<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
GENERAL SEMICONDUCTOR, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a 6(i)(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 or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
GENERAL SEMICONDUCTOR LOGO
GENERAL SEMICONDUCTOR, INC.
TEN MELVILLE PARK ROAD
MELVILLE, NEW YORK 11747
March 31, 1999
Dear Fellow Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of General Semiconductor, Inc., to be held on Wednesday, May 12, 1999, 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 1999. 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. This year, if your shares are held in a participating bank or brokerage
account, you may be eligible to vote over the Internet, or by telephone, as an
alternative to mailing the traditional proxy card. Please see "Voting
Electronically via the Internet or Telephone" in the Proxy Statement for further
details.
Sincerely,
LOGO
Ronald A. Ostertag
Chairman of the Board
<PAGE> 3
GENERAL SEMICONDUCTOR, INC.
TEN MELVILLE PARK ROAD
MELVILLE, NEW YORK 11747
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1999
------------------------
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 12, 1999 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 ratify the appointment of Deloitte & Touche LLP, independent
certified public accountants, as the Company's auditor for the fiscal
year ending December 31, 1999; and
3. 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 15, 1999 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. If your shares are held in a
participating bank or brokerage account and you elected to receive the Proxy
Statement and Annual Report electronically over the Internet you will not
receive a paper proxy and should vote online, unless you cancel your enrollment.
If your shares are held in a participating bank or brokerage account and you did
not elect to receive materials through the Internet, you may be eligible to vote
your proxy over the Internet or by telephone. Please see "Voting Electronically
via the Internet or Telephone" in the Proxy Statement for further details.
By Order of the Board of Directors,
LOGO
Stephen B. Paige
Secretary
Melville, New York
March 31, 1999
<PAGE> 4
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" or "General Semiconductor"), to be used at the 1999
Annual Meeting of Stockholders (the "Annual Meeting") to be held at 10:00 a.m.,
local time on Wednesday, May 12, 1999, at Chase Manhattan Bank, 270 Park
Avenue -- 11th Floor, New York, New York, 10017 and at any adjournments thereof.
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 15, 1999 (the "Record
Date") will be entitled to vote at the Annual Meeting or any adjournments
thereof. As of the Record Date, there were 36,820,778 shares of Common Stock
outstanding and entitled to vote and a majority, or 18,410,390 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 and sent electronically on or
about March 31, 1999 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 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 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
Whether or not you are able to attend the Annual Meeting, you are urged to
vote your proxy, which is solicited by the Company's Board of Directors and
which will be voted as you direct on your proxy when properly completed. If no
directions are specified, such proxies will be voted FOR the election of each
person nominated for election as a director and FOR the ratification of the
appointment by the Board of Directors of Deloitte & Touche LLP as the Company's
auditor for the fiscal year ending December 31, 1999 and in the discretion of
the proxy holders, as to other matters that may properly come before the Annual
Meeting.
The holders of a majority of the shares of Common Stock entitled to vote at
the meeting, present in person or by proxy, constitute 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
<PAGE> 5
of directors; and (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. 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.
VOTING ELECTRONICALLY VIA THE INTERNET OR TELEPHONE
Stockholders whose shares are registered in the name of a participating
bank or brokerage firm and who elected to receive the Company's Annual Report
and this Proxy Statement over the Internet will be receiving an email on or
about March 31, 1999 with information on how to access stockholder information
and instructions for voting. If your shares are registered in the name of a
participating bank or brokerage firm and you have not elected to receive the
Company's Annual Report and this Proxy Statement over the Internet, you may be
eligible to vote your shares electronically over the Internet or by telephone. A
number of banks and brokerage firms participate in the ADP Shareholder
Preference Database program. This program provides eligible stockholders who
receive a paper copy of a company's annual report and proxy statement with the
opportunity to vote via the Internet or by telephone. If your bank or brokerage
firm is participating in the ADP program, your voting form will provide
instructions. If your voting form does not reference Internet or telephone
information, please complete and return the paper proxy card in the
self-addressed postage paid envelope provided.
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, voting by telephone, Internet or mail
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,
1998 is being mailed with this Proxy Statement and the accompanying form of
proxy to stockholders entitled to vote at the Annual Meeting. Copies of the
Company's Annual Report are available on the Company's World Wide Web site at
www.gensemi.com. 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.
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"). Except with respect to Mr. Klinsky, the Board has no
knowledge that any nominee will or may be unable to serve or will or may
withdraw from nomination. On August 26, 1998, the Company filed a Registration
Statement on Form S-3 for the distribution by the two partnerships affiliated
with Forstmann Little & Co. to their individual partners of the shares of Common
Stock held by such partnerships and the subsequent resale to the public of such
shares by the individual partners. The timing of such distribution and resale is
uncertain. Mr. Klinsky has advised the Company that he intends to resign prior
to such distribution. If the distribution occurs, and
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<PAGE> 6
Mr. Klinksy resigns prior to the Annual Meeting, the Company does not intend to
recommend a substitute nominee for election at the Annual Meeting, but intends
that the Board would fill the vacancy in the Board at a later date. 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, 42 Steven B. Klinsky served as a director of General Instrument
General Partner, Corporation of Delaware from August 1990 to March 1992, when
Forstmann Little & Co. he was elected to serve as a director of GI. He has been a
General Partner of FLC XXIX, L.P., the General Partner of
Forstmann Little & Co., since December 1986.
