to acquire within 60 days following March
31, 1998 is deemed to be outstanding, but
6
<PAGE>
is not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(2) The general partner of Instrument Partners, a New York limited partnership
("Instrument Partners"), is FLC XXII Partnership, a general partnership of
which Messrs. Wm. Brian Little, Nicholas C. Forstmann, John A. Sprague,
Steven B. Klinsky and Winston W. Hutchins, and TJ/JA L.P., a Delaware
limited partnership ("TJ/JA L.P."), are general partners. The general
partner of TJ/JA L.P. is Theodore J. Forstmann. The general partner of
Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-IV, a New York limited partnership ("MBO-IV"), is FLC
Partnership, L.P., a New York limited partnership of which Messrs. Theodore
J. Forstmann, Nicholas C. Forstmann, Steven B. Klinsky, and Winston W.
Hutchins, Ms. Sandra J. Horbach and Mr. Thomas H. Lister are general
partners. Accordingly, each of such individuals and partnerships (other than
Ms. Horbach and Mr. Lister for the reasons described below) may be deemed
the beneficial owners of shares owned by MBO-IV and Instrument Partners in
which such individual or partnership is a general partner and, for purposes
of this table, such beneficial ownership is included. Ms. Horbach and Mr.
Lister do not have any voting or investment power with respect to, or any
economic interest in, the shares of GI Common Stock held by MBO-IV; and,
accordingly Ms. Horbach and Mr. Lister are not deemed to be the beneficial
owners thereof. Theodore J. Forstmann and Nicholas C. Forstmann are
brothers. Mr. Little is a special limited partner in FLC Partnership, L.P.
and each of FLC Partnership, L.P. and FLC XXII Partnership is a limited
partner of Instrument Partners. None of the other limited partners in each
of MBO-IV and Instrument Partners is otherwise affiliated with the Company,
or Forstmann Little & Co. The address of MBO-IV and Instrument Partners is
c/o Forstmann Little & Co., 767 Fifth Avenue, New York, New York 10153.
(3) This information is obtained from a Schedule 13G, dated February 11, 1998,
filed with the Securities and Exchange Commission (the "Commission") by
Brinson Partners, Inc. ("BPI") on behalf of itself, Brinson Holdings, Inc.
("BHI"), SBC Holding (USA), Inc. ("SBUSA") and Swiss Bank Corporation
("SBC"). The Schedule 13G states that: BPI is a wholly owned subsidiary of
BHI; BHI is a wholly owned subsidiary of SBUSA; and SBUSA is a wholly owned
subsidiary of SBC. BPI reports beneficial ownership of 3,037,863 shares of
Common Stock and claims shared voting power and shared dispositive power
with respect to all of such shares. BHI reports beneficial ownership of
3,037,863 shares of Common Stock and claims shared voting power and shared
dispositive power with respect to all of such shares. SBUSA reports
beneficial ownership of 3,053,483 shares of Common Stock and claims shared
voting power and shared dispositive power with respect to all of such
shares. SBC reports beneficial ownership of 3,053,483 shares of Common Stock
and claims shared voting power and shared dispositive power with respect to
all of such shares. The Schedule 13G states that by virtue of their
corporate relationships, SBC, SBUSA, BHI and BPI may be deemed to
beneficially own and have the power to dispose and vote or direct the
disposition or voting of the Common Stock held by BPI. Each of BPI and BHI's
principal business office is located at 209 South LaSalle, Chicago, Illinois
60604-1295. SBUSA's principal business office is located at 222 Broadway,
New York, New York 10038. SBC's principal business office is located at
Aeschenplatz 6 CH-4022, Basel, Switzerland.
(4) This information is obtained from a Schedule 13G, dated February 14, 1998,
filed with the Commission by FMR Corp., a parent holding company filed on
behalf of itself and Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR Corp. and an investment advisor ("Fidelity Management");
Fidelity Management Trust Company, a wholly-owned subsidiary of FMR Corp.
and a bank; Edward C. Johnson 3rd ("Mr. Johnson") in his individual capacity
and as a predominant shareholder of FMR Corp.; and Abigail Johnson in her
individual capacity and as a predominant shareholder of FMR Corp. Fidelity
Management reports that it is the beneficial owner of 2,318,550 shares. FMR
Corp. and Mr. Johnson report that they have sole dispositive power with
respect to 2,295,750 shares. Fidelity Management Trust Company reports that
it is beneficial owner of 22,800
7
<PAGE>
shares. Mr. Johnson and FMR Corp. report that they have sole voting and
dispositive power over 22,800 shares.
(5) This information is obtained from a Schedule 13G, dated February 13, 1998,
filed with the Commission by J.P. Morgan & Co. Incorporated ("J.P. Morgan").
J.P. Morgan reports beneficial ownership of 1,841,184 shares. J.P. Morgan
claims sole voting power with respect to 1,426,611 shares, shared voting
power with respect to 25 shares, sole dispositive power with respect to
1,833,359 shares and shared dispositive power with respect to 7,800 shares.
J.P. Morgan's principal business office is located at 60 Wall Street, New
York, New York 10260.
(6) This information is obtained from a Schedule 13G dated February 13, 1998
filed with the Commission by J.&W. Seligman & Co. Incorporated and William
C. Morris, as the owner of a majority of the outstanding securities of J.&W.
Seligman (collectively, "Seligman"). Seligman reports beneficial ownership
of 1,991,570 shares. Seligman claims no sole voting power, shared voting
power with respect to 1,770,300 shares, no sole dispositive power and shared
dispositive power with respect to 1,991,570 shares. Seligman's principal
business office is located at 100 Park Avenue, New York, NY 10017.
(7) This information is obtained from a Schedule 13G, dated January 20, 1998,
filed with the Commission by Mellon Bank Corporation ("Mellon Bank"). Mellon
Bank reports beneficial ownership of 1,968,922 shares. Mellon Bank claims
sole voting power with respect to 1,653,765 shares, no shared voting power,
sole dispositive power with respect to 1,770,672 shares and shared
dispositive power with respect to 181,300 shares. Mellon Bank's principal
business office is located at One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258.
(8) This information is obtained from a Schedule 13G, dated February 12, 1998,
filed with the Commission by Reich & Tang Asset Management LP ("Reich &
Tang"). Reich & Tang reports beneficial ownership of 2,153,400 shares. Reich
& Tang claims no sole voting power, shared voting power with respect to
2,153,400 shares, no sole dispositive power and share dispositive power with
respect to 2,153,400 shares. Reich & Tang's principal business office is
located at 600 Fifth Avenue, New York, NY 10020.
(9) This information is obtained from a Schedule 13G, dated February 4, 1998,
filed with the Commission by Schneider Capital Management Corporation
("SCM"). SCM reports beneficial ownership of 1,917,000 shares. SCM claims
sole voting power with respect to 1,442,800 shares, no shared voting power,
sole dispositive power with respect to 1,917,000 shares and no shared
dispositive power. SCM's principal business office is located at 460 E.
Swedesford Road, Suite 1080, Wayne, PA 19087.
(10) This information is obtained from a Schedule 13G, dated January 20, 1998,
filed with the Commission by State of Wisconsin Investment Board ("Wisconsin
Investment Board"). The Wisconsin Investment Board reports beneficial
ownership of 2,338,900 shares. The Wisconsin Investment Board claims sole
voting power with respect of 2,338,900 shares, no shared voting power, sole
dispositive power with respect to 2,338,900 shares and no shared dispositive
power. The Wisconsin Investment Board's principal business office is located
at P.O. Box 7842, Madison, Wisconsin 53707.
(11) Information regarding the ownership of Common Stock by Wellington
Management Company, LLP ("WMC") was obtained from a Schedule 13G, dated
January 13, 1998, filed with the Commission by WMC. WMC reports beneficial
ownership of 2,913,700 shares of Common Stock. The shares were acquired by
Wellington Trust Company, N.A. ("WTC"), a wholly-owned subsidiary of WMC,
and are owned of record by clients of WMC including Vanguard/Windsor Fund,
Inc. (see below). WMC, in its capacity as investment advisor, may be deemed
to beneficially own the shares which are held of record by the clients of
WMC. With the exception of Vanguard/Windsor Fund, Inc., no such client is
known to have the right to receive, or the power to direct the receipt of,
dividends from, or the proceeds from the sale of, shares representing more
than 5% of the outstanding Common Stock. WMC shares
8
<PAGE>
dispositive power as to all 2,913,700 shares and shares voting power as to
1,200 of such shares. WMC's and WTC's principal business offices are located
at 75 State Street, Boston, MA 02109. Information regarding the ownership of
Common Stock by Vanguard/Windsor Fund, Inc. -- Windsor Fund
("Vanguard/Windsor") was obtained from a Schedule 13G, dated February 9,
1998, filed with the Commission by Vanguard/Windsor. Vanguard/Windsor
reports beneficial ownership of 2,912,500 shares of Common Stock.
Vanguard/Windsor shares dispositive power to all 2,912,500 shares and has
sole voting power as to all 2,915,500 shares. Vanguard/Windsor's principal
business office is located at 100 Vanguard Boulevard, Malvern, PA 19355.
(12) Includes (i) 73,369 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 31, 1998 and (ii) 1,035
shares held by the spouse of Andrew M. Caggia.
(13) Includes 70,079 shares subject to options which are exercisable for Common
Stock currently or within 60 days of March 31, 1998.
(14) Includes 50,000 shares held by Steven B. Klinsky directly, 2,540,414 shares
held by MBO-IV and 2,886,752 shares held by Instrument Partners. See
footnote (2) herein.
(15) Includes 124,505 shares subject to options which are exercisable for Common
Stock currently or within 60 days of March 31, 1998.
(16) Includes (i) 290,743 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 31, 1998 and (ii) 225
shares held by the spouse of Ronald A. Ostertag.
(17) Includes 56,576 shares subject to options which are exercisable for Common
Stock currently or within 60 days of March 31, 1998.
(18) Includes the number of shares which were held by the trustee of the Savings
Plan and were allocated to the individual's respective account under the
Savings Plan as of March 19, 1998 as follows: Andrew M. Caggia, 1,819
shares; Vincent M. Guercio, 798 shares; W. John Nelson, 1,424 shares; Ronald
A. Ostertag, 2,954 shares; and John P. Phillips, 370 shares.
(19) Includes 661,759 shares subject to options which are exercisable for Common
Stock currently or within 60 days of March 31, 1998. Includes an aggregate
of 10,137 shares which were held by the trustees of the Savings Plan and
were allocated to the current officers' respective accounts under the
Savings Plan as of March 19, 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
holders of more than 10% of the outstanding Common Stock to file with the
Commission reports of ownership and changes in ownership of Common Stock and
other equity securities of the Company on Forms 3, 4 and 5. The Company
undertakes to make such filings on behalf of its directors and executive
officers. Based on written representations of reporting persons and a review of
those reports, the Company believes that during the year ended December 31, 1997
its executive officers and directors and holders of more than 10% of the
outstanding Common Stock complied with all applicable Section 16(a) filing
requirements.
9
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth individual compensation information for all
services rendered in all capacities for the last three fiscal years for the
individuals who served as Chief Executive Officer at any time during 1997 and
the other four most highly compensated executive officers of the Company who
were serving as executive officers at December 31, 1997 (the "named executive
officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------------- SECURITIES
NAME AND BASE OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(A) COMPENSATION(B) OPTIONS(#)(C) COMPENSATION($)
- ----------------------------------- ------- ---------- ----------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Ostertag................. 1997(d) $375,000 $215,000 $ 198,859 $5,983(e)
Chairman, President and 1996 320,000 -- -- 59,067 5,460
Chief Executive Officer 1995 305,000 195,810 -- 47,254 5,460
W. John Nelson..................... 1997(d) $223,200 $110,000 $ -- 99,431 $5,324(e)
Senior Vice President, 1996 215,209 -- 132,816(f) 13,783 5,275
Asia Pacific Operations 1995 205,981 107,110 197,574(f) 61,430 5,242
Vincent M. Guercio................. 1997(d) $204,654 $ 77,616 $ -- 48,435 $5,245(e)
Senior Vice President, 1996 185,622 -- -- 13,783 5,168
Worldwide Sales and 1995 176,275 79,106 -- 39,860 5,135
Marketing
Andrew M. Caggia................... 1997(d) $198,608 $ 90,616 $ -- 47,057 $5,609(e)
Senior Vice President 1996 168,743 -- -- 11,813 5,107
and Chief Financial 1995 161,277 73,381 -- 32,487 5,081
Officer
John P. Phillips................... 1997(d) $197,492 $ 75,029 $ -- 48,435 $6,148(e)
Senior Vice President, 1996 165,919 -- -- -- 5,097
European Operations 1995 158,786 72,191 -- 33,865 5,072
Richard S. Friedland............... 1997(g) $437,500 $262,500 $ -- -- $5,310(e)
Chairman and 1996 750,000 -- -- 250,000(h) 5,460
Chief Executive Officer 1995 589,583 $214,445 -- 560,000(h) 5,460
(prior to the Distribution)
</TABLE>
- ------------------------
(a) Amounts reported for 1997 reflect cash bonus awards paid pursuant to the
Company's Annual Incentive Plan in 1998 with respect to performance in 1997.
No cash bonus awards were paid pursuant to the GI Annual Incentive Plan in
1997 with respect to performance in 1996. Amounts reported for 1995 reflect
cash bonus awards paid pursuant to the GI Annual Incentive Plan in 1996 with
respect to performance in 1995.
(b) Unless otherwise indicated, with respect to any individual named in the
above table, the aggregate amount of perquisites and other personal
benefits, securities or property was less than either $50,000 or 10% of the
total annual salary and bonus reported for the named executive officer.
(c) Except for options granted to Mr. Friedland (see (h) below), reflects the
number of shares of Common Stock underlying options granted (including
"repriced options" as if they were new grants). All of such options were
granted pursuant to the Amended and Restated General Semiconductor, Inc.
1993 Long-Term Incentive Plan (the "1993 Long-Term Incentive Plan") and were
adjusted to reflect the Distribution and the Stock Split. The number of
shares of Common Stock covered by the adjusted options was calculated by
dividing the number of shares of GI Common Stock by 0.5079.
10
<PAGE>
(d) Reflects compensation for the full year 1997. Prior to the Distribution,
each of these individuals held positions with the Power Semiconductor
Division of GI. Effective upon the Distribution, each of these individuals
became officers of the Company.
(e) Reflects (i) payment by the Company in 1997 of premiums for term life
insurance of $3,029, $574, $495, $859, $1,398 and $560 on behalf of each of
Messrs. Ostertag, Nelson, Guercio, Caggia, Phillips and Friedland,
respectively and (ii) the matching contribution for 1997 by the Company
under the General Semiconductor, Inc. Savings Plan in the amount of $2,954
for Mr. Ostertag and $4,750 for each of Messrs. Nelson, Guercio, Caggia,
Phillips and Friedland.
(f) Reflects relocation costs.
(g) Effective upon the Distribution, Mr. Friedland resigned as Chairman and
Chief Executive Officer of GI.
(h) Reflects the number of shares of GI Common Stock underlying options granted
under the 1993 Long-Term Incentive Plan prior to the Distribution. Mr.
Friedland's options were not adjusted to reflect the Distribution and the
Stock Split. Mr. Friedland's options were cancelled in connection with his
resignation from GI.
STOCK OPTIONS
The following table sets forth information for the year ended December 31,
1997 with respect to grants to the named executive officers of stock options to
purchase Common Stock. These grants were made pursuant to the 1993 Long-Term
Incentive Plan and are reflected in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (A)
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL EXERCISE/ APPRECIATION
UNDERLYING OPTIONS GRANTED BASE FOR OPTION TERM(C)
OPTIONS TO EMPLOYEES PRICE EXPIRATION --------------------
GRANTED(#) IN FISCAL YEAR(B) ($/SH) DATE 5%($) 10%($)
---------- ----------------- --------- ---------- -------- ----------
Ronald A. Ostertag............ 92,538(d) 0.6% $ 11.75 1/10/07 $683,811 $1,732,910
106,321(e) 0.6 11.75 1/10/07 785,660 1,991,017
W. John Nelson................ 44,301(d) 0.3 11.75 1/10/07 327,363 829,602
55,130(e) 0.3 11.75 1/10/07 407,384 1,032,391
Vincent M. Guercio............ 32,290(d) 0.2 11.75 1/10/07 238,607 604,678
16,145(e) 0.1 11.75 1/10/07 119,304 302,339
Andrew M. Caggia.............. 32,290(d) 0.2 11.75 1/10/07 238,607 604,678
14,767(e) 0.1 11.75 1/10/07 109,121 276,339
John P. Phillips.............. 32,290(d) 0.2 11.75 1/10/07 238,607 604,678
16,145(e) 0.1 11.75 1/10/07 119,304 302,534
Richard S. Friedland(f)....... 150,000 1.7(h) 23.125 7/28/97 -- --
810,000(g) 9.5(h) 23.125 7/28/97 -- --
</TABLE>
11
<PAGE>
- ------------------------
(a) The options included in the table were granted pursuant to the 1993
Long-Term Incentive Plan and were adjusted to reflect the Distribution and
the Stock Split. The number of shares of Common Stock covered by the
adjusted options includes those that were repriced (referred to in (e)
below) and was calculated by dividing the number of shares of GI Common
Stock by 0.5079 and the exercise price was determined by multiplying the
original exercise price by 0.5079.