Ronald A. Ostertag, 58 Ronald A. Ostertag has been Chairman, President and Chief
Chairman, President, and Executive Officer of General Semiconductor, Inc. since July
Chief Executive Officer of the 25, 1997. Previously he held the position of Vice President
Company of GI since February 1989 and President of GI's Power
Semiconductor Division since September 1990.
Ronald Rosenzweig, 61 Ronald Rosenzweig is Chairman of Anadigics, Inc., an
Chairman of Anadigics, Inc. electronics company he co-founded in 1985. He has been a
Director of Anadigics, Inc. since 1985 and served as its
President and Chief Executive Officer from 1985 until
October 1998.
Peter A. Schwartz, 55 Peter A. Schwartz is the Chief Financial Officer of
Chief Financial Officer of InterWorld Corporation, a privately held provider of
InterWorld Corporation Internet commerce software and services. Prior to joining
InterWorld, Mr. Schwartz was Senior Vice President and Chief
Financial Officer of Computer Associates International,
Inc., a business software company, from 1987 until June
1998.
Samuel L. Simmons, 69 Samuel L. Simmons was Senior Vice President and Director --
Retired Corporate Development of ITT Corporation from 1987 until his
retirement in 1994.
Prof. Gerard T. Wrixon, 58 Prof. Gerard T. Wrixon is President of University College,
President of University Cork, Ireland. Previously, he founded and was Director of
College, Cork, Ireland National Microelectronics Research Centre from 1982 until
January 1999. Prof. 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., and Farran Technology Ltd.
</TABLE>
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 1998 the Board of Directors of the Company held six meetings. 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 of
Directors, to exercise all powers and authority of the Board in the management
of the business and affairs of the Company
3
<PAGE> 7
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 Prof. Gerard T. Wrixon. The Executive
Committee held no meetings during 1998.
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 attends Audit Committee meetings and gives reports to
and answers inquiries from the Audit Committee. The Audit Committee reports its
findings and recommendations to the Board for appropriate action. The Audit
Committee is composed of three non-employee directors: Peter A. Schwartz,
Chairman; Ronald Rosenzweig; and Prof. Gerard T. Wrixon. The Audit Committee
held three meetings in 1998.
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 composed of three non-employee directors:
Samuel L. Simmons, Chairman; Steven B. Klinsky; and Peter A. Schwartz. The
Compensation Committee held three meetings in 1998.
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 Company's 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised entirely of non-employee directors
none of whom has ever been an officer or employee of the Company.
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 15, 1999
(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
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<PAGE> 8
each of the executives named in the Summary Compensation Table and by all
current directors and 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).................................. 2,181,898 5.9
FMR Corp.(4)............................................... 3,111,150 8.4
J. & W. Seligman & Co. Incorporated (5).................... 3,084,233 8.4
Reich & Tang Asset Management LP(6)........................ 2,877,000 7.8
State of Wisconsin Investment Board(7)..................... 2,938,900 8.0
Vanguard Windsor Funds, Inc.(8)............................ 2,352,500 6.4
Wellington Management Company, LLP(8)...................... 2,352,500 6.4
Andrew M. Caggia(9)(15).................................... 111,953 *
Nicholas C. Forstmann(2)................................... 5,427,166 14.7
Theodore J. Forstmann(2)................................... 5,427,166 14.7
Vincent M. Guercio(10)(15)................................. 128,802 *
Winston W. Hutchins(2)..................................... 5,427,166 14.7
Steven B. Klinsky(2)(11)................................... 5,477,166 14.9
Wm. Brian Little(2)........................................ 2,886,752 7.8
W. John Nelson(12)(15)..................................... 190,120 *
Ronald A. Ostertag(13)(15)................................. 400,940 *
John P. Phillips(14)(15)................................... 89,154 *
Ronald Rosenzweig(16)...................................... 9,791 *
Peter A. Schwartz(16)...................................... 13,666 *
Samuel L. Simmons(16)...................................... 7,691 *
John A. Sprague(2)......................................... 2,886,752 7.8
Prof. Gerard T. Wrixon(16)................................. 7,666 *
All current directors and executive officers of the Company
as a group (13 persons)(2)(17)........................... 6,552,796 17.8
</TABLE>
- ---------------
* The percentage of shares of Common Stock beneficially owned does not exceed
one percent of the outstanding 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 15, 1999. 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
15, 1999 is deemed to be outstanding, but 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 XXIX,
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, Mr. Erskine B. Bowles, and Mr. Thomas H.
Lister are general partners. Accordingly, each of such individuals and
partnerships (other than Ms. Horbach, Mr. Bowles and Mr. Lister for the
reasons
5
<PAGE> 9
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, Mr. Bowles 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, Mr.
Bowles 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 XXIX, L.P. and each of FLC XXIX, 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 3, 1999,
filed with the Securities and Exchange Commission (the "Commission") by
Brinson Partners, Inc. ("BPI") and UBS AG ("UBS AG"). The Schedule 13G
states that: BPI is a regulated investment advisor and an indirect
wholly-owned subsidiary of UBS AG, and that UBS AG is reporting indirect
beneficial ownership of holdings by reason of its ownership of BPI and UBS
(USA) Inc., a parent holding company of BPI. BPI reports beneficial
ownership of 2,181,898 shares of Common Stock and claims shared voting
power and shared dispositive power with respect to all of such shares. UBS
AG reports beneficial ownership of 2,181,898 shares of Common Stock and
claims shared voting power and shared dispositive power with respect to all
of such shares. Both BPI and UBS AG disclaim beneficial ownership of such
shares. BPI's principal business office is located at 209 South LaSalle,
Chicago, Illinois 60604-1295. UBS AG's principal business office is located
at Bahnhofstrasse 45 8021, Zurich, Switzerland.
(4) This information is obtained from a Schedule 13G, dated February 1, 1999,
filed with the Commission by: FMR Corp., a parent holding company; Fidelity
Management & Research Company, a wholly-owned subsidiary of FMR Corp. and
an investment advisor; Fidelity Low-Priced Stock Fund; Edward C. Johnson
3rd ("Mr. Johnson") and Abigail Johnson ("Ms. Johnson"). FMR Corp., Mr.
Johnson and Ms. Johnson each report beneficial ownership of 3,111,150
shares. FMR Corp. reports that it has sole voting power over 82,700 shares,
no shared voting power and sole dispositive power over 3,111,150 shares.
Mr. Johnson and Ms. Johnson each report no voting power and sole
dispositive power over 3,111,150 shares. The Schedule 13G states that
through their ownership of voting common stock and the execution of a
shareholders' voting agreement, members of the Johnson family may be
deemed, under the Investment Company Act of 1940, to form a controlling
group with respect to FMR Corp. FMR Corp.'s principal business office is
located at 82 Devonshire Street, Boston, Massachusetts 02109.
(5) This information is obtained from a Schedule 13G, dated February 10, 1999,
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 3,084,233 shares. Seligman claims no sole voting power, shared
voting power with respect to 2,510,900 shares, no sole dispositive power
and shared dispositive power with respect to 3,084,233 shares. Seligman's
principal business office is located at 100 Park Avenue, New York, NY
10017.
(6) This information is obtained from a Schedule 13G, dated February 11, 1999,
filed with the Commission by Reich & Tang Asset Management LP ("Reich &
Tang"). Reich & Tang reports beneficial ownership of 2,877,000 shares.
Reich & Tang claims no sole voting power, shared voting power with respect
to 2,877,000 shares, no sole dispositive power and shared dispositive power
with respect to 2,877,000. Reich & Tang's principal business office is
located at 600 Fifth Avenue, New York, NY 10020.
(7) This information is obtained from a Schedule 13G, dated January 16, 1999,
filed with the Commission by State of Wisconsin Investment Board
("Wisconsin Investment Board"). The Wisconsin Investment Board reports
beneficial ownership of 2,938,900 shares. The Wisconsin Investment Board
claims sole voting power with respect to 2,938,900 shares, no shared voting
power, sole dispositive power with respect to 2,938,900 shares and no
shared dispositive power. The Wisconsin Investment Board's principal
business office is located at P.O. Box 7842, Madison, Wisconsin 53707.
6
<PAGE> 10
(8) Information regarding the ownership of Common Stock by Wellington
Management Company, LLP ("WMC") was obtained from a Schedule 13G, dated
December 31, 1998, filed with the Commission by WMC. WMC reports beneficial
ownership of 2,352,500 shares of Common Stock. The shares are owned of
record by clients of WMC including Vanguard Windsor Fund (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, 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 dispositive power as to all 2,352,500
shares and has no voting power as to such shares. WMC's principal business
offices are located at 75 State Street, Boston, MA 02109. Information
regarding the ownership of Common Stock by Vanguard Windsor Funds
Inc. -- Windsor Fund ("Vanguard Windsor") was obtained from a Schedule 13G,
dated February 12, 1999, filed with the Commission by Vanguard Windsor.
Vanguard Windsor reports beneficial ownership of 2,352,500 shares of Common
Stock. Vanguard Windsor shares dispositive power as to all 2,352,500 shares
and has sole voting power as to all 2,352,500 shares.
(9) Includes (i) 105,576 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 15, 1999 and (ii) 1,035
shares held by the spouse of Andrew M. Caggia.
(10) Includes 105,388 shares subject to options which are exercisable for Common
Stock currently or within 60 days of March 15, 1999.