(b) Percentages are based on the total options granted to employees of the
Company during 1997, including both pre-Distribution grants (including
repriced options as new grants) and post-Distribution grants (adjusted to
reflect the Distribution and the Stock Split).
(c) Sets forth potential option gains based on assumed annualized rates of stock
price appreciation from the market price at the date of grant of 5% and 10%
(compounded annually) over the full term of the grant with appreciation
determined as of the expiration date. The 5% and 10% assumed rates of
appreciation are mandated by the rules of the Commission, and do not
represent the Company's estimate or projection of future Common Stock
prices.
(d) One-third of these options are exercisable. The remaining two-thirds will
become exercisable with respect to one-third of the shares covered thereby
on January 10 in each of 1999 and 2000.
(e) These options were cancelled as of January 10, 1997, and new options in
respect of the same number of shares ("repriced options") were granted as of
such date at an exercise price of $23.125 per share (pre-Distribution), the
closing market price per share of the GI Common Stock on such date. Two-
thirds of these options are exercisable. The remaining options become
exercisable on January 10, 1999.
(f) Reflects the number and exercise price of shares of GI Common Stock granted
prior to the Distribution. Mr. Friedland's options were not adjusted to
reflect the Distribution and the Stock Split. Mr. Friedland's options were
cancelled in connection with his resignation from GI.
(g) These options were cancelled as of January 10, 1997, and new options in
respect of the same number of shares ("repriced options") were granted as of
such date at an exercise price of $23.125 per share (pre-Distribution), the
closing market price per share of the GI Common Stock on such date. Mr.
Friedland's options were cancelled in connection with his resignation from
GI.
(h) Percentages are based on the total options granted to employees of the
Company during 1997, including both pre-Distribution grants (including
repriced options as new grants) and post-Distribution grants (not adjusted
to reflect the Distribution and the Stock Split).
AGGREGATED OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth as of December 31, 1997, for each of the
named executive officers listed (i) the total number of shares received upon
exercise of options during 1997, (ii) the value realized upon such exercise,
(iii) the total number of unexercised options to purchase Common Stock
(exercisable and unexercisable) and (iv) the value of such options which were
in-the-money at December 31, 1997 (based on the difference between the closing
price of the Common Stock at December 31, 1997 and the exercise price of the
option on such date).
12
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY STOCK OPTIONS
OPTIONS AT
SHARES FISCAL YEAR-END(#)(A) AT FISCAL YEAR-END($)(B)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#)(C) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------- ------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Ostertag..................... -- -- 224,456 163,418 $ 165,389 $ --
W. John Nelson......................... -- -- 86,766 98,904 69,533 1,242
Vincent M. Guercio..................... -- -- 49,338 60,145 35,079 1,064
Andrew M. Caggia....................... -- -- 53,754 55,917 62,557 1,242
John P. Phillips....................... -- -- 40,430 48,960 33,079 --
Richard S. Friedland(d)................ -- -- -- -- -- --
</TABLE>
- ------------------------
(a) The options included in the table were granted pursuant to the 1993
Long-Term Incentive Plan and were adjusted to reflect the Distribution and
the Stock Split. The number of shares of Common Stock covered by the
adjusted options includes those that were repriced (refer to footnote (e) to
the chart "Option Grants in Last Fiscal Year") and was calculated by
dividing the number of shares of GI Common Stock by 0.5079 and the exercise
price was determined by multiplying the original exercise price by 0.5079.
(b) Based on the difference between the closing price of $11.563 per share at
December 31, 1997, as reported on the NYSE Composite Tape, and the exercise
price of the outstanding stock options on such date.
(c) No options were exercised in 1997 by any of the named executive officers.
(d) Mr. Friedland's options were cancelled as of the Distribution in connection
with his resignation from GI.
GI OPTION REPRICINGS
The following table sets forth certain information with respect to repricing
of options by GI from June 1992, when GI first became a reporting company under
the Exchange Act, through the Distribution, for all current and former executive
officers. No options were repriced subsequent to the Distribution. See "Report
of the Compensation Committee."
13
<PAGE>
TEN-YEAR GI OPTION REPRICINGS
All share, market price and exercise price information is pre-Distribution
and has not been adjusted for the Distribution and Stock Split.
<TABLE>
<CAPTION>
EXERCISE
MARKET PRICE AT LENGTH OF
SECURITIES PRICE OF TIME OF ORIGINAL OPTION
UNDERLYING STOCK AT REPRICING NEW TERM REMAINING
OPTIONS TIME OF OR EXERCISE AT DATE OF
REPRICED OR REPRICING OR AMENDMENT PRICE REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) ($) ($) AMENDMENT
- ---------------------------------- --------- ------------- ------------- ----------- ---------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald A. Ostertag................ 1/10/97 24,000 $ 23.125 $ 29.50 $ 23.125 8 yrs. 1 mo.
Chairman, President and 3/23/94 30,000 23.125 27.25 23.125 9 yrs. 1 mo.
Chief Executive Officer 72,000 25.1875 29.6875 25.1875 9 yrs. 10 mos.
W. John Nelson.................... 1/10/97 18,000 23.125 29.50 23.125 8 yrs. 1 mo.
Senior Vice President, 10,000 23.125 26.9375 23.125 8 yrs. 1 mo.
Asia Pacific Operations
Vincent M. Guercio................ 1/10/97 8,200 23.125 29.50 23.125 8 yrs. 1 mo.
Senior Vice President, Worldwide
Sales and Marketing
Andrew M. Caggia.................. 1/10/97 7,500 23.125 29.50 23.125 8 yrs. 1 mo.
Senior Vice President and
Chief Financial Officer
John P. Phillips.................. 1/10/97 8,200 23.125 29.50 23.125 8 yrs. 1 mo.
Senior Vice President, European
Operations
</TABLE>
14
<PAGE>
For former executives of GI, option repricing information is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Richard S. Friedland.......... 1/10/97 250,000 $ 23.125 $ 26.75 $ 23.125 9 yrs. 1 mo.
Chairman and 3/23/94 60,000 23.125 29.50 23.125 8 yrs. 1 mo.
Chief Executive Officer 500,000 23.125 36.75 23.125 8 yrs. 6 mos.
300,000 25.1875 28.875 25.1875 9 yrs. 10 mos.
70,000 25.1875 29.6875 25.1875 9 yrs. 10 mos.
Daniel F. Akerson............. 3/23/94 150,000 $ 25.1875 $ 29.6875 $ 25.1875 9 yrs. 10 mos.
Chairman and
Chief Executive Officer
Frank M. Drendel.............. 1/10/97 24,000 23.125 27.25 23.125 9 yrs. 1 mo.
President, Chairman and 3/23/94 24,000 23.125 29.50 23.125 8 yrs. 1 mo.
Chief Executive Officer 72,000 25.1875 29.6875 25.1875 9 yrs. 10 mos.
of CommScope, NC
J.A. Blanchard, III........... 3/23/94 130,000 25.1875 29.9375 25.1875 9 yrs. 10 mos.
Executive Vice President
Thomas A. Dumit............... 1/10/97 42,000 23.125 27.25 23.125 9 yrs. 1 mo.
Vice President, General 3/23/94 24,000 23.125 29.50 23.125 8 yrs. 1 mo.
Counsel and Secretary 48,000 25.1875 29.6875 25.1875 9 yrs. 10 mos.
Paul J. Berzenski............. 1/10/97 17,000 23.125 27.25 23.125 9 yrs. 1 mo.
Vice President and 3/23/94 16,000 23.125 29.50 23.125 8 yrs. 1 mo.
Controller 30,000 25.1875 29.6875 25.1875 9 yrs. 10 mos.
Charles T. Dickson............ 1/10/97 24,000 23.125 27.25 23.125 9 yrs. 1 mo.
Vice President and 3/23/94 24,000 23.125 29.50 23.125 8 yrs. 1 mo.
Chief Financial Officer 90,000 25.1875 29.875 25.1875 9 yrs. 10 mos.
Lee R. Keenan................. 3/23/94 24,000 25.1875 29.6875 25.1875 9 yrs. 10 mos.
Vice President-
Human Resources
Richard C. Smith.............. 1/10/97 16,000 23.125 23.25 23.125 9 yrs. 1 mo.
Vice President-Taxes, 3/23/94 20,000 23.125 29.50 23.125 8 yrs. 1 mo.
Treasurer and Assistant 24,000 25.1875 29.6875 25.1875 9 yrs. 10 mos.
Secretary
</TABLE>
Options held by former executives of GI listed above still employed by GI on
the Distribution Date were cancelled on that date.
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of General
Semiconductor, Inc. is providing this report to enable stockholders to
understand the goals, policies and procedures relevant in establishing the
compensation of the Company's Chief Executive Officer and other executive
officers.
The present Compensation Committee was established by the Board of Directors
of the Company following the Distribution in July 1997, and is comprised
entirely of non-employee directors. The Compensation Committee considers and
recommends to the Board of Directors the base salary to be paid to the Chief
Executive Officer, determines the base salary for all other executive officers
and others as appropriate, administers and grants awards under the Company's
equity-based incentive plans, administers any bonus plans of the Company, makes
recommendations to the Board with respect to the Company's overall compensation
policies and employee benefit plans, and performs such duties as the Board may
from time to time request.
The Compensation Committee of the GI Board of Directors prior to the
Distribution, which was responsible for executive compensation, consisted of:
Nicholas C. Forstmann, Chairman; Lynn Forester and J. Tracy O'Rourke. The Plan
Committee of the GI Board of Directors prior to the Distribution, which
administered the 1993 Long-Term Incentive Plan and the Annual Incentive Plan of
GI, consisted of: Lynn Forester and J. Tracy O'Rourke. Both such committees are
together referred to as the "GI Compensation Committee."
In establishing and administering the Company's compensation policies and
programs subsequent to the Distribution, the Compensation Committee considered
the compensation plans and arrangements established by GI prior to the
Distribution, including the levels of individual compensation, and the
recommendations and commitments made by GI and the Board of Directors in office
prior to the Distribution as set forth in the June 13, 1997 Proxy Statement
disseminated in connection with the Distribution, as well as factors relevant to
the Company subsequent to the Distribution.
The Company's compensation philosophy is based on the premise that the
achievements of the Company result from the efforts of employees working toward
common goals and objectives. The Company's compensation program is designed to
reward its executive officers and other employees through a combination of
equity-based and cash compensation and to attract, retain, and motivate highly
qualified employees. A substantial portion of the Company's total cash
compensation is intended to vary based on the Company's performance and
reinforce the alignment of employee and stockholder interests. Compensation of
executive officers and other management employees, including the Chief Executive
Officer, is comprised of three principal elements: (i) stock ownership, (ii)
base salary and (iii) annual bonuses, each of which is described below.
STOCK OWNERSHIP
The Compensation Committee believes that executive officers and other
employees, who are in a position to make a substantial contribution to the
long-term success of the Company and to build stockholder value, should have a
significant stake in the Company's ongoing success. Accordingly, one of the
Company's principal methods of motivating executive officers and other employees
is through a broad-based stock option program.
PRE-DISTRIBUTION: GI BOARD OF DIRECTORS AND GI COMPENSATION COMMITTEE
On January 10, 1997 prior to the Distribution, GI awarded options to
purchase an aggregate of approximately 536,200 shares of GI Common Stock
(pre-Distribution) to 16 executive officers (including: Mr. Friedland -- 150,000
shares of GI Common Stock (pre-Distribution); and Mr. Ostertag -- 47,000 shares
of GI Common Stock (pre-Distribution) with an exercise price of $23.125 per
share (pre-Distribution), the closing market price per share of GI Common Stock
on the date of grant. Also on that
16
<PAGE>
date, the GI Board of Directors authorized an offer to the holders of existing
options for an aggregate of 3,536,636 shares of GI Common Stock
(pre-Distribution) to have such options cancelled as of such date and new
options in respect of the same number of shares ("repriced options") granted as
of such date with an exercise price of $23.125 per share (pre-Distribution), the
closing market price per share of GI Common Stock on that date, such repriced
options to become exercisable in one-third increments on July 10, 1997, January
10, 1998 and January 10, 1999. The GI Board of Directors determined that the
pre-existing options would no longer provide sufficient incentives to, or
encourage continued service from, employees as a result of the decline in the
market price of the Common Stock due to factors beyond GI's control, and in
light of the forthcoming Distribution; accordingly, the GI Compensation
Committee authorized the "repricing" of these options. (For further information
on repricing, see tables above "Option Grants in Last Fiscal Year" and "Ten-Year
GI Option Repricings".) Repriced options were granted to the following named
executive officers: Mr. Friedland -- 810,000 shares of GI Common Stock
(pre-Distribution); Mr. Ostertag -- 54,000 shares of GI Common Stock
(pre-Distribution); Mr. Nelson -- 28,000 shares of GI Common Stock
(pre-Distribution); Mr. Guercio -- 8,200 shares of GI Common Stock
(pre-Distribution); Mr. Caggia -- 7,500 shares of GI Common Stock
(pre-Distribution); and Mr. Phillips -- 8,200 shares of GI Common Stock
(pre-Distribution).
Effective upon the Distribution, all of the outstanding options in respect
of shares of GI Common Stock held by employees of General Semiconductor, Inc.
were adjusted to reflect the Distribution and the Stock Split.
POST-DISTRIBUTION: COMPANY BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
Following the Distribution, the Company continued in effect the General
Instrument Corporation 1993 Long-Term Incentive Plan, renamed the Amended and
Restated General Semiconductor, Inc. 1993 Long-Term Incentive Plan (the "1993
Long-Term Incentive Plan"), as adjusted to reflect the Distribution and the
Stock Split. Subsequent to the Distribution in 1997, the Company granted an
option to purchase 36,820 shares of Common Stock at an exercise price of
$14.9375 per share, the closing market price per share of Common Stock on that
date, to Stephen B. Paige, the Company's Senior Vice President, General Counsel
and Secretary, in connection with his commencement of employment with the
Company. On March 18, 1998, the Board of Directors adopted the 1998 Long-Term
Incentive Plan, subject to approval by the stockholders at the Annual Meeting.
Management recommends to the Compensation Committee those executive officers
and other employees to whom options should be granted and the number of options
to be granted to them. The recommendations are based on a review of the
employee's individual performance, position and level of responsibility in the
Company, long-term potential contribution to the Company and the number of
options previously granted to the employee. Neither management nor the
Compensation Committee assigned specific weights to these factors, although the
executive's position and a subjective evaluation of his or her performance were
considered most important. Generally, the number of options granted to an
executive reflects his or her level of responsibility and position in the
Company.
To encourage employees to remain in the employ of the Company, options
generally vest and become exercisable over a three or four-year period and are
not exercisable until one year after the date of grant. It is expected that
awards under the 1993 Long-Term Incentive Plan and the 1998 Long-Term Incentive
Plan will be made periodically in furtherance of the goals described above.
BASE SALARY
Base salary is intended to provide annual cash compensation that is
consistent with the executive officer's position and contributions, and is
competitive with comparable companies. Salaries paid to executive officers
(other than the Chief Executive Officer) are based on the Chief Executive
Officer's
17
<PAGE>
recommendations to the Compensation Committee, which is responsible for
reviewing and approving or disapproving those recommendations.
PRE-DISTRIBUTION: GI BOARD OF DIRECTORS AND GI COMPENSATION COMMITTEE
Prior to the Distribution, the recommendations, and the response of the GI
Compensation Committee, were based on a review of the same factors reviewed in
connection with determining option grants and a review of two surveys of the
range of salaries paid for comparable positions at approximately 100 other
companies. (This survey information was provided by an independent benefits
consulting firm on an aggregate basis and the GI Compensation Committee did not
study the salaries or compensation practices of any particular company. Any
overlap of the companies included in these surveys and those included in the
Standard & Poor's Communication Equipment Manufacturers Index used in the graph
of cumulative stockholder return included in this Proxy Statement is
coincidental.) Neither management nor the GI Compensation Committee assigned
specific weights to these factors, although the executive's position and a
subjective evaluation of his or her performance were considered most important.
Generally, an executive's base salary reflected his or her level of
responsibility and position in GI. Moreover, the GI Compensation Committee did
not target executives' cash compensation (or any element thereof) to any
particular level in the group of companies, but rather reviewed the surveys to
confirm that executive officers' cash compensation was within the middle range
of cash compensation paid by companies with comparable revenues.