(11) Includes 50,000 shares held by Steven B. Klinsky directly.
(12) Includes 177,570 shares subject to options which are exercisable for Common
Stock currently or within 60 days of March 15, 1999.
(13) Includes (i) 382,028 shares subject to options which are exercisable for
Common Stock currently or within 60 days of March 15, 1999 and (ii) 225
shares held by the spouse of Ronald A. Ostertag.
(14) Includes 85,295 shares subject to options which are exercisable for Common
Stock currently or within 60 days of March 15, 1999.
(15) 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 February 28, 1999 as follows: Andrew M. Caggia, 2,307
shares; Vincent M. Guercio, 18,414 shares; W. John Nelson, 2,950 shares;
Ronald A. Ostertag, 3,560 shares; and John P. Phillips, 859 shares.
(16) Includes 6,666 shares subject to options which are exercisable for Common
Stock currently or within 60 days of March 15, 1999.
(17) Includes 980,758 shares subject to options which are exercisable for Common
Stock currently or within 60 days of March 15, 1999. Includes an aggregate
of 32,725 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 February 28, 1999.
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
Securities and Exchange 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, 1998 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.
7
<PAGE> 11
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
individual who served as Chief Executive Officer during 1998 and the other four
most highly compensated executive officers of the Company who were serving as
executive officers at December 31, 1998 (the "named executive officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL 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....... 1998 $450,000 $143,000 $ -- 225,000 $167,459(d)
Chairman, President 1997 375,000 215,000 -- 198,859 5,983
and Chief Executive 1996 320,000 -- -- 59,067 5,460
Officer
W. John Nelson........... 1998 $235,000 $ 52,000 $111,744(e) 60,000 $ 94,628(d)
President, Asia 1997 223,200 110,000 133,643(e) 99,431 5,324
Pacific Operations 1996 215,209 -- 150,853(f) 13,783 5,275
Vincent M. Guercio....... 1998 $223,000 $ 22,000 $ -- 60,000 $ 71,863(d)
Senior Vice President, 1997 204,654 77,616 -- 48,435 5,245
e-commerce 1996 185,622 -- -- 13,783 5,168
Andrew M. Caggia......... 1998 $223,000 $ 37,000 $ -- 60,000 $ 69,154(d)
Senior Vice President 1997 198,608 90,616 -- 47,057 5,609
and Chief Financial 1996 168,743 -- -- 11,813 5,107
Officer
John P. Phillips......... 1998 $223,000 $ 42,000 $121,295(f) 60,000 $ 68,723(d)
President, Europe and 1997 197,492 75,029 18,342(e) 48,435 6,148
North America
Operations 1996 165,919 -- -- -- 5,097
</TABLE>
- ---------------
(a) Amounts reported for 1998 reflect discretionary cash bonus awards paid in
1999. No awards were paid under the Company's Annual Incentive Plan with
respect to performance in 1998 (see "Report of the Compensation
Committee -- Annual Incentive Bonus"). 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.
(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) Reflects the number of shares of Common Stock underlying options granted in
1998 under the Amended and Restated General Semiconductor, Inc. 1993
Long-Term Incentive Plan and the Company's 1998 Long-Term Incentive Plan.
(d) Reflects (i) payment by the Company in 1998 of premiums for group term life
insurance of $3,151, $548, $773, $1,004 and $1,623 on behalf of each of
Messrs. Ostertag, Nelson, Guercio, Caggia, and Phillips, respectively, (ii)
the matching contribution for 1998 by the Company under the General
Semiconductor, Inc. Savings Plan in the amount of $4,308 for Mr. Ostertag
and $4,800 for each of Messrs. Nelson, Guercio, Caggia and Phillips, and
(iii) Stay Incentive bonuses of $160,000, $89,280, $66,290, $63,350 and
$62,300 to Messrs. Ostertag, Nelson, Guercio, Caggia and Phillips,
respectively, pursuant to severance protection and stay agreements with the
Company entered into on July 28, 1997 (see "Severance Protection and Other
Agreements").
(e) Reflects foreign service premium, cost of living adjustment, and overseas
housing allowance.
(f) Reflects relocation costs, foreign service premium, cost of living
adjustment, and overseas housing allowance.
8
<PAGE> 12
STOCK OPTIONS
The following table sets forth information for the year ended December 31,
1998 with respect to grants to the named executive officers of stock options to
purchase Common Stock. These grants were made pursuant to the Amended and
Restated General Semiconductor, Inc. 1993 Long-Term Incentive Plan and the
Company's 1998 Long-Term Incentive Plan and are reflected in the Summary
Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE/ FOR OPTION TERM(C)
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION ---------------------------
GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---------- --------------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Ostertag..... 75,000(a) 12.4% $12.3750 01/29/08 $583,693 $1,479,192
150,000(b) 13.6 7.0625 10/26/08 666,235 1,688,371
W. John Nelson......... 20,000(a) 3.3 12.3750 01/29/08 155,651 394,451
40,000(b) 3.6 7.0625 10/26/08 177,663 450,232
Vincent M. Guercio..... 20,000(a) 3.3 12.3750 01/29/08 155,651 394,451
40,000(b) 3.6 7.0625 10/26/08 177,663 450,232
Andrew M. Caggia....... 20,000(a) 3.3 12.3750 01/29/08 155,651 394,451
40,000(b) 3.6 7.0625 10/26/08 177,663 450,232
John P. Phillips....... 20,000(a) 3.3 12.3750 01/29/08 155,651 394,451
40,000(b) 3.6 7.0625 10/26/08 177,663 450,232
</TABLE>
- ---------------
(a) These options were granted pursuant to the Amended and Restated General
Semiconductor, Inc. 1993 Long-Term Incentive Plan. 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 29 in
each of 2000 and 2001. In the event of a change in control of the Company,
all such options shall become immediately and fully exercisable.
(b) These options were granted pursuant to the Company's 1998 Long-Term
Incentive Plan and will become exercisable with respect to one-third of the
shares covered thereby on October 26, in each of 1999, 2000 and 2001. In the
event of a change in control of the Company, all such options shall become
immediately and fully exercisable.
(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.
AGGREGATED OPTION EXERCISES AND YEAR-END VALUE
The following table sets forth as of December 31, 1998, for each of the
named executive officers listed (i) the total number of shares received upon
exercise of options during 1998, (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, 1998 (based on the difference between the closing
price of the Common Stock at December 31, 1998 and the exercise price of the
option on such date).
9
<PAGE> 13
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 AT OPTIONS
SHARES FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(A)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#)(B) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Ostertag........ -- -- 290,743 322,131 $5,888 $168,750
W. John Nelson............ -- -- 133,167 112,503 2,453 45,000
Vincent M. Guercio........ -- -- 77,983 91,500 1,178 45,000
Andrew M. Caggia.......... -- -- 79,286 90,385 2,208 45,000
John P. Phillips.......... -- -- 62,483 86,907 1,227 45,000
</TABLE>
- ---------------
(a) Based on the difference between the closing price of $8.1875 per share at
December 31, 1998, as reported on the NYSE Composite Tape, and the exercise
price of the outstanding stock options on such date.
(b) No options were exercised in 1998 by any of the named executive officers.
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 Compensation Committee of the Board of Directors of the Company 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 the 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 Company's compensation philosophy is in keeping with the Company's
mission statement and 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. The Compensation Committee generally sets compensation levels for
executives based on a review of available data from comparable companies. 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.
On March 18, 1998, the Board of Directors adopted the 1998 Long-Term
Incentive Plan, (the "1998 LTIP"), which was approved by the stockholders at the
1998 Annual Meeting. The 1998 LTIP will be the
10
<PAGE> 14
principal plan through which the Company's executive officers and other
employees will receive equity-based incentive awards in the future.
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 assigns specific weights to these factors, although the
executive's position and a subjective evaluation of his or her performance are
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 year period and are not
exercisable until one year after the date of grant.
During 1998, the Compensation Committee made two option grants. On January
29, 1998, the Compensation Committee granted a total of 127,500 options under
the Amended and Restated 1993 Long-Term Incentive Plan (the "1993 LTIP") to a
total of seven officers, including a total of 80,000 options to the named
executive officers (other than the Chief Executive Officer). The options were
granted at an exercise price of $12.375 per share, the closing market price per
share of Common Stock on that date, to become exercisable in one-third
increments on January 29, 1999, January 29, 2000, and January 29, 2001. The
Compensation Committee approved a second option grant in 1998 in order to
continue to motivate the executive officers and other employees, since the
January grant had been made under the 1993 LTIP, and a limited number of shares
remained available under that plan. On October 26, 1998, the Compensation
Committee granted a total of 253,350 options under the 1998 LTIP to a total of
seven officers, including a total of 160,000 options to the named executive
officers (other than the Chief Executive Officer). The options were granted at
an exercise price of $7.0625 per share, the closing market price per share of
Common Stock on that date, to become exercisable in one-third increments on
October 26, 1999, October 26, 2000, and October 26, 2001.
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 recommendations to the Compensation Committee, which is responsible
for reviewing and approving or disapproving those recommendations.
No base salary changes were recommended to, or considered by, the
Compensation Committee for the Chief Executive Office or for six of the seven
other executive officers in 1998, since base salary increases were previously
made effective as of July 28, 1997, the date of the Company's restructuring. The
Compensation Committee did approve a salary increase for W. John Nelson
effective January 1, 1998, as his previous change in base salary was October 1,
1996.
ANNUAL INCENTIVE BONUS
The Company has an Annual Incentive Plan which 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.