POST-DISTRIBUTION: COMPANY BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
Following the Distribution, four named executive officers (other than the
Chief Executive Officer) received base salary increases. Management's
recommendations and the Compensation Committee's response were intended to more
closely align the compensation of these executive officers with their new
responsibilities in a publicly-traded company and were based on executive
compensation data for comparable positions at 12 competitive companies. (This
information was provided by an independent executive compensation consulting
firm on an aggregate basis and the Compensation Committee did not study the
salaries or compensation practices of any particular company. Any overlap of the
companies included in this information and those included in the Standard &
Poor's Mid-Cap 400 Index used in the graph of cumulative stockholder return
included in this Proxy Statement is coincidental.) Neither management nor the
Compensation Committee assigned specific weights to these factors, although the
executive's position and a subjective evaluation of his or her performance were
considered most important. Generally, an executive's base salary reflected his
or her level of responsibility and position in the Company. Moreover, the
Compensation Committee did not target executives' cash compensation (or any
element thereof) to any particular level in the group of companies, but rather
reviewed the competitive data to confirm that executive officers' cash
compensation was within a competitive range of cash compensation paid by
companies within the target group.
ANNUAL INCENTIVE BONUS
POST-DISTRIBUTION: COMPANY BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
Following the Distribution, the Company continued in effect the Annual
Incentive Plan, but adjusted the targets to reflect the Distribution. The Annual
Incentive Plan is intended to provide a means of annually rewarding certain
employees, including the named executive officers, based on the performance of
the Company and on the achievement of personal performance objectives. This
approach allows management to focus on key business objectives in the short-term
and to support the long-term performance orientation of stock ownership.
Management recommended, and the Compensation Committee established, for each
executive officer a bonus target percentage of the executive officer's salary
under the Annual Incentive Plan. That
18
<PAGE>
percentage was based on the executive officer's position in the Company and was
the percentage of the executive officer's salary that would be paid if the
performance targets were met. All executive officers of the Company participated
in the Annual Incentive Plan following the Distribution, and the target award
percentage for executive officers (other than the Chief Executive Officer) for
1997 ranged from 30% to 45%. Following the Distribution, six executive officers
received increases in their bonus target percentages in connection with their
new positions and responsibilities at the Company.
Bonuses for executive officers are a function of the Company's achievement
of its earnings per share target and its consolidated operating income target.
Under the Annual Incentive Plan, if a financial target is exceeded, the
portion of the bonus based on that target is increased above the target level,
but may not exceed 150% of the target level. The maximum award any executive
officer may receive for any performance period is 150% of the participant's base
salary times his or her target award percentage. Awards are earned only if the
Company attains or exceeds 90% of its financial targets. Each of the named
executive officers received a bonus payment under the Annual Incentive Plan for
1997.
CHIEF EXECUTIVE OFFICER COMPENSATION
PRE-DISTRIBUTION: GI BOARD OF DIRECTORS AND GI COMPENSATION COMMITTEE
Richard S. Friedland served as Chief Executive Officer of GI from August
1995 through July 25, 1997. Mr. Friedland's annual salary rate in 1997 was
$750,000 and his target bonus percentage under the Annual Incentive Plan was
70%. Mr. Friedland's annual salary rate and target bonus percentage as Chief
Executive Officer of GI was unchanged from 1996. On January 10, 1997, the GI
Board (i) granted to Mr. Friedland an option to purchase 150,000 shares of GI
Common Stock (pre-Distribution), at an exercise price of $23.125 per share
(pre-Distribution), the closing market price per share of GI Common Stock on
that date and (ii) authorized an offer to Mr. Friedland to have options for an
aggregate of 810,000 shares of GI Common Stock (pre-Distribution) canceled as of
such date and a new option in respect of the same number of shares granted as of
such date with an exercise price of $23.125 per share (pre-Distribution), the
closing market price per share of GI Common Stock on that date, to become
exercisable in one-third increments on July 10, 1997, January 10, 1998 and
January 10, 1999. Also at that meeting, the GI Board instructed GI to enter into
a severance protection agreement with Mr. Friedland, specifying that it would
not be triggered by the Distribution transaction and Mr. Friedland's move to
NextLevel Systems, Inc. Effective upon the Distribution, Mr. Friedland resigned
to become Chief Executive Officer of NextLevel Systems, Inc.
Immediately prior to the Distribution, Ronald A. Ostertag's 1997
compensation as President of the Power Semiconductor Division of GI was at an
annual salary rate of $320,000 and his target bonus percentage under the Annual
Incentive Plan was 50%, which was unchanged from 1996. On January 10, 1997 Mr.
Ostertag (i) was granted an option to purchase 47,000 shares of GI Common Stock
(pre-Distribution) at an exercise price of $23.125 per share (pre-Distribution),
the closing market price per share of GI Common Stock on that date and (ii) had
options to purchase an aggregate of 54,000 shares of GI Common Stock
(pre-Distribution) canceled as of such date and a new option in respect of the
same number of shares granted as of such date with an exercise price of $23.125
per share (pre-Distribution), the closing market price per share of GI Common
Stock on that date, to become exercisable in one-third increments on July 10,
1997, January 10, 1998 and January 10, 1999. Mr. Ostertag was elected Chairman
of the Board, President and Chief Executive Officer of the Company, at a GI
Board Meeting on June 18, 1997 to become effective upon the Distribution. His
compensation package for his new position was approved by the Executive
Committee of the GI Board of Directors at a meeting on June 19, 1997 and
consisted of an annual salary rate of $450,000 and a target bonus percentage
under the Annual Incentive Plan of 65%.
19
<PAGE>
POST-DISTRIBUTION: COMPANY BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
The Board of Directors and Compensation Committee of the Company did not
make any changes in Mr. Ostertag's compensation for 1997. Mr. Ostertag's bonus
for 1997 (paid in 1998) under the Annual Incentive Plan was $215,000.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), which was enacted in 1993, generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of $1
million in any taxable year to the chief executive officer or any of the four
other most highly compensated executive officers who are employed by the Company
on the last day of the taxable year. Section 162(m), however, allows a federal
income tax deduction for qualified "performance-based compensation," the
material terms of which are disclosed to and approved by stockholders.
The Compensation Committee has considered the tax deductibility of
compensation awarded under the 1993 Long-Term Incentive Plan, the 1998 Long-Term
Incentive Plan and the Annual Incentive Plan in light of Section 162(m). The
Company has structured and intends to administer the stock option and stock
appreciation right portions of the 1993 Long-Term Incentive Plan and the stock
option, stock appreciation right, performance share and performance unit portion
of the 1998 Long-Term Incentive Plan, and has structured the annual cash bonus
paid to the Chief Executive Officer, with the intention that the compensation
thereunder may qualify as "performance-based compensation" and, if so qualified,
would be deductible. No executive officer's compensation in 1997 exceeded $1
million. It is not expected that any executive officer's compensation will be
non-deductible in 1998 by reason of the application of Section 162(m).
Respectfully submitted,
Compensation Committee
Samuel L. Simmons, Chairman
Steven B. Klinsky
Peter A. Schwartz
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<PAGE>
PENSION PLAN AND SERP
The following table shows, as of December 31, 1997, estimated aggregate
annual benefits payable upon retirement at age 65 under the General
Semiconductor, Inc. Pension Plan for Salaried and Hourly Paid Non-Union
Employees (the "Pension Plan") and the General Semiconductor, Inc. Supplemental
Executive Retirement Plan (the "SERP").
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL BASIC ESTIMATED ANNUAL BENEFITS UPON RETIREMENT,
REMUNERATION DURING WITH YEARS OF SERVICE INDICATED
SIXTY CONSECUTIVE CALENDAR -------------------------------------------------------
MONTHS PRIOR TO RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- -------------------------------------------------------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$125,000................................................ $ 25,920 $ 34,560 $ 43,200 $ 51,840 $ 51,840
150,000................................................ 31,545 42,060 52,575 63,090 63,090
175,000................................................ 37,170 49,560 61,950 74,340 74,340
200,000................................................ 42,795 57,060 71,325 85,590 85,590
225,000................................................ 48,420 64,560 80,700 96,840 96,840
250,000................................................ 54,045 72,060 90,075 108,090 108,090
300,000................................................ 56,295 75,060 93,825 112,590 112,590
</TABLE>
The compensation covered by the Company's Pension Plan and the Company's
SERP is substantially that described under the "Salary" column of the Summary
Compensation Table. However, pursuant to Section 401(a)(17) of the Code, the
maximum amount of compensation that can be considered in computing benefits
under the Company's Pension Plan for 1997 was $160,000. Under the SERP,
compensation for 1997 in excess of $160,000, but not exceeding $260,000, is
considered in computing benefits. Accordingly, the total compensation covered by
the Company's Pension Plan and the Company's SERP for the calendar year 1997 was
$260,000 for Mr. Ostertag, $223,200 for Mr. Nelson, $204,654 for Mr. Guercio,
$198,608 for Mr. Caggia and $197,492 for Mr. Phillips. Credited years of service
under both the Pension Plan and the SERP as of December 31, 1997 are as follows:
Mr. Ostertag, 19 years; Mr. Nelson, 7 years; Mr. Guercio, 23 years, Mr. Caggia,
11 years and Mr. Phillips, 8 years. Estimated benefits set forth in the Pension
Plan Table were calculated on the basis of a single life annuity and Social
Security covered compensation as in effect during 1997. Such estimated benefits
are not subject to any deduction for Social Security or other offset amounts.
21
<PAGE>
PERFORMANCE GRAPHS
GI
The following graph compares the cumulative total return on $100 invested on
June 30, 1992 in each of the GI Common Stock, the Standard & Poor's 500 Index
and the Standard & Poor's Communication Equipment Manufacturers Index. The graph
covers a period commencing June 1992, when the GI Common Stock was first
publicly traded, through the Distribution Date. The graph is included below for
historical purposes, only, as required by the applicable rules of the
Commission, and will not be provided in future proxy statements. The return of
the Standard & Poor's indices is calculated assuming reinvestment of dividends.
For the purposes of the graph, the Distribution is treated as a non-taxable cash
dividend that was converted into shares of Common Stock on July 25, 1997. GI did
not pay any cash dividends. Returns are based upon end of period prices.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FIVE-YEAR PERFORMANCE COMPARISON
<S> <C> <C> <C>
GI S&P 500(0) S&P COMM(0)
6/30/92 100 100 100
12/31/92
6/30/93 270 114 134
12/31/93 393 119 128
6/30/94 397 115 106
12/31/94 417 121 146
6/30/95 532 145 184
12/31/95 325 166 222
6/30/96 402 182 252
12/31/96 303 202 254
6/30/97 351 241 349
7/25/97 377 256 390
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-----------------------------------
<S> <C> <C> <C> <C> <C> <C>
6/92 12/92 6/93 12/93 6/94 12/94
--- ----- --- ----- --- -----
GI................................................. 100 177 270 393 397 417
S&P 500-Registered Trademark-...................... 100 108 114 119 115 121
S&P Comm-Registered Trademark-..................... 100 133 134 128 106 146
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
6/95 12/95 6/96 12/96 6/97 7/25/97
--- ----- --- ----- --- -----------
GI................................................. 532 325 402 303 351 377
S&P 500-Registered Trademark-...................... 145 166 182 202 241 256
S&P Comm-Registered Trademark-..................... 184 222 252 254 349 390
</TABLE>
22
<PAGE>
GENERAL SEMICONDUCTOR, INC.
The following graph compares the cumulative total return on $100 invested on
July 28, 1997, the date General Semiconductor's stock was first publicly traded,
in each of the General Semiconductor Common Stock, the Standard & Poor's 500
Index and the Standard & Poor's Mid-Cap 400 Index. The return of the Standard &
Poor's indices is calculated assuming reinvestment of dividends. General
Semiconductor has not paid any dividends. Returns are based upon end of period
prices. The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FIVE-MONTH PERFORMANCE COMPARISON
<S> <C> <C> <C>
GENERAL SEMICONDUCTOR S&P 500(0) S&P 400(0)
7/28/97 100 100 100
Aug-97 93 94 100
Sep-97 84 99 105
Oct-97 75 96 101
Nov-97 71 100 102
Dec-97 76 102 106
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------
<S> <C> <C> <C> <C>
7/28/97 8/97 9/97 10/97
----------- --- --- -----
General Semiconductor......................................................... 100 93 84 75
S&P 500-Registered Trademark-................................................. 100 94 99 96
S&P Mid-Cap 400-Registered Trademark-......................................... 100 100 105 101
<CAPTION>
<S> <C> <C>
11/97 12/97
----- -----
General Semiconductor......................................................... 71 76
S&P 500-Registered Trademark-................................................. 100 102
S&P Mid-Cap 400-Registered Trademark-......................................... 102 106
</TABLE>
23
<PAGE>
SEVERANCE PROTECTION AND OTHER AGREEMENTS
On July 28, 1997, the Company entered into severance protection agreements
with its Chief Executive Officer and its other executive officers. These
agreements have a two-year term which is automatically extended for one year
upon the first anniversary of the agreement and every anniversary thereafter
unless notification is given to either the Company or the executive.
The agreements provide severance pay and other benefits in the event of a
termination of employment within 24 months of a Change in Control (as defined in
the agreement) of the Company if such termination is for any reason other than
(i) by the Company for Cause or Disability (as such terms are defined in the
agreement), (ii) by reason of the executive's death or (iii) by the executive
other than for Good Reason (as defined in the agreement). Such severance pay
will be in an amount equal to two times the sum of the executive's base salary
and the executive's bonus amount that would be payable to the executive in the
year of termination in the case of the Chief Executive Officer and one and
one-half times such sum in the case of all other executive officers. In
addition, the Company will pay the executive all accrued but unpaid compensation
and a pro rata bonus (calculated up to the executive's termination date). The
executive's benefits will be continued for either 24 months in the case of the
Chief Executive Officer, or 18 months in the case of all other executive
officers (in each case a "continuation period"). If, at the end of the
continuation period, the executive is not employed by another employer
(including self-employment), the executive will receive for up to six months, an
amount equal to one-twelfth (1/12) of the sum of the executive's base salary and
the executive's bonus amount. The executive will also receive limited
reimbursement for outplacement, tax and financial planning assistance and
reimbursement for relocation under certain circumstances. If the executive's
employment is terminated without cause (i) within six months prior to a Change
in Control or (ii) prior to the date of a Change in Control but (A) at the
request of a third party who effectuates a Change in Control or (B) otherwise in
connection with, or in anticipation of, a threatened Change in Control which
actually occurs, such termination shall be deemed to have occurred after the
Change in Control. In addition, the agreements provide for payments for Messrs.
Ostertag, Nelson, Guercio, Caggia and Phillips of $160,000, $89,280, $66,290,
$63,350, $62,300, respectively, if such executive officers remain employed by
the Company on May 31, 1998.
If the executive's employment is terminated by the Company for Cause or
Disability, by reason of the executive's death or by the executive other than
for Good Reason, the Company shall pay to the executive his accrued
compensation. In addition, in the case of a termination by the Company for
Disability or due to the executive's death, the executive will receive a pro
rata bonus in addition to accrued compensation.
The agreements provide for a gross-up payment by the Company in the event
that the total payments the executive receives under the agreement or otherwise
are subject to the excise tax under Section 4999 of the Code. In such an event,
the Company will pay an additional amount so that the executive is made whole on
an after-tax basis from the effect of the excise tax.
Except for the severance protection agreements described above, the
Company's Pension Plan, the Company's SERP, the Company's Savings Plan, the 1993
Long-Term Incentive Plan, the 1998 Long-Term Incentive Plan, the Annual
Incentive Plan and the Company's Deferred Compensation Plan (under which certain
employees may elect to defer receipt of a designated percentage or amount of
their compensation), there are no compensatory plans or arrangements with
respect to any of the named executive officers which are triggered by, or result
from, the resignation, retirement or any other termination of such executive's
employment, a change in control of the Company or a change in such executive's
responsibilities following a change in control.
CERTAIN RELATED PARTY TRANSACTIONS
Prior to the Distribution, an affiliate of Forstmann Little & Co. provided
aircraft maintenance services to GI and charged GI approximately $1.3 million
for such services in 1997. GI believes that the terms of
24
<PAGE>
these transactions were no less favorable to GI than the terms which could be
obtained from an unrelated third party.
Since 1989, the Company has been a party to a Research Agreement with
National Microelectronics Research Centre (the "Centre"), a non-profit
educational and research facility (funded in significant part by industrial
research projects) located at University College Cork, Ireland. Pursuant to this
agreement, the Company makes annual payments to the Centre to sponsor research
in a minimum amount of $150,000 (subject to increase for particular research
projects specified by the Company). Payments under this agreement were
approximately $475,000 in 1997 and are expected to be approximately $580,000 in
1998. Dr. Gerard T. Wrixon, a director of the Company, is a Founder and Director
of the Centre.
CERTAIN LEGAL PROCEEDINGS
A securities class action is presently pending in the United States District
Court for the Northern District of Illinois, Eastern Division, IN RE GENERAL
INSTRUMENT CORPORATION SECURITIES LITIGATION. This action, which consolidates
numerous class action complaints filed in various courts between October 10 and
October 27, 1995, is brought by plaintiffs, on their own behalf and as
representatives of a class of purchasers of GI Common Stock during the period
March 21, 1995 through October 18, 1995. The complaint alleges that, prior to
the Distribution, GI and certain of its officers and directors, as well as
Forstmann Little & Co. and certain related entities, violated the federal
securities laws, namely, Sections 10(b) and 20(a) of the Exchange Act, by
allegedly making false and misleading statements and failing to disclose
material facts about GI's planned shipments in 1995 of its CFT 2200 and
DigiCipher II products. The plaintiffs have moved for class certification and
the Company has filed its opposition to class certification. Also pending in the
same court, under the same name, is a derivative action brought on behalf of the
Company. The derivative action alleges that, prior to the Distribution, the
members of the GI Board of Directors, several of its officers and Forstmann
Little & Co. and related entities have breached their fiduciary duties by reason
of the matter complained of in the class action and the defendant's alleged use
of material non-public information to sell shares of GI Common Stock for
personal gain. The court had granted the defendants motions to dismiss the
original complaints in both of these actions, but allowed the plaintiffs in each
action an opportunity to file amended complaints. Amended complaints were filed
on November 7, 1997. The defendants have answered the amended consolidated
complaint in the class actions, denying liability, and have filed a renewed
motion to dismiss the derivative action. In connection with the Distribution,
General Instrument Corporation (formerly "NextLevel Systems, Inc.") agreed to
indemnify the Company with respect to its obligations, if any, relating to these
actions.
APPROVAL OF THE GENERAL SEMICONDUCTOR, INC.
1998 LONG-TERM INCENTIVE PLAN
GENERAL
As of March 2, 1998, there remained only 97,880 shares of Common Stock
available for future grants pursuant to the Amended and Restated General
Semiconductor, Inc. 1993 Long-Term Incentive Plan (the "1993 LTIP"). In order to
continue to motivate key employees of the Company subsequent to the
Distribution, the Compensation Committee determined that it was in the Company's
best interest to increase the number of shares with respect to which options and
other awards may be granted pursuant to such a plan. Consequently, on March 18,
1998 the Company's Board of Directors adopted, subject to the approval of the
Company's stockholders at the Annual Meeting, the 1998 Long-Term Incentive Plan
(the "1998 LTIP") in order to (i) reinforce the alignment of employee, director
and stockholder interests and (ii) provide additional incentive and reward
opportunities to current employees and directors to encourage them to enhance
the profitable growth of the Company.
The 1998 LTIP provides for the granting of options, stock appreciation
rights, dividend equivalent rights, restricted stock, performance units,
performance shares, phantom stock, director shares and share
25
<PAGE>
awards to employees, officers, consultants, advisors and directors of the
Company and its Subsidiaries. The 1998 LTIP is intended to replace the 1993 LTIP
and, following the approval of the 1998 LTIP by stockholders at the Annual
Meeting, no further awards or options will be granted pursuant to the 1993 LTIP.
All Shares available for future grant under the 1993 LTIP, and those Shares in
respect of options or awards granted or issued pursuant to the 1993 LTIP which
are subsequently forfeited, expire or otherwise terminate without having been
exercised, will be added to the number of Shares available for grant under the
1998 LTIP.
The principal provisions of the 1998 LTIP are summarized below. This
summary, however, does not purport to be complete and is qualified in its
entirety by reference to the 1998 LTIP which has been included as Annex A to
this Proxy Statement. All capitalized terms used below have the meanings set
forth in the 1998 LTIP, unless otherwise indicated.
PURPOSE OF THE 1998 LTIP
The purpose of the 1998 LTIP is based on the premise that the achievements
of the Company result from the efforts of employees and directors working toward
common goals and objectives. The 1998 LTIP is designed to attract, retain and
motivate highly qualified employees, reinforce the alignment of employee,
director and stockholder interests and reward its employees, officers,
consultants, advisors and directors based on the Company's performance. It is
intended that this purpose be achieved by extending to employees, officers,
consultants, advisors and directors of the Company and its Subsidiaries an added
long-term incentive through the grant of Options and Awards.
DESCRIPTION OF THE 1998 LTIP
ADMINISTRATION.The 1998 LTIP will be administered by a committee (the
"Committee") consisting of at least two directors of the Company who are
"non-employee directors" within the meaning of Rule 16b-3 promulgated under
Section 16(b) of the Exchange Act. The Board may, however, reserve to itself or
exercise any or all of the authority and responsibility of the Committee under
the 1998 LTIP. It may also delegate to another committee of the Board any or all
of the authority and responsibility of the Committee with respect to Awards to
Optionees or Grantees, as the case may be, who are not Section 16 Grantees at
the time any such delegated authority or responsibility is exercised. The
Committee will (i) select those individuals to whom Options and Awards will be
granted, and (ii) determine the type, the size and the terms and conditions of
Options and Awards, the vesting provisions of Restricted Stock, Phantom Stock
and Options, and the restrictions or performance criteria relating to Restricted
Stock, Phantom Stock, Performance Units and Performance Shares. The Committee
will also construe and interpret the 1998 LTIP.
SHARES. The maximum number of Shares that may be made the subject of
Options and Awards granted under the 1998 LTIP is 4.9 million plus the Shares
which are available for future grant under the 1993 LTIP as of the date the
stockholders approve the 1998 LTIP; PROVIDED, HOWEVER, that in the aggregate,
not more than 250,000 Shares may be made the subject of Awards other than
Options and Stock Appreciation Rights. The maximum number of Shares with respect
to which Options and Awards may be granted to any individual in any three
calendar year period is 750,000. The maximum dollar amount of cash or the Fair
Market Value of Shares that may be paid to any individual in any calendar year
with respect to Performance Units denominated in dollars may not exceed
$1,000,000. In the event of any Change in Capitalization, however, the Committee
may adjust the maximum number and class of Shares with respect to which Options
and Awards may be granted, the number and class of Shares which are subject to
outstanding Options and Awards and the purchase price therefor. If any Option
(and any option granted or issued pursuant to the 1993 LTIP) is exercised by
tendering Shares, either actually or by attestation, to the Company as full or
partial payment of the exercise price, the maximum number of Shares available
under the 1998 LTIP will be increased by the number of Shares so tendered. In
addition, if any Option or Award or portion thereof (and any option or award
granted or issued pursuant to the 1993 LTIP) is
26
<PAGE>
canceled, is settled in cash (including the settlement of tax withholding
obligations using Shares) or expires or terminates without having been
exercised, the Shares subject to that Option or Award (or other option or award)
again become available for grant under the 1998 LTIP.
ELIGIBILITY. Any of the Company's or its Subsidiaries' employees, officers,
consultants, advisors or directors are eligible to participate in the 1998 LTIP
(each an "Eligible Individual").
OPTIONS. Pursuant to the 1998 LTIP, the Committee will grant to each
non-employee director (other than a director who is a general partner of any of
the Forstmann Little Companies) of the Company (an "Eligible Director")
Nonqualified Stock Options to purchase 20,000 Shares in connection with his or
her initial election to the Board, and an additional Option in respect of 20,000
Shares on each third anniversary of each Eligible Directors' first appointment
to the Board, if such Eligible Director is still serving on the Board (the
"Automatic Director Options"). The per share exercise price of the Automatic
Director Options will be equal to 100% of the Fair Market Value of the Shares on
the date the option is granted. The Automatic Director Options will be
exercisable with respect to one-third of the underlying Shares on each of the
first, second and third anniversaries of the date on which they were granted. If
an Eligible Director ceases to serve as a director of the Company for any
reason, Automatic Director Options will be exercisable, during their remaining
term, to the extent that the option was exercisable on the date the Eligible
Director ceases to serve as a director. The term of each Automatic Director
Option is ten (10) years; PROVIDED, HOWEVER, that an Automatic Director Option
may, upon the death of an Eligible Director who dies while serving as a
director, be exercised for up to one (1) year following he date of such Eligible
Director's death even if such period extends beyond ten (10) years from the date
of such Automatic Director Option is granted.
In addition, the Committee may grant Nonqualified Stock Options and
Incentive Stock Options to any Eligible Individual. The per share exercise price
of the Options is fixed by the Committee when the Options are granted and must
be at least 100% of the Fair Market Value of the Shares on the date the Option
is granted (110% in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder).
Each Option (other than an Automatic Director Option) will be exercisable at
the times and in the installments determined by the Committee at the time of
grant and as provided for in the Agreement evidencing the grant. All outstanding
Options will become fully exercisable upon a Change of Control. A "Change of
Control" under the 1998 LTIP means, generally: (i) the acquisition by any
person, other than the Forstmann Little Companies, of beneficial ownership of
voting securities resulting in such person beneficially owning (A) 33% or more
of the combined voting power of the Company's then outstanding voting
securities, and (B) a number of voting securities greater than the aggregate
number then beneficially owned by the Forstmann Little Companies; (ii) the
individuals who, as of March 18, 1998, the date of adoption of the 1998 LTIP,
are members of the Board (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the Board; or (iii) approval by stockholders
of: (A) a merger, consolidation or reorganization involving the Company unless:
(1) the stockholders of the Company, immediately before such merger,
consolidation or reorganization own, following such merger, consolidation or
reorganization at least a majority of the combined voting power of the
outstanding voting securities of the corporation resulting from such merger,
consolidation or reorganization in substantially the same proportion as before
the merger, consolidation or reorganization; and (2) the members of the
Incumbent Board immediately prior to the merger, consolidation or reorganization
constitute at least a majority of the Board of the surviving corporation; and
(3) no person has beneficial ownership of 33% or more of the combined voting
power of the surviving corporation's then outstanding voting securities; (B) a
complete liquidation or dissolution of the Company; or (C) the disposition of
all or substantially all of the assets of the Company.
In addition, the Committee reserves the authority to accelerate the
exercisability of any Option (other than an Automatic Director Option). Each
Option (other than an Automatic Director Option) terminates at the time
determined by the Committee, except that the term of each Option may not exceed
ten years (five years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder); PROVIDED,
27
<PAGE>
HOWEVER, that the Committee may provide that an Option (other than an Incentive
Stock Option or an Automatic Director Option) may, upon the death of the
Optionee, be exercised for up to one (1) year following the date of such
Optionee's death even if such period extends beyond ten (10) years from the date
such Option is granted. Options are not transferable by the Optionee except by
will or the laws of descent and distribution or pursuant to a domestic relations
order (within the meaning of Rule 16a-12 promulgated under the Exchange Act) and
may be exercised during the Optionee's lifetime only by the Optionee or the
Optionee's guardian or legal representative. Notwithstanding the foregoing, the
Committee may set forth in the Agreement evidencing an Option (other than an
Incentive Stock Option) at the time of grant or thereafter, that the Option may
be transferred to members of the Optionee's immediate family, to trusts solely
for the benefit of such immediate family members and to partnerships in which
such family members and/or trusts are the only partners. In the discretion of
the Committee, the exercise price for Shares acquired pursuant to the exercise
of an Option may be paid (i) in cash, (ii) by transferring Shares (either
actually or by attestation) to the Company, or (iii) by a combination of the
foregoing. Further, the Committee may permit Optionees to elect to defer the
issuance of Shares upon the exercise of Nonqualified Stock Options granted
pursuant to the 1998 LTIP.
STOCK APPRECIATION RIGHTS. The 1998 LTIP permits the granting of Stock
Appreciation Rights to employees of the Company or a Subsidiary in connection
with an Option or as a freestanding right. A Stock Appreciation Right permits
the Grantee to receive, upon exercise of the Stock Appreciation Right, cash
and/or Shares, at the discretion of the Committee, in an amount determined by
multiplying (i) the excess of the Fair Market Value of a Share on the date
preceding the date of exercise of such Stock Appreciation Right over the Fair
Market Value of a Share on the date the Stock Appreciation Right was granted (or
in the case of a Stock Appreciation Right related to an Option, the per Share
exercise price under the related option), by (ii) the number of Shares as to
which the Stock Appreciation Right is being exercised. When a Stock Appreciation
Right is granted, however, the Committee may establish a limit on the maximum
amount the Optionee may receive upon exercise of the Stock Appreciation Right. A
Stock Appreciation Right granted in connection with an Option shall be
exercisable at such time or times and only to the extent that the related
Options are exercisable. The Committee will decide, when each freestanding Stock
Appreciation Right is granted, the time or times when the Stock Appreciation
Right will be exercisable. However, the Committee reserves the authority to
thereafter accelerate the exercisability of any Stock Appreciation Right.
DIVIDEND EQUIVALENT RIGHTS. Dividend Equivalent Rights may be granted to
Eligible Individuals in tandem with an Option or Award or as a separate Award.
The terms and conditions applicable to each Dividend Equivalent Right shall be
specified in the Agreement under which the Dividend Equivalent Right is granted.
Amounts payable in respect of Dividend Equivalent Rights may be payable
currently or deferred until the lapsing of restrictions on such Dividend
Equivalent Rights or until the vesting or other lapse of restrictions on the
Option or Award to which the Dividend Equivalent Rights relate. Dividend
Equivalent Rights may be settled in cash or Shares or a combination thereof.
RESTRICTED STOCK. Restricted Stock Awards may be granted by the Committee
to any Eligible Individuals and the Committee will determine, when each
Restricted Stock Award is made, the terms of the Restricted Stock Award,
including the price, if any, to be paid by the Grantee for the Restricted Stock,
the restrictions placed on the Shares and the time or times when the
restrictions will lapse; PROVIDED, HOWEVER, that except in the case of Shares of
Restricted Stock issued in full or partial settlement of another Award or other
earned compensation, or in the event of the Grantee's termination of employment,
as determined by the Committee and set forth in the Agreement evidencing the
Award, such restrictions shall not lapse prior to the third anniversary of the
date on which such Shares of Restricted Stock were granted. Unless the Committee
shall determine otherwise at the time of the grant of an Award of Restricted
Stock, the restrictions upon Shares of Restricted Stock shall lapse upon a
Change in Control.
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PERFORMANCE UNITS AND PERFORMANCE SHARES. Performance Units and Performance
Shares will be awarded as the Committee may determine, and the vesting of
Performance Units and Performance Shares will be based upon the Company's
attainment of specified Performance Objectives within the Performance Cycle.
Performance Objectives and the length of the Performance Cycle for Performance
Units and Performance Shares will be determined by the Committee when the Award
is made. Performance Objectives may be expressed in terms of (i) earnings per
Share, (ii) Share price, (iii) pre-tax profits, (iv) net earnings, (v) return on
equity or assets, (vi) revenues, (vii) EBITDA, (viii) market share or market
penetration, or (ix) any combination of the foregoing. Performance Objectives
may be in respect of the performance of the Company, any of its Subsidiaries,
any of its Divisions or any combination thereof. Performance Objectives may be
absolute or relative (to prior performance or to the performance of one or more
other entities or external indices) and may be expressed in terms of a
progression within a specified range. The Agreements evidencing Awards of
Performance Units and Performance Shares will set forth the terms and conditions
of the Awards, including those applicable in the event of the Grantee's
termination of employment or a Change of Control. Performance Units may be
denominated in dollars or in Shares, and payments in respect of vested
Performance Units will be made in cash or Shares or any combination of the
foregoing, as determined by the Committee.
SHARE AWARDS. The Committee may grant Share Awards on such terms and
conditions as it may determine in its sole discretion. Share Awards may be made
as additional compensation for services rendered by an Eligible Individual or
may be in lieu of cash or other compensation to which the Eligible Individual is
entitled from the Company.
PHANTOM STOCK. The Committee may grant Phantom Stock, subject to the terms
and conditions established by the Committee. Upon the vesting of a Phantom Stock
Award, the Grantee will be entitled to receive a cash payment in respect of each
share of Phantom Stock equal to the Fair Market Value of a Share as of the date
the Phantom Stock Award was granted or such other date as determined by the
Committee when the Phantom Stock Award was granted. The Committee may, when a
Phantom Stock Award is granted, provide a limitation on the amount payable in
respect of each share of Phantom Stock. In lieu of a cash payment, the Committee
may settle Phantom Stock Awards with Shares having a Fair Market Value equal to
the cash payment to which the Grantee has become entitled.
DIRECTOR SHARES. Each Eligible Director will be granted 1,000 Director
Shares upon his or her initial election to the Company's Board of Directors.
AMENDMENT AND TERMINATION. The 1998 LTIP will terminate in 2008 on the
tenth anniversary of its adoption. The Board may sooner terminate the 1998 LTIP
and the Board may at any time and from time to time amend, modify or suspend the
1998 LTIP; PROVIDED, HOWEVER, that: (i) no such amendment or termination may
adversely affect any Options or Awards theretofore granted under the Plan,
without the consent of the Optionee or Grantee; and (ii) to the extent necessary
under any applicable law, no amendment will be effective unless approved by the
stockholders of the Company. No modification of an Option or Award shall
adversely affect any rights or obligations under the Option or Award without the
consent of the Optionee or Grantee.