Bonuses for executive officers are generally 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
11
<PAGE> 15
are earned if the Company attains or exceeds 90% of the financial targets
referred to above. No awards were earned under the Annual Incentive Plan in
1998. In the event a bonus is not payable under the Annual Incentive Plan, the
Compensation Committee may approve the awarding of discretionary bonuses. In
recognition of the Company's increased market share in the face of the Asian
economic crisis and extreme pricing pressures, its substantial cost reductions
in its global operations, its major restructuring, and its outperforming many of
its competitors in key financial indicators, the Compensation Committee awarded
each of the named executive officers (other than the Chief Executive Officer) a
discretionary bonus payment in 1999 for performance in 1998, which payments are
reflected in the Summary Compensation Table.
CHIEF EXECUTIVE OFFICER COMPENSATION
Ronald A. Ostertag has been Chairman of the Board, President, and Chief
Executive Officer of the Company since July 1997. His 1998 base salary was at an
annual rate of $450,000 and his 1998 target bonus percentage under the Annual
Incentive Plan was 65%. Mr. Ostertag's base salary and target bonus percentage
for 1998 were not changed in 1998. On January 29, 1998 Mr. Ostertag was granted
an option under the 1993 LTIP to purchase 75,000 shares of Common Stock at an
exercise price of $12.375 per share, the closing market price per share of
Common Stock on that date, to become exercisable in one-third increments on
January 29, 1999, January 29, 2000 and January 29, 2001. On October 26, 1998 Mr.
Ostertag was granted an option under the 1998 LTIP to purchase 150,000 shares of
Common Stock at an exercise price of $7.0625 per share, the closing market price
per share of Common Stock on that date, to become exercisable in one-third
increments on October 26, 1999, October 26, 2000 and October 26, 2001. The
rationale for Mr. Ostertag's option grants is described under the caption "Stock
Ownership" above.
The Compensation Committee recommended, and the Board of Directors
approved, a discretionary bonus payment in 1999 for performance in 1998 for Mr.
Ostertag in the amount of $143,000, which payment is reflected in the Summary
Compensation Table.
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 LTIP, the 1998 LTIP 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
LTIP and the stock option, stock appreciation right, performance share and
performance unit portions of the 1998 LTIP, and has structured the annual cash
bonus paid under the Annual Incentive Plan 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 1998 exceeded $1 million. It is not expected that any executive
officer's compensation will be non-deductible in 1999 by reason of the
application of Section 162(m).
Respectfully submitted,
Compensation Committee
Samuel L. Simmons, Chairman
Steven B. Klinsky
Peter A. Schwartz
12
<PAGE> 16
PENSION PLAN AND SERP
The following table shows, as of December 31, 1998, 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............................... $25,790 $34,387 $42,984 $ 51,581 $ 51,581
150,000............................... 31,415 41,887 52,359 62,831 62,831
175,000............................... 37,040 49,387 61,734 74,081 74,081
200,000............................... 42,665 56,887 71,109 85,331 85,331
225,000............................... 48,290 64,387 80,484 96,581 96,581
250,000............................... 53,915 71,887 89,859 107,831 107,831
300,000............................... 57,290 76,387 95,484 114,581 114,581
</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 1998 was $160,000. Under the SERP,
compensation for 1998 in excess of $160,000, but not exceeding $265,000, 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 1998 was
$265,000 for Mr. Ostertag, $235,000 for Mr. Nelson, and $223,000 for each of
Messrs. Guercio, Caggia and Phillips. Credited years of service under both the
Pension Plan and the SERP as of December 31, 1998 are as follows: Mr. Ostertag,
20 years; Mr. Nelson, 8 years; Mr. Guercio, 24 years, Mr. Caggia, 12 years and
Mr. Phillips, 9 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 1998. Such estimated benefits are not
subject to any deduction for Social Security or other offset amounts.
Pursuant to the terms of the SERP, in the event of a change in control of
the Company (as defined in the SERP), the present value lump sum actuarial
equivalent of each of the named executive officer's supplemental benefit under
the SERP on the date of the change of control will be paid to the individual
immediately in a lump sum in cash.
PERFORMANCE GRAPH
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 ("S&P 500"), the Standard & Poor's Mid-Cap 400 Index ("S&P 400"), the
Standard & Poor's SmallCap 600 Index ("S&P 600") and the Standard & Poor's
SmallCap Technology Index ("S&P SCT"). In 1998, the Company's stock performance
graph compared the Company's stock performance to the S&P 500 and the S&P 400.