OPTIONS TO BE GRANTED TO CERTAIN INDIVIDUALS AND GROUPS
As of the date of this Proxy Statement, no grants have been made under the
1998 LTIP and the Compensation Committee has no immediate intention or plans to
make any grants. Presently there are approximately 208 Eligible Individuals and
4 Eligible Directors (as such terms are defined in the 1998 LTIP) who could
qualify to participate in the 1998 LTIP. Because adoption of the 1998 LTIP is
subject to stockholder approval and because the granting of Options and Awards
will be entirely within the discretion of the Committee, it is not possible to
determine the employees, directors and other persons to whom Options or Awards
will be granted under the 1998 LTIP or the number of Shares or value of dollar-
denominated grants to be covered by such Options and Awards.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO AWARDS UNDER THE 1998 LTIP
INCENTIVE STOCK OPTION ("ISO"). In general, an Optionee will not recognize
taxable income upon the grant or exercise of an ISO, and the Company and its
Subsidiaries will not be entitled to any business expense deduction with respect
to the grant or exercise of an ISO. (However, upon the exercise of an ISO, the
excess of the fair market value on the date of exercise of the shares received
over the exercise price of the option will be treated as an adjustment to
alternative minimum taxable income.) In order for the exercise of an ISO to
qualify as an ISO, an Optionee generally must be an employee of the Company or a
Subsidiary (within the meaning of Section 422 of the Code) from the date the ISO
is granted through the date three months before the date of exercise (one year
preceding the date of exercise in the case of an Optionee whose employment is
terminated due to disability). The employment requirement does not apply where
an Optionee's employment is terminated due to his or her death.
If an Optionee has held the shares acquired upon exercise of an ISO for at
least two years after the date of grant and for at least one year after the date
of exercise, when the Optionee disposes of the Shares, the difference, if any,
between the sales price of the Shares and the exercise price of the Option will
be treated as long-term capital gain or loss subject to reduced rates of tax,
provided that any gain will be subject to further reduced rates of tax if Shares
are held for more than eighteen months after the date of exercise. If an
Optionee disposes of the Shares prior to satisfying these holding period
requirements (a "Disqualifying Disposition"), the Optionee will recognize
ordinary income (treated as compensation) at the time of the Disqualifying
Disposition, generally in an amount equal to the excess of the fair market value
of the Shares at the time the Option was exercised over the exercise price of
the Option. The balance of the gain realized, if any, will be short-term or
long-term capital gain, depending upon whether the Shares have been held for at
least twelve months after the date of exercise, with the lowest capital gain
rates available if Shares are held for more than eighteen months after the date
of exercise. If the Optionee sells the shares in a Disqualifying Disposition at
a price below the fair market value of the shares at the time the option was
exercised, the amount of ordinary income (treated as compensation) will be
limited to the amount realized on the sale over the exercise price of the
Option. In general, if the Company and its Subsidiaries comply with applicable
income reporting requirements, the Company and its Subsidiaries will be allowed
a business expense deduction to the extent an Optionee recognizes ordinary
income.
NONQUALIFIED STOCK OPTION. In general, an Optionee who receives a
Nonqualified Stock Option will recognize no income at the time of the grant of
the Option. In general, upon exercise of a Nonqualified Stock Option, an
Optionee will recognize ordinary income (treated as compensation) in an amount
equal to the excess of the fair market value of the Shares on the date of
exercise (or in the case of an Optionee who has timely elected to defer the
issuance of Shares upon exercise of an Option, the date of issuance of the
Shares) over the exercise price of the Option. The basis in shares acquired upon
exercise of a Nonqualified Stock Option will equal the fair market value of such
shares at the time of exercise, and the holding period of the Shares (for
capital gain purposes) will begin on the date of exercise. In general, if the
Company and its Subsidiaries comply with applicable income reporting
requirements, they will be entitled to a business expense deduction in the same
amount and at the same time as the Optionee recognizes ordinary income. In the
event of a sale of the Shares received upon the exercise of a Nonqualified Stock
Option, any appreciation or depreciation after the exercise date generally will
be taxed as capital gain or loss, provided that any gain will be subject to
reduced rates of tax if the Shares were held for more than twelve months and
will be subject to further reduced rates if the Shares were held for more than
eighteen months. Special rules may apply with respect to persons who may be
subject to Section 16(b) of the Exchange Act.
EXCISE TAXES. Under certain circumstances, the accelerated vesting or
exercise of Options in connection with a Change in Control might be deemed an
"excess parachute payment" for purposes of the golden parachute tax provisions
of Section 280G of the Code. To the extent it is so considered, an Optionee may
be subject to a 20% excise tax and the Company and its Subsidiaries may be
denied a tax deduction.
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Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly-held corporation for compensation paid in excess of $1
million in any taxable year to the chief executive officer or any of the four
other most highly compensated executive officers who are employed by the Company
on the last day of the taxable year, but does not disallow a deduction for
qualified "performance-based compensation," the material terms of which are
disclosed to and approved by stockholders. The Company has structured the 1998
LTIP with the intention that compensation resulting from awards of Options,
Stock Appreciation Rights, Performance Shares and Performance Units may qualify
as "performance-based compensation" and, if so qualified, would be deductible.
Accordingly, the Company is seeking stockholder approval of the 1998 LTIP and
will not grant Options or Awards thereunder if such stockholder approval is not
obtained.
PROXIES WILL BE VOTED FOR APPROVAL OF THE 1998 LTIP UNLESS OTHERWISE SPECIFIED
IN THE PROXY.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
1998 LTIP.
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INDEPENDENT PUBLIC ACCOUNTANTS
Based on the recommendation of the Audit Committee, the Board of Directors
appointed Deloitte & Touche LLP, independent certified public accountants, to
audit and report on the consolidated financial statements of the Company for the
year ending December 31, 1998 and to perform such other services as may be
required of them. The Board of Directors is asking the stockholders to ratify
and approve this action. Deloitte & Touche LLP has served as the Company's
independent accountants since September 1990. A representative of Deloitte &
Touche LLP will be present at the Annual Meeting and will be afforded the
opportunity, if so desired, to make a statement or respond to appropriate
questions that may come before the Annual Meeting.
Although such ratification is not required by law, the Board of Directors
believes that stockholders should be given the opportunity to express their
views on the subject. While not binding on the Board of Directors, the failure
of the stockholders to ratify the appointment of Deloitte & Touche LLP as the
Company's independent accountants would be considered by the Board of Directors
in determining whether to continue with the services of Deloitte & Touche LLP.
STOCKHOLDER PROPOSALS FOR THE COMPANY'S 1999 ANNUAL MEETING
Stockholders who intend to present proposal(s) at the 1999 Annual Meeting,
and who wish to have such proposal(s), included in the proxy statement for such
meeting, must submit such proposal(s) in writing by notice delivered or mailed
by first-class United States mail, postage prepaid, to the Secretary, General
Semiconductor, Inc., 10 Melville Park Road, Melville, New York 11747, which
notice must be received no later than December 15, 1998. Such proposals must
meet the requirements set forth in the rules and regulations of the Commission
in order to be eligible for inclusion in the Company's proxy statement for its
1999 Annual Meeting.
SOLICITATION OF PROXIES
Proxies will be solicited by mail, telephone, or other means of
communication. Solicitation of proxies also may be made by directors, officers
and regular employees of the Company. The Company has retained Kissel Blake,
Inc. to assist in the solicitation of proxies from stockholders. Kissel Blake,
Inc. will receive a fee of $6,500 plus reimbursement of certain out-of-pocket
expenses. The Company will reimburse brokerage firms, custodians, nominees and
fiduciaries in accordance with the rules of the NYSE, for reasonable expenses
incurred by them in forwarding materials to the beneficial owners of shares. The
cost of soliciting proxies will be borne by the Company.
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OTHER MATTERS
The Company knows of no other matter to be brought before the Annual
Meeting. If any other matter requiring a vote of the stockholders should come
before the Annual Meeting, it is the intention of the persons named in the proxy
to vote with respect to any such matter in accordance with their best judgement.
The Company will furnish, without charge, to each person whose proxy is
being solicited upon written request, a copy of its Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, as filed with the Commission
(excluding exhibits). Copies of any exhibits thereto also will be furnished upon
the payment of a reasonable duplicating charge. Requests in writing for copies
of any such materials should be directed to General Semiconductor, Inc., 10
Melville Park Road, Melville, New York 11747, Attention: Vice President,
Investor Relations.
By Order of the Board of Directors,
/s/ Stephen B. Paige
Stephen B. Paige
SECRETARY
Melville, New York
April 1, 1998
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ANNEX A
GENERAL SEMICONDUCTOR, INC.
1998 LONG-TERM INCENTIVE PLAN
AS ADOPTED MARCH 18, 1998
1. PURPOSE.
The purpose of this Plan is based on the premise that the achievements of
the Company result from the efforts of employees working toward common goals and
objectives. This Plan is designed to attract, retain and motivate highly
qualified employees, reinforce the alignment of employee and stockholder
interests and reward its employees, officers, consultants, advisors and
directors based on the Company's performance. It is intended that this purpose
be achieved by extending to employees, officers, consultants, advisors and
directors of the Company and its Subsidiaries an added long-term incentive
through the grant of Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Dividend Equivalent Rights, Performance Awards, Share
Awards, Director Shares, Phantom Stock and Restricted Stock (as each term is
herein defined).
2. DEFINITIONS.
For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the event of a Change of Control,
the greater of (a) the highest price per Share paid to holders of the Shares in
any transaction (or series of transactions) constituting or resulting in a
Change of Control or (b) the highest Fair Market Value of a Share during the
ninety (90) day period ending on the date of a Change of Control.
2.2 "Affiliate" means any entity, directly or indirectly, controlled by,
controlling or under common control with the Company or any corporation or other
entity acquiring, directly or indirectly, all or substantially all the assets
and business of the Company, whether by operation of law or otherwise.
2.3 "Agreement" means the written agreement between the Company and an
Optionee or Grantee evidencing the grant of an Option or Award and setting forth
the terms and conditions thereof.
2.4 "Award" means a grant of Restricted Stock, Phantom Stock, a Stock
Appreciation Right, a Performance Award, a Dividend Equivalent Right, a Share
Award, Director Shares or any or all of them.
2.5 "Beneficial Owner," "Beneficially Owned" and "Beneficially Owning" shall
have the meanings applicable under Rule 13d-3 promulgated under the Exchange
Act.
2.6 "Board" means the Board of Directors of the Company.
2.7 "Cause" means: unless otherwise set forth in an Agreement, (i)
intentional failure to perform reasonably assigned duties, (ii) dishonesty or
willful misconduct in the performance of duties, (iii) involvement in a
transaction in connection with the performance of duties to the Company or any
of its Subsidiaries which transaction is adverse to the interests of the Company
or any of its Subsidiaries and which is engaged in for personal profit or (iv)
willful violation of any law, rule or regulation in connection with the
performance of duties (other than traffic violations or similar offenses).
2.8 "Change in Capitalization" means any increase or reduction in the number
of Shares, or any change (including, but not limited to, in the case of a
spin-off, dividend or other distribution in respect of Shares, a change in
value) in the Shares or exchange of Shares for a different number or kind of
Shares or other securities of the Company or another corporation, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
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dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.
2.9 "Change of Control" means any of the following:
(i) the acquisition by any Person other than Instrument Partners or
Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership IV or any of their affiliates (collectively, the "Forstmann
Little Companies") of Beneficial Ownership of Voting Securities which, when
added to the Voting Securities then Beneficially Owned by such Person, would
result in such Person Beneficially Owning (A) 33% or more of the combined
Voting Power of the Company's then outstanding Voting Securities, and (B) a
number of Voting Securities greater than the aggregate number of Voting
Securities then Beneficially Owned by the Forstmann Little Companies;
PROVIDED, HOWEVER, that for purposes of this paragraph (i), a Person shall
not be deemed to have made an acquisition of Voting Securities if such
Person: (1) acquires Voting Securities as a result of a stock split, stock
dividend or other corporate restructuring in which all stockholders of the
class of such Voting Securities are treated on a pro rata basis; (2)
acquires the Voting Securities directly from the Company; (3) becomes the
Beneficial Owner of 33% or more of the combined Voting Power of the
Company's then outstanding Voting Securities solely as a result of the
acquisition of Voting Securities by the Company or any Subsidiary which, by
reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by such Person, provided
that if (x) a Person would own at least such percentage as a result of the
acquisition by the Company or any Subsidiary and (y) after such acquisition
by the Company or any Subsidiary, such Person acquires Voting Securities,
then an acquisition of Voting Securities shall have occurred; (4) is the
Company or any corporation or other Person of which a majority of its voting
power or its equity securities or equity interest is owned directly or
indirectly by the Company (a "Controlled Entity"); or (5) acquires Voting
Securities in connection with a "Non-Control Transaction" (as defined in
paragraph (iii) below); or
(ii) the individuals who, as of the Effective Date, are members of the
Board (the "Incumbent Board") cease for any reason to constitute at least
two-thirds of the Board; PROVIDED, HOWEVER, that if either the election of
any new director or the nomination for election of any new director by the
Company's stockholders was approved by a vote of at least two-thirds of the
Incumbent Board prior to such election or nomination, such new director
shall be considered as a member of the Incumbent Board; PROVIDED FURTHER,
HOWEVER, that no individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(iii) approval by stockholders of the Company of:
(A) a merger, consolidation or reorganization involving the Company (a
"Business Combination"), unless
(1) the stockholders of the Company, immediately before the Business
Combination, own, directly or indirectly immediately following the Business
Combination, at least a majority of the combined voting power of the
outstanding voting securities of the corporation resulting from the Business
Combination (the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities immediately before
the Business Combination, and
(2) the individuals who were members of the Incumbent Board immediately
prior to the execution of the agreement providing for the Business
Combination constitute at least a majority of the members of the Board of
Directors of the Surviving Corporation, and
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(3) no Person (other than the Company or any Controlled Entity, a
trustee or other fiduciary holding securities under one or more employee
benefit plans or arrangements (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation or any Controlled
Entity, or any Person who, immediately prior to the Business Combination,
had Beneficial Ownership of 33% or more of the then outstanding Voting
Securities) has Beneficial Ownership of 33% or more of the combined voting
power of the Surviving Corporation's then outstanding voting securities (a
Business Combination satisfying the conditions of clauses (1), (2) and (3)
of this subparagraph (A) shall be referred to as a "Non-Control
Transaction");
(B) a complete liquidation or dissolution of the Company; or
(C) the sale or other disposition of all or substantially all of the
assets of the Company (other than a transfer to a Controlled Entity).
Notwithstanding the foregoing, a Change of Control shall not be deemed to
occur solely because 33% or more of the then outstanding Voting Securities is
Beneficially Owned by (x) a trustee or other fiduciary holding securities under
one or more employee benefit plans or arrangements (or any trust forming a part
thereof) maintained by the Company or any Controlled Entity or (y) any
corporation which, immediately prior to its acquisition of such interest, is
owned directly or indirectly by the stockholders of the Company in the same
proportion as their ownership of stock in the Company immediately prior to such
acquisition.
2.10 "Code" means the Internal Revenue Code of 1986, as amended.
2.11 "Committee" means a committee, as described in Section 3.1, appointed
by the Board from time to time to administer the Plan and to perform the
functions set forth herein.
2.12 "Company" means General Semiconductor, Inc.
2.13 "Director" means a director of the Company.
2.14 "Director Option" means an Option granted pursuant to Section 6.
2.15 "Director Share" means a Share issued or transferred pursuant to
Section 12.3.
2.16 "Disability" means a mental or physical condition which, in the opinion
of the Committee, renders a Grantee unable or incompetent to carry out the job
responsibilities which such Grantee held or the duties to which such Grantee was
assigned at the time the disability was incurred, and which is expected to be
permanent or for an indefinite duration.
2.17 "Division" means any of the operating units or divisions of the Company
designated as a Division by the Committee.
2.18 "Dividend Equivalent Right" means a right to receive all or some
portion of the cash dividends that are or would be payable with respect to
Shares.
2.19 "Eligible Director" means a director of the Company who is not an
employee of the Company or any Subsidiary, or a general partner of any of the
Forstmann Little Companies.
2.20 "Eligible Individual" means any director, officer or employee of the
Company or a Subsidiary, or any consultant or advisor of the Company or a
Subsidiary, designated by the Committee as eligible to receive Options or Awards
subject to the conditions set forth herein.
2.21 "Employee Option" means an Option granted pursuant to Section 5.
2.22 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.23 "Fair Market Value" of any security of the Company or any other issuer
means, as of any applicable date:
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(i) if the security is listed for trading on the New York Stock
Exchange, the closing price, regular way, of the security as reported on the
New York Stock Exchange Composite Tape, or if no such reported sale of the
security shall have occurred on such date, on the next preceding date on
which there was such a reported sale, or
(ii) if the security is not so listed, but is listed on another national
securities exchange or authorized for quotation on the National Association
of Securities Dealers, Inc.'s NASDAQ National Market System ("NASDAQ/NMS"),
the closing price, regular way, of the security on such exchange or
NASDAQ/NMS, as the case may be, or if no such reported sale of the security
shall have occurred on such date, on the next preceding date on which there
was such a reported sale, or
(iii) if the security is not listed for trading on a national securities
exchange or authorized for quotation on NASDAQ/NMS, the average of the
closing bid and asked prices as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or, if no such
prices shall have been so reported for such date, on the next preceding date
for which such prices were so reported, or
(iv) if the security is not listed for trading on a national securities
exchange or is not authorized for quotation on NASDAQ/NMS or NASDAQ, the
fair market value of the security as determined in good faith by the
Committee and, in the case of an Incentive Stock Option, in accordance with
Section 422 of the Code.