For subsequent years, the Company will substitute the S&P 600 (to which the
Company was added in 1998) and the S&P SCT. The Company believes the S&P 600 and
the S&P SCT provide a better comparison than the S&P 500 and the S&P 400,
because the relative size and nature (sales, assets, market capitalization and
other factors) of the companies included in the S&P 600 and the S&P SCT are more
comparable to the Company. Accordingly, the comparison of the Company's stock
performance to the S&P 500 and the S&P 400 indices is included for historical
purposes only and will not be included next year. The return of the Standard &
Poor's indices is
13
<PAGE> 17
calculated assuming reinvestment of dividends. General Semiconductor has not
paid any dividends. The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
QUARTERLY PERFORMANCE COMPARISON
[QUARTERLY PERFORMANCE COMPARISON LINE GRAPH]
<TABLE>
<CAPTION>
GENERAL
SEMICONDUCTOR S&P 500[ S&P 400[ S&P 600[ S&P SCT
------------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Jul 28, 97 100.00 100.00 100.00 100.00 100.00
Sep 97 87.00 102.00 108.00 111.00 112.00
Dec 97 78.00 104.00 109.00 108.00 92.00
Mar 98 81.00 119.00 121.00 120.00 102.00
Jun 98 67.00 123.00 119.00 115.00 94.00
Sep 98 41.00 111.00 102.00 91.00 71.00
Dec 98 56.00 134.00 130.00 107.00 94.00
</TABLE>
SEVERANCE PROTECTION AND OTHER AGREEMENTS
On October 23, 1998, the Company entered into amended and restated
severance protection agreements (the "Severance Agreements") with its Chief
Executive Officer and its other executive officers, which supersede the
severance protection and stay agreements entered into on July 28, 1997 (the
"Former Agreements"). During 1998, each of the named executive officers received
Stay Incentive bonuses pursuant to the Former Agreements, which are reflected in
the Summary Compensation Table, for remaining in the employ of the Company
through May 31, 1998. The Severance Agreements continue in effect until December
31, 1999 and are automatically extended for one year each January 1 thereafter
unless notification is given to either the Company or the executive.
The Severance 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 Severance Agreements) of the Company if such termination is (i)
by the Company without Cause (other than by reason of the executive's Disability
or death) (as such terms are defined in the Severance Agreements), or (ii) by
the executive (other than the Chief Executive Officer) for Good Reason (as
defined in the Severance Agreements) or in the case of the Chief Executive
Officer, for any reason. Such severance pay will be in an amount equal to two
and one-half 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 two 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 30 months, in the case of the Chief Executive Officer, or 24 months in
the
14
<PAGE> 18
case of all other executive officers. 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.
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
the Chief Executive Officer 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 Severance Agreements provide for a gross-up payment by the Company in
the event that the total payments due the executive under the agreement or
otherwise exceed by $10,000 or more the maximum amount which could be paid
without being 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. In the event
that such payments exceed the aforementioned amount by less than $10,000, the
payments shall be reduced to the extent necessary so that no excise tax is
payable.
Except for the severance protection agreements described above, the
Company's Pension Plan and SERP (see "Pension Plan and SERP"), the 1993 LTIP,
the 1998 LTIP, the Annual Incentive Plan and the Company's Deferred Compensation
Plan, there are no compensatory plans or arrangements with respect to any of the
named executive officers which are triggered by, or result from, a change in
control of the Company or a change in such executive's responsibilities or any
other termination of such executive's employment following a change in control.
The following is a brief description of the change in control provisions of
the Company's employee compensation plans.
ANNUAL INCENTIVE PLAN
The Annual Incentive Plan is the Company's annual cash bonus incentive plan
for the Chief Executive Officer and certain other key employees. In the event of
a Change in Control of the Company (as defined in the Annual Incentive Plan),
within 60 days thereafter, the Company will pay to each participant in the plan
immediately prior to such Change in Control (regardless of whether such
participant remains in the employ of the Company following the Change in
Control) a pro rata portion of his or her bonus award assuming that all
performance percentages are 100%.
DEFERRED COMPENSATION PLAN
The Company's Deferred Compensation Plan allows a select group of
management or highly compensated employees to defer a percentage of compensation
or a specified dollar amount each year; up to 50% of base salary and 100% of
bonus earned. Amounts deferred are payable in a lump sum or in annual
installments pursuant to the terms of an irrevocable election made by the
participant or earlier upon termination of the participant's employment.
Upon a Change in Control of the Company (as defined in the plan), the
Deferred Compensation Plan will terminate and each participant will be paid his
or her entire deferred account balance in a single lump sum.
1998 LTIP AND 1993 LTIP
The 1998 LTIP provides for the granting of stock options, stock
appreciation rights ("SARs"), dividend equivalent rights, restricted stock,
performance units, performance shares, phantom stock, director shares and share
awards to employees, officers, consultants, advisors and directors of the
Company and its subsidiaries.
15
<PAGE> 19
Pursuant to the terms of the 1998 LTIP and subject to an optionee's or grantee's
rights under his or her option or award agreement, in the event of a Change in
Control of the Company (as defined in the 1998 LTIP), (i) all stock options will
become immediately and fully exercisable and, to the extent set forth in the
agreement evidencing the grant, the optionee may elect to receive a cash payment
within 60 days of the Change in Control with respect to all or a portion of any
unexercised options, (ii) all SARs will become immediately and fully exercisable
and, to the extent set forth in the agreement evidencing the grant of a SAR
unrelated to an option, the grantee will be entitled to receive a payment of
cash or stock upon exercise of the SAR, (iii) any restrictions on restricted
stock shall lapse, unless the Compensation Committee determined otherwise at the
time of the grant, (iv) all or a portion of any performance units will become
fully vested, as determined by the Compensation Committee at the time of grant,
and will entitle the grantee to a cash payment within 10 days of the Change in
Control in an amount as determined by the Compensation Committee at the time of
the grant, and (v) any restrictions on performance shares shall lapse unless the
Compensation Committee determined otherwise at the time of the grant. In
addition, in the event that an optionee's or grantee's employment with, or
service as a director of, the Company terminates following a Change in Control,
each option or SAR exercisable as of the date of such termination shall remain
exercisable for the longer of (i) the first anniversary of such termination or
(ii) the stated expiration of the term of the option or SAR.
The 1993 LTIP has been terminated with respect to the granting of any new
awards. Stock options and other awards previously granted pursuant to the 1993
LTIP, however, remain outstanding. Pursuant to the terms of the 1993 LTIP and
subject to an optionee's rights under his or her option award agreement, in the
event of a Change of Control of the Company (as defined in the 1993 LTIP), all
stock options granted pursuant to the 1993 LTIP will become immediately and
fully exercisable.
CERTAIN RELATED PARTY TRANSACTIONS
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 $150,000 in 1998. Prof. Gerard T. Wrixon, a director of the
Company, was a Founder and Director of the Centre from 1982 until January 1999.
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. 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. 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.
16
<PAGE> 20
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, 1999 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 certified public 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 certified public 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 2000 ANNUAL MEETING
Stockholders who intend to present proposal(s) at the 2000 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 16, 1999. Such proposals must
meet the requirements set forth in the rules and regulations of the Securities
and Exchange Commission in order to be eligible for inclusion in the Company's
proxy statement for its 2000 Annual Meeting.
In addition, under the Company's By-laws, stockholders must comply with
specified procedures to nominate directors or introduce an item of business at
an annual meeting. Nominations or an item of business to be introduced at an
annual meeting must be submitted in writing and received by the Company
generally not less than 60 days nor more than 90 days in advance of an annual
meeting. To be in proper written form, a stockholder's notice must contain the
specific information required by the Company's By-laws. A copy of the Company's
By-laws which describes the advance notice procedures can be obtained from the
Secretary of the Company.
SOLICITATION OF PROXIES
Proxies will be solicited electronically, 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 $5,000 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.
17
<PAGE> 21
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, 1998, as filed with the Securities and
Exchange 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
Dated: March 31, 1999
Melville, New York
18
<PAGE> 22
PROXY
GENERAL SEMICONDUCTOR, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 1999
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 Wednesday, May 12, 1999 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
March 31, 1999. IF THIS PROXY IS RETURNED WITHOUT DIRECTION BEING GIVEN, THIS
PROXY WILL BE VOTED FOR PROPOSALS ONE AND TWO.
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> 23
Please mark / X /
your vote as
indicated in
this example.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSALS ONE AND
TWO.
FOR WITHHOLD AUTHORITY
ALL NOMINEES TO VOTE FOR ALL
LISTED BELOW NOMINEES LISTED
(EXCEPT AS MARKED BELOW
TO THE CONTRARY)
/ / / /
PROPOSAL ONE: 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.
Nominees: Steven B. Klinsky, Ronald A. Ostertag, Ronald Rosenzweig, Peter A.
Schwartz, Samuel L. Simmons and Prof. Gerard T. Wrixon
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME.
PROPOSAL TWO: To ratify the appointment of Deloitte & Touche LLP, independent
certified public accountants, as the Company's Auditor for the fiscal year
ending December 31, 1999.
FOR AGAINST ABSTAIN
/ / / / / /
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature(s):____________________________________________ Date: ________________
Signature(s):____________________________________________ Date: ________________
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.
-FOLD AND DETACH HERE-
<PAGE> 24
PROXY
GENERAL SEMICONDUCTOR, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 1999
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 Wednesday, May 12, 1999 at
10:00 a.m., local time, and at 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
March 31, 1999.
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> 25
Please mark /X/
your vote as
indicated in
this example.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSALS ONE AND
TWO.
FOR WITHHOLD AUTHORITY
ALL NOMINEES TO VOTE FOR ALL
LISTED BELOW NOMINEES LISTED
(EXCEPT AS MARKED BELOW
TO THE CONTRARY)
/ / / /
PROPOSAL ONE: 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.
Nominees: Steven B. Klinsky, Ronald A. Ostertag, Ronald Rosenzweig, Peter A.
Schwartz, Samuel L. Simmons and Prof. Gerard T. Wrixon
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME.
PROPOSAL TWO: To ratify the appointment of Deloitte & Touche LLP, independent
certified public accountants, as the Company's Auditor for the fiscal year
ending December 31, 1999.
FOR AGAINST ABSTAIN
/ / / / / /
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature(s):___________________________________ Date: __________________
Please sign as name appears hereon. If acting as attorney, executor,
administrator, trustee, guardian, etc., you should so indicate when signing.
-FOLD AND DETACH HERE-