2.24 "Grantee" means a person to whom an Award has been granted under the
Plan.
2.25 "Incentive Stock Option" means an Option satisfying the requirements of
Section 422 of the Code and designated by the Committee as an Incentive Stock
Option.
2.26 "Nonemployee Director" means a director of the Company who is a
"nonemployee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.
2.27 "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.
2.28 "Option" means a Nonqualified Stock Option, an Incentive Stock Option,
a Director Option, or any or all of them.
2.29 "Optionee" means a person to whom an Option has been granted under the
Plan.
2.30 "Outside Director" means a director of the Company who is an "outside
director" within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.
2.31 "Parent" means any corporation which is a parent corporation (within
the meaning of Section 424(e) of the Code) with respect to the Company.
2.32 "Performance Awards" means Performance Units, Performance Shares or
either or both of them.
2.33 "Performance-Based Compensation" means any Option or Award that is
intended to constitute "performance based compensation" within the meaning of
Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder.
2.34 "Performance Cycle" means the time period specified by the Committee at
the time Performance Awards are granted during which the performance of the
Company, a Subsidiary or a Division will be measured.
2.35 "Performance Objectives" has the meaning set forth in Section 11.
2.36 "Performance Shares" means Shares issued or transferred to an Eligible
Individual under Section 11.
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2.37 "Performance Units" means Performance Units granted to an Eligible
Individual under Section 11.
2.38 "Person" shall mean a person within the meaning of Section 13(d) and
14(d) of the Exchange Act.
2.39 "Phantom Stock" means a right granted to an Eligible Individual under
Section 12 representing a number of hypothetical Shares.
2.40 "Plan" means the General Semiconductor, Inc. 1998 Long-Term Incentive
Plan, as amended and restated from time to time.
2.41 "Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.
2.42 "Restricted Stock" means Shares issued or transferred to an Eligible
Individual pursuant to Section 10.
2.43 "Section 16 Grantee" means a person subject to potential liability with
respect to equity securities of the Company under Section 16(b) of the Exchange
Act.
2.44 "Share Award" means an Award of Shares granted pursuant to Section 12.
2.45 "Shares" means the common stock, par value $.01 per share, of the
Company.
2.46 "Stock Appreciation Right" means a right to receive all or some portion
of the increase in the value of the Shares as provided in Section 8 hereof.
2.47 "Subsidiary" means any corporation which is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) with respect to the Company.
2.48 "Successor Corporation" means a corporation, or a parent or subsidiary
thereof within the meaning of Section 424(a) of the Code, which issues or
assumes a stock option in a transaction to which Section 424(a) of the Code
applies.
2.49 "Ten-Percent Stockholder" means an Eligible Individual, who, at the
time an Incentive Stock Option is to be granted to him or her, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
or of a Parent or a Subsidiary.
2.50 "Voting Power" shall mean the combined voting power of the then
outstanding Voting Securities.
2.51 "Voting Securities" shall mean, with respect to the Company or any
Subsidiary, any securities issued by the Company or such Subsidiary,
respectively, which generally entitle the holder thereof to vote for the
election of directors of the Company or such Subsidiary, respectively.
3. ADMINISTRATION.
3.1 COMMITTEE ADMINISTRATION. The Plan shall be administered by the
Committee, which shall hold meetings at such times as may be necessary for the
proper administration of the Plan. The Committee shall keep minutes of its
meetings. A quorum shall consist of not fewer than two members of the Committee
and a majority of a quorum may authorize any action. Any decision or
determination reduced to writing and signed by a majority of all of the members
of the Committee shall be as fully effective as if made by a majority vote at a
meeting duly called and held. The Committee shall consist of at least two (2)
Directors and may consist of the entire Board; PROVIDED, HOWEVER, that (A) if
the Committee consists of less than the entire Board, each member shall be a
Nonemployee Director and (B) to the extent necessary for any Option or Award
intended to qualify as Performance-Based Compensation to so qualify, each member
of the Committee, whether or not it consists of the entire Board, shall be an
Outside Director. No member of
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the Committee shall be liable for any action, failure to act, determination or
interpretation made in good faith with respect to this Plan or any transaction
hereunder, except for liability arising from his or her own willful misfeasance,
gross negligence or reckless disregard of his or her duties. The Company hereby
agrees to indemnify each member of the Committee for all costs and expenses and,
to the extent permitted by applicable law, any liability incurred in connection
with defending against, responding to, negotiating for the settlement of or
otherwise dealing with any claim, cause of action or dispute of any kind arising
in connection with any actions in administering this Plan or in authorizing or
denying authorization to any transaction hereunder.
3.2 BOARD RESERVATION AND DELEGATION. The Board may, in its discretion,
reserve to itself or exercise any or all of the authority and responsibility of
the Committee hereunder. It may also delegate to another committee of the Board
any or all of the authority and responsibility of the Committee with respect to
Awards to Optionees or Grantees, as the case may be, who are not Section 16
Grantees at the time any such delegated authority or responsibility is
exercised. Such other committee may consist of one or more directors who may,
but need not be, officers or employees of the Company or of any of its
Subsidiaries. To the extent that the Board has reserved to itself, or exercised
the authority and responsibility of the Committee, or delegated the authority
and responsibility of the Committee to such other committee, all references to
the Committee in the Plan shall be to the Board or to such other committee.
3.3 COMMITTEE AUTHORITY. Subject to the express terms and conditions set
forth herein, the Committee shall have the power from time to time to:
(a) determine those Eligible Individuals to whom Employee Options shall be
granted under the Plan and the number of such Employee Options to be granted and
to prescribe the terms and conditions (which need not be identical) of each such
Employee Option, including the exercise price per Share subject to each Employee
Option, and make any amendment or modification to any Option Agreement
consistent with the terms of the Plan;
(b) select those Eligible Individuals to whom Awards shall be granted under
the Plan and to determine the number of Shares, Stock Appreciation Rights,
Performance Awards, Shares of Phantom Stock, Shares of Restricted Stock and/or
Dividend Equivalent Rights to be granted pursuant to each Award, the terms and
conditions (which need not be identical) of each such Award, and make any
amendment or modification to any Award Agreement consistent with the terms of
the Plan;
(c) construe and interpret the Plan and the Options and Awards granted
hereunder and to establish, amend and revoke rules and regulations for the
administration of the Plan, including, but not limited to, correcting any defect
or supplying any omission, or reconciling any inconsistency in the Plan or in
any Agreement, in the manner and to the extent it shall deem necessary or
advisable, including so that the Plan complies with Rule 16b-3 under the
Exchange Act, the Code to the extent applicable and other applicable law, and
otherwise to make the Plan fully effective. All decisions and determinations by
the Committee in the exercise of this power shall be final, binding and
conclusive upon the Company, its Subsidiaries, the Optionees and Grantees, and
all other persons having any interest therein;
(d) determine the duration and purposes for leaves of absence which may be
granted to an Optionee or Grantee on an individual basis without constituting a
termination of employment or service for purposes of the Plan;
(e) exercise its discretion with respect to the powers and rights granted to
it as set forth in the Plan; and
(f) generally, to exercise such powers and to perform such acts as are
deemed necessary or advisable to promote the best interests of the Company with
respect to the Plan.
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4. STOCK SUBJECT TO THE PLAN; GRANT LIMITATIONS.
4.1 The maximum number of Shares that may be made the subject of Options and
Awards granted under the Plan is 4.9 million plus the number of Shares available
for grant pursuant to the Company's Amended and Restated 1993 Long-Term
Incentive Plan as of the date the stockholders approve this Plan; PROVIDED,
HOWEVER, that in the aggregate, not more than 250,000 of allotted Shares may be
made the subject of Awards other than Options and Stock Appreciation Rights. The
maximum number of Shares that may be the subject of Options and Awards granted
to an Eligible Individual in any three (3) calendar year period may not exceed
750,000 Shares. The maximum dollar amount of cash or the Fair Market Value of
Shares that any Eligible Individual may receive in any calendar year in respect
of Performance Units denominated in dollars may not exceed $1,000,000. Upon a
Change in Capitalization, the maximum number of Shares referred to in the first
two sentences of this Section 4.1 shall be adjusted in number and kind pursuant
to Section 14. The Company shall reserve for the purposes of the Plan, out of
its authorized but unissued Shares or out of Shares held in the Company's
treasury, or partly out of each, such number of Shares as shall be determined by
the Board.
4.2 Upon the granting of an Option or an Award, the number of Shares
available under Section 4.1 for the granting of further Options and Awards shall
be reduced as follows:
(a) In connection with the granting of an Option or an Award (other than the
granting of a Performance Unit denominated in dollars), the number of Shares
shall be reduced by the number of Shares in respect of which the Option or Award
is granted or denominated; PROVIDED, HOWEVER, that if any Option, and any option
granted or issued pursuant to the Company's Amended and Restated 1993 Long-Term
Incentive Plan is exercised by tendering Shares, either actually or by
attestation, to the Company as full or partial payment of the exercise price,
the maximum number of Shares available under Section 4.1 shall be increased by
the number of Shares so tendered.
(b) In connection with the granting of a Performance Unit denominated in
dollars, the number of Shares shall be reduced by an amount equal to the
quotient of (i) the dollar amount in which the Performance Unit is denominated,
divided by (ii) the Fair Market Value of a Share on the date the Performance
Unit is granted.
4.3 Whenever any outstanding Option or Award or portion thereof, and any
option or award or portion thereof granted or issued pursuant to the Company's
Amended and Restated 1993 Long-Term Incentive Plan expires, is canceled, is
settled in cash (including the settlement of tax withholding obligations using
Shares) or is otherwise terminated for any reason without having been exercised
or payment having been made in respect of the entire Option or Award, the Shares
allocable to the expired, canceled, settled or otherwise terminated portion of
the Option or Award may again be the subject of Options or Awards granted
hereunder.
5. OPTION GRANTS FOR ELIGIBLE INDIVIDUALS.
5.1 AUTHORITY OF COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible
Individuals who will receive Employee Options, and the terms and conditions of
the grant to such Eligible Individuals shall be set forth in an Agreement.
5.2 EXERCISE PRICE. The exercise price or the manner in which the exercise
price is to be determined for Shares under each Employee Option shall be
determined by the Committee and set forth in the Agreement; PROVIDED, HOWEVER,
that the exercise price per Share under each Employee Option shall not be less
than 100% of the Fair Market Value of a Share on the date the Employee Option is
granted (110% in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder).
5.3 MAXIMUM DURATION. Employee Options granted hereunder shall be for such
term as the Committee shall determine, provided that an Incentive Stock Option
shall not be exercisable after the expiration of ten (10) years from the date it
is granted (five (5) years in the case of an Incentive Stock
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Option granted to a Ten-Percent Stockholder) and a Nonqualified Stock Option
shall not be exercisable after the expiration of ten (10) years from the date it
is granted; PROVIDED, HOWEVER, that the Committee may provide that an Option
(other than an Incentive Stock Option) may, upon the death of the Optionee, be
exercised for up to one (1) year following the date of the Optionee's death even
if such period extends beyond ten (10) years from the date the Option is
granted. The Committee may, subsequent to the granting of any Employee Option,
extend the term thereof, but in no event shall the term as so extended exceed
the maximum term provided for in the preceding sentence.
5.4 VESTING. Subject to Section 7.4, each Employee Option shall become
exercisable in such installments (which need not be equal) and at such times as
may be designated by the Committee and set forth in the Agreement. To the extent
not exercised, installments shall accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the date the
Employee Option expires. The Committee may accelerate the exercisability of any
Employee Option or portion thereof at any time.
5.5 DEFERRED DELIVERY OF OPTION SHARES. The Committee may, in its
discretion, permit Optionees to elect to defer the issuance of Shares upon the
exercise of one or more Nonqualified Stock Options granted pursuant to the Plan.
The terms and conditions of such deferral shall be determined at the time of the
grant of the Option or thereafter and shall be set forth in the Agreement
evidencing the grant.
5.6 LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent that the
aggregate Fair Market Value (determined as of the date of the grant) of Shares
with respect to which Incentive Stock Options granted under the Plan and
"incentive stock options" (within the meaning of Section 422 of the Code)
granted under all other plans of the Company or its Subsidiaries (in either case
determined without regard to this Section 5.6) are exercisable by an Optionee
for the first time during any calendar year exceeds $100,000, such Incentive
Stock Options shall be treated as Nonqualified Stock Options. For purposes of
the foregoing sentence, Incentive Stock Options shall be treated as Nonqualified
Stock Options according to the order in which they were granted such that the
most recently granted Incentive Stock Options are first treated as Nonqualified
Stock Options.
6. OPTION GRANTS FOR ELIGIBLE DIRECTORS.
Director Options with respect to 20,000 Shares shall be granted to each
Eligible Director of the Company upon his or her initial election to the Board
and every three (3) years thereafter on the anniversary of such Eligible
Director's initial election to the Board provided such Eligible Director is then
still serving on the Board, at an exercise price per Share equal to 100% of the
Fair Market Value of a Share on the date the Director Option is granted. Each
Director Option granted to an Eligible Director will become exercisable with
respect to one-third of the underlying Shares on each of the first, second and
third anniversaries of the date the Director Option is granted, and will have a
term of ten (10) years; PROVIDED, HOWEVER, that the Committee may provide that a
Director Option may, upon the death of the Eligible Director while still serving
as a Director, be exercised at any time within one (1) year following the date
of the Eligible Director's death, even if such period extends beyond ten (10)
years from the date the Director Option is granted, by the person or persons to
whom such rights under the Director Option shall pass by will, or by the laws of
descent or distribution, after which time the Director Option shall terminate in
full. If an Eligible Director ceases to serve as a Director for any reason, any
Director Option granted to such Eligible Director shall be exercisable during
its remaining term, to the extent that such Director Option was exercisable on
the date such Eligible Director ceased to be a Director.
7. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.
7.1 NON-TRANSFERABILITY. No Option shall be transferable by the Optionee
otherwise than by will or by the laws of descent and distribution or, in the
case of an Option other than an Incentive Stock Option, pursuant to a domestic
relations order (within the meaning of Rule 16a-12 promulgated under the
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Exchange Act), and such Option shall be exercisable during the lifetime of an
Optionee only by the Optionee or his or her guardian or legal representative.
Notwithstanding the foregoing, the Committee may set forth in the Agreement
evidencing an Option (other than an Incentive Stock Option) at the time of grant
or thereafter, that the Option may be transferred to members of the Optionee's
immediate family, to trusts solely for the benefit of such immediate family
members and to partnerships in which such family members and/or trusts are the
only partners, and for purposes of this Plan, a transferee of an Option shall be
deemed to be the Optionee. For this purpose, immediate family means the
Optionee's spouse, parents, children, stepchildren and grandchildren and the
spouses of such parents, children, stepchildren and grandchildren. The terms of
an Option shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the Optionee.
7.2 METHOD OF EXERCISE. The exercise of an Option shall be made only by a
written notice delivered in person or by mail to the Secretary of the Company at
the Company's principal executive office, specifying the number of Shares to be
exercised and, to the extent applicable, accompanied by payment therefor and
otherwise in accordance with the Agreement pursuant to which the Option was
granted; PROVIDED, HOWEVER, that Options may not be exercised by an Optionee for
twelve months following a hardship distribution to the Optionee, to the extent
such exercise is prohibited under Treasury Regulation
Section1.401(k)-1(d)(2)(iv)(B)(4). The exercise price for any Shares purchased
pursuant to the exercise of an Option shall be paid, as determined by the
Committee in its discretion, in either of the following forms (or any
combination thereof): (a) cash or (b) the transfer, either actually or by
attestation, to the Company of Shares that have been held by the Optionee for at
least six (6) months (or such lesser period as may be permitted by the
Committee), prior to the exercise of the Option, such transfer to be upon such
terms and conditions as determined by the Committee. In addition, an Option may
be exercised through a registered broker-dealer pursuant to such cashless
exercise procedures which are, from time to time, deemed acceptable by the
Committee. Any Shares transferred to the Company as payment of the exercise
price under an Option shall be valued at their Fair Market Value on the day
preceding the date of exercise of such Option. If requested by the Committee,
the Optionee shall deliver the Agreement evidencing the Option to the Secretary
of the Company who shall endorse thereon a notation of such exercise and return
such Agreement to the Optionee. No fractional Shares (or cash in lieu thereof)
shall be issued upon exercise of an Option and the number of Shares that may be
purchased upon exercise shall be rounded to the nearest number of whole Shares.
7.3 RIGHTS OF OPTIONEES. No Optionee shall be deemed for any purpose to be
the owner of any Shares subject to any Option unless and until (a) the Option
shall have been exercised pursuant to the terms thereof, (b) the Company shall
have issued and delivered Shares to the Optionee, and (c) the Optionee's name
shall have been entered as a stockholder of record on the books of the Company.
Thereupon, the Optionee shall have full voting, dividend and other ownership
rights with respect to such Shares, subject to such terms and conditions as may
be set forth in the applicable Agreement.
7.4 EFFECT OF CHANGE OF CONTROL. In the event of a Change of Control, all
Options outstanding on the date of such Change of Control shall become
immediately and fully exercisable. In addition, to the extent set forth in an
Agreement evidencing the grant of an Employee Option, an Optionee will be
permitted to surrender to the Company for cancellation within sixty (60) days
after such Change of Control any Employee Option or portion of an Employee
Option to the extent not yet exercised and the Optionee will be entitled to
receive a cash payment in an amount equal to the excess, if any, of (a) (i) in
the case of a Nonqualified Stock Option, the greater of (A) the Fair Market
Value, on the date preceding the date of surrender, of the Shares subject to the
Employee Option or portion thereof surrendered or (B) the Adjusted Fair Market
Value of the Shares subject to the Employee Option or portion thereof
surrendered or (ii) in the case of an Incentive Stock Option, the Fair Market
Value, on the date preceding the date of surrender, of the Shares subject to the
Employee Option or portion thereof surrendered, over (b) the aggregate exercise
price for such Shares under the Employee Option or portion thereof surrendered.
In the event an Optionee's employment with, or service as a Director of, the
Company and its Subsidiaries
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terminates following a Change of Control, each Option held by the Optionee that
was exercisable as of the date of termination of the Optionee's employment or
service shall, notwithstanding any shorter period set forth in the Agreement
evidencing the Option, remain exercisable for a period ending not before the
earlier of (x) the first anniversary of the termination of the Optionee's
employment or service or (y) the expiration of the stated term of the Option.
8. STOCK APPRECIATION RIGHTS.
The Committee may in its discretion, either alone or in connection with the
grant of an Employee Option, grant to any Eligible Individual Stock Appreciation
Rights in accordance with the Plan, the terms and conditions of which shall be
set forth in an Agreement. If granted in connection with an Option, a Stock
Appreciation Right shall cover the same Shares covered by the Option (or such
lesser number of Shares as the Committee may determine) and shall, except as
provided in this Section 8, be subject to the same terms and conditions as the
related Option.
8.1 TIME OF GRANT. A Stock Appreciation Right may be granted (a) at any
time if unrelated to an Option, or (b) if related to an Option, either at the
time of grant, or at any time thereafter during the term of the Option.
8.2 STOCK APPRECIATION RIGHT RELATED TO AN OPTION.
(a) EXERCISE. A Stock Appreciation Right granted in connection with an
Option shall be exercisable at such time or times and only to the extent
that the related Options are exercisable, and will not be transferable
except to the extent the related Option may be transferable. A Stock
Appreciation Right granted in connection with an Incentive Stock Option
shall be exercisable only if the Fair Market Value of a Share on the date of
exercise exceeds the exercise price specified in the related Incentive Stock
Option Agreement.
(b) AMOUNT PAYABLE. Upon the exercise of a Stock Appreciation Right
related to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (i) the excess of the Fair Market Value of a Share
on the date preceding the date of exercise of such Stock Appreciation Right
over the per Share exercise price under the related Option, by (ii) the
number of Shares as to which such Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation
Right at the time it is granted.
(c) TREATMENT OF RELATED OPTIONS AND STOCK APPRECIATION RIGHTS UPON
EXERCISE. Upon the exercise of a Stock Appreciation Right granted in
connection with an Option, the Option shall be canceled to the extent of the
number of Shares as to which the Stock Appreciation Right is exercised, and
upon the exercise of an Option granted in connection with a Stock
Appreciation Right, the Stock Appreciation Right shall be canceled to the
extent of the number of Shares as to which the Option is exercised or
surrendered.
8.3 STOCK APPRECIATION RIGHT UNRELATED TO AN OPTION. The Committee may
grant to Eligible Individuals Stock Appreciation Rights unrelated to Options.
Stock Appreciation Rights unrelated to Options shall contain such terms and
conditions as to exercisability (subject to Section 8.7), vesting and duration
as the Committee shall determine, but in no event shall they have a term of
greater than ten (10) years. Upon exercise of a Stock Appreciation Right
unrelated to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (a) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the Fair Market Value of a Share on the date the Stock Appreciation Right was
granted, by (b) the number of Shares as to which the Stock Appreciation Right is
being exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation Right
at the time it is granted.
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8.4 NON-TRANSFERABILITY. No Stock Appreciation Right shall be transferable
by the Grantee otherwise than by will or by the laws of descent and distribution
or pursuant to a domestic relations order (within the meaning of Rule 16a-12
promulgated under the Exchange Act), and such Stock Appreciation Right shall be
exercisable during the lifetime of such Grantee only by the Grantee or his or
her guardian or legal representative. The terms of such Stock Appreciation Right
shall be final, binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the Grantee.
8.5 METHOD OF EXERCISE. Stock Appreciation Rights shall be exercised by a
Grantee only by a written notice delivered in person or by mail to the Secretary
of the Company at the Company's principal executive office, specifying the
number of Shares with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Grantee shall deliver the
Agreement evidencing the Stock Appreciation Right being exercised and the
Agreement evidencing any related Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Agreement to
the Grantee.
8.6 FORM OF PAYMENT. Payment of the amount determined under Sections
8.2(b) or 8.3 may be made in the discretion of the Committee solely in whole
Shares in a number determined at their Fair Market Value on the date preceding
the date of exercise of the Stock Appreciation Right, or solely in cash, or in a
combination of cash and Shares. If the Committee decides to make full payment in
Shares and the amount payable results in a fractional Share, payment for the
fractional Share will be made in cash.
8.7 EFFECT OF CHANGE OF CONTROL. In the event of a Change of Control, all
Stock Appreciation Rights shall become immediately and fully exercisable. In
addition, to the extent set forth in an Agreement evidencing the grant of a
Stock Appreciation Right unrelated to an Option, a Grantee will be entitled to
receive a payment from the Company in cash or stock, in either case, with a
value equal to the excess, if any, of (a) the greater of (i) the Fair Market
Value, on the date preceding the date of exercise, of the underlying Shares
subject to the Stock Appreciation Right or portion thereof exercised and (ii)
the Adjusted Fair Market Value, on the date preceding the date of exercise, of
the Shares over (b) the aggregate Fair Market Value, on the date the Stock
Appreciation Right was granted, of the Shares subject to the Stock Appreciation
Right or portion thereof exercised. In the event a Grantee's employment with the
Company terminates following a Change of Control, each Stock Appreciation Right
held by the Grantee that was exercisable as of the date of termination of the
Grantee's employment shall, notwithstanding any shorter period set forth in the
Agreement evidencing the Stock Appreciation Right, remain exercisable for a
period ending not before the earlier of the first anniversary of (x) the
termination of the Grantee's employment or (y) the expiration of the stated term
of the Stock Appreciation Right.
9. DIVIDEND EQUIVALENT RIGHTS.
Dividend Equivalent Rights may be granted to Eligible Individuals in tandem
with an Option or Award or as a separate Award. The terms and conditions
applicable to each Dividend Equivalent Right shall be specified in the Agreement
under which the Dividend Equivalent Right is granted. Amounts payable in respect
of Dividend Equivalent Rights may be payable currently or deferred until the
lapsing of restrictions on such Dividend Equivalent Rights or until the vesting,
exercise, payment, settlement or other lapse of restrictions on the Option or
Award to which the Dividend Equivalent Rights relate. In the event that the
amount payable in respect of Dividend Equivalent Rights are to be deferred, the
Committee shall determine whether such amounts are to be held in cash or
reinvested in Shares or deemed (notionally) to be reinvested in Shares. If
amounts payable in respect of Dividend Equivalent Rights are to be held in cash,
there may be credited at the end of each year (or portion thereof) interest on
the amount of the account at the beginning of the year at a rate per annum as
the Committee, in its discretion, may determine. Dividend Equivalent Rights may
be settled in cash or Shares or a combination thereof, in a single installment
or multiple installments.
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10. RESTRICTED STOCK.
10.1 GRANT. The Committee may grant Awards to Eligible Individuals of
Restricted Stock, which shall be evidenced by an Agreement between the Company
and the Grantee. Each Agreement shall contain such restrictions, terms and
conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on Share certificates. Awards of Restricted Stock
shall be subject to the terms and provisions set forth below in this Section 10.
10.2 RIGHTS OF GRANTEE. Shares of Restricted Stock granted pursuant to an
Award hereunder shall be issued in the name of the Grantee as soon as reasonably
practicable after the Award is granted provided that the Grantee has executed
such documents which the Committee may require as a condition to the issuance of
such Shares. At the discretion of the Committee, Shares issued in connection
with a Restricted Stock Award shall be deposited together with the stock powers
with an escrow agent (which may be the Company) designated by the Committee.
Unless the Committee determines otherwise and as set forth in the Agreement,
upon delivery of the Shares to the escrow agent, the Grantee shall have all of
the rights of a stockholder with respect to such Shares, including the right to
vote the Shares and to receive all dividends or other distributions paid or made
with respect to the Shares.
10.3 NON-TRANSFERABILITY. Until all restrictions upon the Shares of
Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth
in Section 10.4, such Shares shall not be sold, transferred or otherwise
disposed of and shall not be pledged or otherwise hypothecated.
10.4 LAPSE OF RESTRICTIONS.
(a) GENERALLY. Restrictions upon Shares of Restricted Stock awarded
hereunder shall lapse at such time or times and on such terms and conditions
as the Committee may determine; PROVIDED, HOWEVER, that except in the case
of Shares of Restricted Stock issued in full or partial settlement of
another Award or other earned compensation, or in the event of the Grantee's
termination of employment, as determined by the Committee and set forth in
the Agreement evidencing the Award, such restrictions shall not fully lapse
prior to the third anniversary of the date on which such Shares of
Restricted Stock were granted. The Agreement evidencing the Award shall set
forth any such restrictions.
(b) EFFECT OF CHANGE OF CONTROL. Unless the Committee shall determine
otherwise at the time of the grant of an Award of Restricted Stock, the
restrictions upon Shares of Restricted Stock shall lapse upon a Change of
Control. The Agreement evidencing the Award shall set forth any such
provisions.
10.5 TREATMENT OF DIVIDENDS. At the time an Award of Shares of Restricted
Stock is granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividends, or a specified portion thereof, declared or
paid on such Shares by the Company shall be (a) deferred until the lapsing of
the restrictions imposed upon such Shares and (b) held by the Company for the
account of the Grantee until such time. In the event that dividends are to be
deferred, the Committee shall determine whether such dividends are to be
reinvested in Shares (which shall be held as additional Shares of Restricted
Stock) or held in cash. If deferred dividends are to be held in cash, there may
be credited at the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine. Payment of deferred dividends in
respect of Shares of Restricted Stock (whether held in cash or as additional
Shares of Restricted Stock), together with interest accrued thereon, if any,
shall be made upon the lapsing of restrictions imposed on the Shares in respect
of which the deferred dividends were paid, and any dividends deferred (together
with any interest accrued thereon) in respect of any Shares of Restricted Stock
shall be forfeited upon the forfeiture of such Shares.
10.6 DELIVERY OF SHARES. Upon the lapse of the restrictions on Shares of
Restricted Stock, the Committee shall cause a stock certificate to be delivered
to the Grantee with respect to such Shares, free of all restrictions hereunder.
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11. PERFORMANCE AWARDS.
11.1 PERFORMANCE UNITS. The Committee, in its discretion, may grant
Performance Units to Eligible Individuals, the terms and conditions of which
shall be set forth in an Agreement between the Company and the Grantee.
Performance Units may be denominated in Shares or a specified dollar amount and
represent the right, contingent upon the attainment of specified Performance
Objectives within the Performance Cycle and subject to Section 11.3(c), to
receive payment as provided in the Agreement. Subject to Section 11.3(c),
payment to Grantees in respect of vested Performance Units shall be made as soon
as practicable after the last day of the Performance Cycle to which such Award
relates unless the Agreement evidencing the Award provides for the deferral of
payment, in which event the terms and conditions of the deferral shall be set
forth in the Agreement. Subject to Section 11.4, such payments may be made
entirely in Shares valued at their Fair Market Value as of the day preceding the
date of payment or such other date specified by the Committee, entirely in cash,
or in such combination of Shares and cash as the Committee in its discretion
shall determine at any time prior to such payment; PROVIDED, HOWEVER, that if
the Committee in its discretion determines to make such payment entirely or
partially in Shares of Restricted Stock, the Committee must determine the extent
to which such payment will be in Shares of Restricted Stock and the terms of
such Restricted Stock at the time the Award is granted.
11.2 PERFORMANCE SHARES. The Committee, in its discretion, may grant
Performance Shares to Eligible Individuals, which shall represent the right,
contingent upon the attainment of specified Performance Objectives within the
Performance Cycle and subject to Section 11.3(c), to receive, as provided in the
Agreement, Shares free of all restrictions under the Plan or the Agreement.
Awards of Performance Shares shall be subject to the following terms and
provisions:
(a) ISSUANCE OF SHARES. Performance Shares granted pursuant to an Award
shall be issued in the name of the Grantee as soon as reasonably practicable
after the Award is granted provided that the Grantee has executed such
documents which the Committee may require as a condition to the issuance of
such Performance Shares. At the discretion of the Committee, Shares issued
in connection with an Award of Performance Shares shall be deposited
together with the stock powers with an escrow agent (which may be the
Company) designated by the Committee. Unless the Committee determines
otherwise, and as set forth in the Agreement, upon delivery of the Shares to
the escrow agent, the Grantee shall have all of the rights of a stockholder
with respect to such Shares, including the right to vote the Shares and to
receive all dividends or other distributions paid or made with respect to
the Shares.
(b) TREATMENT OF DIVIDENDS. At the time the Award of Performance Shares
is granted, the Committee may, in its discretion, determine that the payment
to the Grantee of dividends, or a specified portion thereof, declared or
paid on Shares represented by such Award which have been issued by the
Company to the Grantee shall be (i) deferred until the lapsing of the
restrictions imposed upon such Performance Shares and (ii) held by the
Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in Shares (which shall be held as additional
Performance Shares) or held in cash. If deferred dividends are to be held in
cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate
per annum as the Committee, in its discretion, may determine. Payment of
deferred dividends in respect of Performance Shares (whether held in cash or
in additional Performance Shares), together with interest accrued thereon,
if any, shall be made upon the lapsing of restrictions imposed on the
Performance Shares in respect of which the deferred dividends were paid, and
any dividends deferred (together with any interest accrued thereon) in
respect of any Performance Shares shall be forfeited upon the forfeiture of
such Performance Shares.
A-13
<PAGE>
(c) DELIVERY OF SHARES. Upon the lapse of the restrictions on
Performance Shares awarded hereunder, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free
of all restrictions hereunder.
11.3 PERFORMANCE OBJECTIVES.
(a) ESTABLISHMENT. Performance Objectives for Performance Awards may be
expressed in terms of (i) earnings per Share, (ii) Share price, (iii)
pre-tax profits, (iv) net earnings, (v) return on equity or assets, (vi)
revenues, (vii) EBITDA, (viii) market share or market penetration, (ix) any
combination of the foregoing. Performance Objectives may be in respect of
the performance of the Company, any of its Subsidiaries, any of its
Divisions or any combination thereof. Performance Objectives may be absolute
or relative (to prior performance or to the performance of one or more other
entities or external indices) and may be expressed in terms of a progression
within a specified range. The Performance Objectives with respect to a
Performance Cycle shall be established in writing by the Committee by the
earlier of (x) the date on which a quarter of the Performance Cycle has
elapsed or (y) the date which is ninety (90) days after the commencement of
the Performance Cycle, and in any event while the performance relating to
the Performance Objectives remain substantially uncertain.
(b) EFFECT OF CERTAIN EVENTS. At the time of the granting of a
Performance Award, or at any time thereafter, in either case to the extent
permitted under Section 162(m) of the Code and the regulations thereunder
without adversely affecting the treatment of the Performance Award as
Performance-Based Compensation, the Committee may provide for the manner in
which performance will be measured against the Performance Objectives (or
may adjust the Performance Objectives) to reflect the impact of specified
corporate transactions, special charges, foreign currency effects,
accounting or tax law changes and other extraordinary or nonrecurring
events.
(c) DETERMINATION OF PERFORMANCE. Prior to the vesting, payment,
settlement or lapsing of any restrictions with respect to any Performance
Award that is intended to constitute Performance-Based Compensation made to
a Grantee who is subject to Section 162(m) of the Code, the Committee shall
certify in writing that the applicable Performance Objectives have been
satisfied.
11.4 EFFECT OF CHANGE OF CONTROL. In the event of a Change of Control:
(a) With respect to Performance Units, the Grantee shall (i) become
vested in all or a portion of the Performance Units as determined by the
Committee at the time of the Award of such Performance Units and as set
forth in the Agreement and (ii) be entitled to receive in respect of all
Performance Units which become vested as a result of a Change of Control a
cash payment within ten (10) days after such Change of Control in an amount
as determined by the Committee at the time of the Award of such Performance
Unit and as set forth in the Agreement.
(b) With respect to Performance Shares, all or a portion of any unissued
Performance Shares shall be issued and restrictions shall lapse immediately
on all or a portion of the Performance Shares in each case as determined by
the Committee at the time of the Award of such Performance Shares and as set
forth in the Agreement.
(c) The Agreements evidencing Performance Shares and Performance Units
shall provide for the treatment of such Awards (or portions thereof) which
do not become vested as the result of a Change of Control, including, but
not limited to, provisions for the adjustment of applicable Performance
Objectives.
11.5 NON-TRANSFERABILITY. Until the vesting of Performance Units or the
lapsing of any restrictions on Performance Shares, as the case may be, such
Performance Units or Performance Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated.
A-14
<PAGE>
12. OTHER SHARE BASED AWARDS.
12.1 SHARE AWARDS. The Committee may grant a Share Award to any Eligible
Individual on such terms and conditions as the Committee may determine in its
sole discretion. Share Awards may be made as additional compensation for
services rendered by the Eligible Individual or may be in lieu of cash or other
compensation to which the Eligible Individual is entitled from the Company.
12.2 PHANTOM STOCK AWARDS.
(a) GRANT. The Committee may, in its discretion, grant shares of
Phantom Stock to any Eligible Individuals. Such Phantom Stock shall be
subject to the terms and conditions established by the Committee and set
forth in the applicable Agreement.
(b) PAYMENT OF AWARDS. Upon the vesting of a Phantom Stock Award, the
Grantee shall be entitled to receive a cash payment in respect of each share
of Phantom Stock which shall be equal to the Fair Market Value of a Share as
of the date the Phantom Stock Award was granted, or such other date as
determined by the Committee at the time the Phantom Stock Award was granted.
The Committee may, at the time a Phantom Stock Award is granted, provide a
limitation on the amount payable in respect of each share of Phantom Stock.
In lieu of a cash payment, the Committee may settle Phantom Stock Awards
with Shares having a Fair Market Value equal to the cash payment to which
the Grantee has become entitled.
12.3 DIRECTOR SHARES. Each Eligible Director shall be granted 1,000
Director's Shares upon his or her initial election to the Board. Director's
Shares shall be fully vested and transferable upon issuance.
13. EFFECT OF A TERMINATION OF EMPLOYMENT.
The Agreement evidencing the grant of each Option and each Award shall set
forth the terms and conditions applicable to such Option or Award upon a
termination, retirement or other change in the status of the employment of the
Optionee or Grantee by the Company, a Subsidiary or a Division (including a
termination or change by reason of the sale of a Subsidiary or a Division),
which, except for Director Options, shall be as the Committee may, in its
discretion, determine at the time the Option or Award is granted or thereafter.
14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to (i) the
maximum number and class of Shares or other stock or securities with respect
to which Options or Awards may be granted under the Plan, (ii) the maximum
number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted to any Eligible Individual in any
three (3) calendar year period, (iii) the number and class of Shares or
other stock or securities which are subject to outstanding Options or Awards
granted under the Plan and the exercise price therefor, if applicable, (iv)
the number and class of Shares or other securities in respect of which
Director Options are to be granted under Section 6, (v) the number and class
of Shares or other stock or securities with respect to which Director Shares
are to be granted under Section 12.3, and (vii) the Performance Objectives.
(b) Any such adjustment in the Shares or other stock or securities
subject to outstanding Incentive Stock Options (including any adjustments in
the exercise price) shall be made in such manner as not to constitute a
modification as defined by Section 424(h)(3) of the Code and only to the
extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a Grantee of an Award
shall be entitled to, or an Optionee shall be entitled to exercise an Option
with respect to, new, additional or different shares of stock or securities,
such new, additional or different shares shall thereupon be subject to all
of the
A-15
<PAGE>
14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. (CONTINUED)
conditions, restrictions and performance criteria which were applicable to
the Shares subject to the Award or Option, as the case may be, prior to such
Change in Capitalization.
15. EFFECT OF CERTAIN TRANSACTIONS.
Subject to Sections 7.4, 8.7, 10.4(b) and 11.4 or as otherwise provided in
an Agreement, in the event of (a) the liquidation or dissolution of the Company
or (b) a merger or consolidation of the Company (a "Transaction"), the Plan and
the Options and Awards issued hereunder shall continue in effect in accordance
with their respective terms, except that following a Transaction each Optionee
and Grantee shall be entitled to receive in respect of each Share subject to any
outstanding Options or Awards, as the case may be, upon exercise of any Option
or payment or transfer in respect of any Award, the same number and kind of
stock, securities, cash, property or other consideration that each holder of a
Share was entitled to receive in the Transaction in respect of a Share;
PROVIDED, HOWEVER, that such stock, securities, cash, property, or other
consideration shall remain subject to all of the conditions, restrictions and
performance criteria which were applicable to the Options and Awards prior to
such Transaction.
16. INTERPRETATION.
(a) The Plan is intended to comply with Rule 16b-3 promulgated under the
Exchange Act and the Committee shall interpret and administer the provisions
of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not
affect the validity of the Plan.
(b) Unless otherwise expressly stated in the relevant Agreement, each
Option, Stock Appreciation Right and Performance Award granted under the
Plan is intended to be Performance-Based Compensation. The Committee shall
not be entitled to exercise any discretion otherwise authorized hereunder
with respect to such Options or Awards if the ability to exercise such
discretion or the exercise of such discretion itself would cause the
compensation attributable to such Options or Awards to fail to qualify as
Performance-Based Compensation.
17. POOLING TRANSACTIONS.
Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event of a Change of Control which is also intended to
constitute a Pooling Transaction, the Committee shall make such equitable
adjustments to outstanding Options and Awards, if any, as are specifically
recommended by an independent accounting firm retained by the Company to the
extent reasonably necessary in order to assure that the Pooling Transaction will
qualify as such, including but not limited to (a) deferring the vesting,
exercise, payment, settlement or lapsing of restrictions with respect to any
Option or Award, (b) providing that the payment or settlement in respect of any
Option or Award be made in the form of cash, Shares or securities of a successor
or acquirer of the Company, or a combination of the foregoing, and (c) providing
for the extension of the term of any Option or Award to the extent necessary to
accommodate the foregoing, but not beyond the maximum term permitted for any
Option or Award.
18. TERMINATION AND AMENDMENT OF THE PLAN OR MODIFICATION OF OPTIONS AND AWARDS.
18.1 PLAN AMENDMENT OR TERMINATION. The Plan shall terminate on the day
preceding the tenth anniversary of the date of its adoption by the Board and no
Option or Award may be granted thereafter. The Board may sooner terminate the
Plan and the Board may at any time and from time to time amend, modify or
suspend the Plan; PROVIDED, HOWEVER, that:
A-16
<PAGE>
18. TERMINATION AND AMENDMENT OF THE PLAN OR MODIFICATION OF OPTIONS AND AWARDS.
(CONTINUED)
(a) no such amendment, modification, suspension or termination shall
impair or adversely alter any Options or Awards theretofore granted under
the Plan, except with the consent of the Optionee or Grantee, nor shall any
amendment, modification, suspension or termination deprive any Optionee or
Grantee of any Shares which he or she may have acquired through or as a
result of the Plan; and
(b) to the extent necessary under any applicable law, regulation or
exchange requirement no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law, regulation or
exchange requirement.
18.2 MODIFICATION OF OPTIONS AND AWARDS. No modification of an Option or
Award shall adversely alter or impair any rights or obligations under the Option
or Award without the consent of the Optionee or Grantee, as the case may be.
19. NON-EXCLUSIVITY OF THE PLAN.
The adoption of the Plan by the Board shall not be construed as amending,
modifying or rescinding any previously approved incentive arrangement or as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.
20. LIMITATION OF LIABILITY.
As illustrative of the limitations of liability of the Company, but not
intended to be exhaustive thereof, nothing in the Plan shall be construed to:
(a) give any person any right to be granted an Option or Award other
than at the sole discretion of the Committee;
(b) give any person any rights whatsoever with respect to Shares except
as specifically provided in the Plan;
(c) limit in any way the right of the Company or any Subsidiary to
terminate the employment of any person at any time; or
(d) be evidence of any agreement or understanding, expressed or implied,
that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
21. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
21.1 Except as to matters of federal law, the Plan and the rights of all
persons claiming hereunder shall be construed and determined in accordance with
the laws of the State of Delaware without giving effect to conflicts of laws
principles thereof.
21.2 The obligation of the Company to sell or deliver Shares with respect to
Options and Awards granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
21.3 The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority, or to obtain
for Eligible Individuals granted Incentive Stock Options the tax benefits under
the applicable provisions of the Code and regulations promulgated thereunder.
A-17
<PAGE>
21. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW. (CONTINUED)
21.4 Each Option and Award is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing, registration
or qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or Award or the
issuance of Shares, no Options or Awards shall be granted or payment made or
Shares issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions as
acceptable to the Committee.
21.5 Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise
exempt from such registration, such Shares shall be restricted against transfer
to the extent required by the Securities Act and Rule 144 or other regulations
thereunder. The Committee may require any individual receiving Shares pursuant
to an Option or Award granted under the Plan, as a condition precedent to
receipt of such Shares, to represent and warrant to the Company in writing that
the Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under said Act or pursuant to an exemption
applicable under the Securities Act or the rules and regulations promulgated
thereunder. The certificates evidencing any of such Shares shall be
appropriately amended to reflect their status as restricted securities as
aforesaid.
22. WITHHOLDING OF TAXES.
22.1 At such times as the Company becomes obligated to pay withholding taxes
in connection with the granting, vesting, settlement, or exercise of an Award or
Option hereunder (a "Withholding Event"), the Optionee or Grantee shall pay to
the Company an amount equal to the federal, state and local income taxes and
other amounts as may be required by law to be withheld by the Company in
connection with the Withholding Event (the "Withholding Taxes") prior to the
issuance, or release from escrow, of such Shares or the payment of such cash. In
satisfaction of the obligation to pay Withholding Taxes, the Company shall have
the right to (i) deduct from any payment of cash to an Optionee or Grantee an
amount equal to the Withholding Taxes, or (ii) withhold from any Shares issuable
to an Optionee or Grantee the number of Shares having a Fair Market Value equal
to the Withholding Taxes. The Committee may provide in the Agreement at the time
of grant, or at any time thereafter, that the Optionee or Grantee, in
satisfaction of the obligation to pay Withholding Taxes to the Company, may
elect to have withheld a portion of the Shares then issuable to him or her
having an aggregate Fair Market Value equal to the Withholding Taxes. The
Committee may also include in an Agreement that the Optionee or Grantee is
required to satisfy the obligation to pay Withholding Taxes by having the
Company withhold a portion of the Shares then issuable to him or her having an
aggregate Fair Market Value equal to the Withholding Taxes.
22.2 If an Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any Share or
Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.
23. EFFECTIVE DATE. The effective date of this Plan shall be as determined by
the Board, subject only to the approval by the affirmative vote of the holders
of a majority of the securities of the Company present, or represented, and
entitled to vote at a meeting of stockholders duly held in accordance with the
applicable laws of the State of Delaware within twelve (12) months of the
adoption of the Plan by the Board.
A-18
<PAGE>
GENERAL SEMICONDUCTOR, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
The undersigned hereby appoints Andrew M. Caggia, Robert J. Gange and
Stephen B. Paige and each or either of them his/her attorneys and agents,
with full power of substitution, to vote as Proxy for the undersigned as
herein stated at the Annual Meeting of Stockholders of General Semiconductor,
Inc. (the "Company") to be held at Chase Manhattan Bank, 270 Park Avenue,
11th Floor, New York, New York 10017, on Thursday, May 21, 1998 at 10:00
a.m., local time, and at any adjournment thereof, according to the number of
votes the undersigned would be entitled to vote if personally present, on the
proposals set forth on the reverse hereof and in accordance with their
discretion on any other matters that may properly come before the meeting or
any adjournments thereof. The undersigned hereby acknowledges receipt of the
Notice and Proxy Statement, dated April 1, 1998. If this proxy is returned
without direction being given, this proxy will be voted FOR Proposals One,
Two and Three.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
SEE REVERSE
SIDE
- -----------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<S> <C> <C> <C>
Please mark
your votes as
indicated in |X|
this example
The Board of Directors recommends that stockholders vote FOR Proposals One, Two and Three.
FOR WITHHOLD
all nominees AUTHORITY
listed below to vote for all
(except as marked to nominees listed
the contrary) below
FOR AGAINST ABSTAIN
PROPOSAL ONE: To elect six | | | | PROPOSAL TWO: To approve | | | | | |
directors of the Company the adoption of the
to serve until the next General Semiconductor, Inc.
annual meeting of stockholders 1998 Long-Term Incentive
and until the election and Plan
qualification of their
respective successors.
FOR AGAINST ABSTAIN
Nominees: Steven B. Klinsky, PROPOSAL THREE: To ratify the | | | | | |
Ronald A. Ostertag, Ronald Rosenzweig, appointment of Deloitte & Touche
Peter A. Schwartz, Samuel L. Simmons and LLP, independent certified public
Dr. Gerard T. Wrixon accountants, as the Company's
auditor for the fiscal year ending
INSTRUCTION: To withhold your vote for any December 31, 1998.
individual nominee, strike a line through
the nominee's name.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears. If acting as attorney,
executor, administrator, trustee, guardian, etc. you should so
indicate when signing. If a corporation, please sign the full
corporate name by President or other duly authorized officer. If
a partnership, please sign in full partnership name by
authorized person. If shares are held jointly, both parties must
sign and date.
</TABLE>
Signature(s): _________________________________ Date: __________________
Signature(s): _________________________________ Date: __________________
- -----------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
GENERAL SEMICONDUCTOR, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
The undersigned hereby authorizes and directs State Street Bank and Trust
Company, as Special Fiduciary (the "Special Fiduciary") of the General
Semiconductor, Inc. Savings Plan (the "Plan"), to direct Vanguard Fiduciary
Trust, as Trustee (the "Trustee") of the Plan to vote as Proxy for the
undersigned as herein stated at the Annual Meeting of Stockholders of General
Semiconductor, Inc. (the "Company") to be held at Chase Manhattan Bank, 270
Park Avenue, 11th Floor, New York, New York 10017, on Thursday, May 21, 1998
at 10:00 a.m., local time, and to any adjournment thereof, all shares of
Common Stock of General Semiconductor, Inc. allocated to the account of the
undersigned under such Plan, on the proposals set forth on the reverse hereof
and in accordance with the discretion of the Special Fiduciary on any other
matters that may properly come before the meeting or any adjournments
thereof. The undersigned hereby acknowledges receipt of the Notice and Proxy
Statement, dated April 1, 1998.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE PROXY WILL BE VOTED BY THE TRUSTEE, AS DIRECTED BY
THE SPECIAL FIDUCIARY, IN ITS SOLE DISCRETION IN THE BEST INTEREST OF THE
PLAN PARTICIPANTS AND BENEFICIARIES.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
SEE REVERSE
SIDE
- ------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<S> <C> <C> <C>
Please mark
your votes as
indicated in |X|
this example
The Board of Directors recommends that stockholders vote FOR Proposals One, Two and Three.
FOR WITHHOLD
all nominees AUTHORITY
listed below to vote for all
(except as marked to nominees listed
the contrary) below
FOR AGAINST ABSTAIN
PROPOSAL ONE: To elect six | | | | PROPOSAL TWO: To approve | | | | | |
directors of the Company the adoption of the
to serve until the next General Semiconductor, Inc.
annual meeting of stockholders 1998 Long-Term Incentive
and until the election and Plan
qualification of their
respective successors.
FOR AGAINST ABSTAIN
Nominees: Steven B. Klinsky, PROPOSAL THREE: To ratify the | | | | | |
Ronald A. Ostertag, Ronald Rosenzweig, appointment of Deloitte & Touche
Peter A. Schwartz, Samuel L. Simmons and LLP, independent certified public
Dr. Gerard T. Wrixon accountants, as the Company's
auditor for the fiscal year ending
INSTRUCTION: To withhold your vote for any December 31, 1998.
individual nominee, strike a line through
the nominee's name.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Please sign as name appears hereon. If acting as attorney,
executor, administrator, trustee, guardian, etc., you should
so indicate when signing. If shares are held jointly, both
parties must sign and date.
</TABLE>
Signature(s): _________________________________ Date: __________________
Signature(s): _________________________________ Date: __________________
- -----------------------------------------------------------------------------
FOLD AND DETACH HERE
