FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION NO. 69004
[LOGO] [LOGO]
JOINT PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The boards of directors of Vishay Intertechnology, Inc. and General
Semiconductor, Inc. have agreed on a merger. As a result of the merger, General
Semiconductor will become a wholly owned subsidiary of Vishay, and General
Semiconductor stockholders will receive 0.563 of a share of Vishay common stock
for each share of General Semiconductor common stock they own. We believe that
the merger represents an exciting opportunity for both of our companies. It will
create one of the world's leading manufacturers and distributors of discrete
semiconductor components, combine complementary product lines and promote
important synergies and cost savings.
We cannot complete the merger unless:
- the stockholders of General Semiconductor approve and adopt the merger
agreement; and
- the stockholders of Vishay approve an increase in the authorized capital
stock of Vishay so that there will be sufficient authorized shares for
issuance in the merger, and approve the issuance of shares of Vishay
common stock in connection with the merger.
The founding stockholders of Vishay, who together control approximately 54% of
its outstanding voting power, have agreed to vote all of the Vishay capital
stock they control in favor of the proposals.
Special meetings of the stockholders of General Semiconductor and of Vishay have
been scheduled to vote on the merger-related proposals.
Only stockholders of record of General Semiconductor as of Monday, October 1,
2001 and stockholders of record of Vishay as of Monday October 1, 2001 are
entitled to attend and vote at the special meetings. The dates, times and places
of the meetings are as follows:
For GENERAL SEMICONDUCTOR stockholders:
The special meeting of General Semiconductor stockholders will be held on
Friday, November 2, 2001, at 10:00 a.m. Eastern Time, at General Semiconductor's
corporate office at 10 Melville Park Road, Melville, New York 11747-3113.
For VISHAY stockholders:
The special meeting of Vishay stockholders will be held on Friday,
November 2, 2001, at 11:00 a.m. Eastern Time, at Vishay's corporate office at 63
Lincoln Highway, Malvern, Pennsylvania 19355-2120.
Whether or not you plan to attend the special stockholders meeting of your
company, please cast your vote either by completing the enclosed proxy card or
voting by telephone or over the internet.
Instructions for telephone and internet voting appear on the proxy card.
Vishay's common stock is listed on the New York Stock Exchange under the symbol
"VSH". General Semiconductor's common stock is also listed on the New York Stock
Exchange under the symbol "SEM".
This joint proxy statement/prospectus provides you with detailed information
about the proposed merger. WE ENCOURAGE YOU TO READ THIS ENTIRE JOINT PROXY
STATEMENT/PROSPECTUS CAREFULLY. In addition, you may obtain information about
our companies from documents that we have filed with the Securities and Exchange
Commission.
[LOGO] [LOGO]
Dr. Felix Zandman Ronald A. Ostertag
CHAIRMAN AND CHIEF EXECUTIVE OFFICER CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
Vishay Intertechnology, Inc. OFFICER
General Semiconductor, Inc.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF RISKS THAT YOU
SHOULD CONSIDER WITH RESPECT TO THE MERGER.
--------------------------------------------------------------------------------
Neither the Securities Exchange Commission nor any state securities regulator
has approved or disapproved the Vishay common stock to be issued under this
joint proxy statement/prospectus or determined if this joint proxy
statement/prospectus is accurate or adequate. Any representation to the contrary
is a criminal offense.
--------------------------------------------------------------------------------
This joint proxy statement/prospectus is dated October 2, 2001 and is first
being mailed to stockholders on or about October 3, 2001.
REFERENCES TO ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates by reference important
business and financial information about Vishay and General Semiconductor from
reports and documents that we have filed with the Securities and Exchange
Commission, but are not included in, or delivered with, this joint proxy
statement/prospectus. This information is available to you without charge upon
request. You can obtain documents related to Vishay and General Semiconductor
that are incorporated in this joint proxy statement/prospectus by requesting
them in writing or by telephone from the appropriate company:
VISHAY INTERTECHNOLOGY, INC. GENERAL SEMICONDUCTOR, INC.
63 LINCOLN HIGHWAY 10 MELVILLE PARK ROAD
MALVERN, PENNSYLVANIA 19355-2120 MELVILLE, NEW YORK 11747-3113
ATTN: SECRETARY ATTN: SECRETARY
TEL NO.: (610) 644-1300 TEL NO.: (631) 847-3000
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY FRIDAY, OCTOBER 26,
2001 IN ORDER TO RECEIVE THEM BEFORE YOUR SPECIAL MEETING.
See also "Where You Can Find More Information" on page i.
VOTING ELECTRONICALLY OR BY TELEPHONE
Vishay stockholders of record may submit their proxies:
- through the internet by visiting a web site established for that
purpose at "http://www.voteproxy.com" and following the instructions;
or
- by telephone by calling the toll-free number 1-800-PROXIES or
1-800-776-9437 in the United States, Canada or Puerto Rico on a
touch-tone phone and following the recorded instructions.
General Semiconductor stockholders of record may submit their proxies:
- through the internet by visiting a web site established for that
purpose at "http://www.proxyvoting.com/sem" and following the
instructions; or
- by telephone by calling the toll-free number 1-800-840-1208 in the
United States, Canada or Puerto Rico on a touch-tone phone and
following the recorded instructions.
If you hold your shares through a bank, broker or other custodian, check the
voting form supplied to you by your custodian to see if it offers internet or
telephone voting.
GENERAL SEMICONDUCTOR, INC.
10 MELVILLE PARK ROAD
MELVILLE, NEW YORK 11747-3113
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 2, 2001
------------------------
TO THE STOCKHOLDERS OF
GENERAL SEMICONDUCTOR, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of General
Semiconductor, Inc. will be held at General Semiconductor's corporate office at
10 Melville Park Road, Melville, New York 11747-3113, on Friday, November 2,
2001 at 10:00 a.m. Eastern Time for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of July 31, 2001, among Vishay
Intertechnology, Inc., a Delaware corporation, Vishay Acquisition Corp.,
a Delaware corporation and a wholly owned subsidiary of Vishay, and
General Semiconductor, Inc., a Delaware corporation, pursuant to which,
among other things, General Semiconductor would become a wholly owned
subsidiary of Vishay and holders of General Semiconductor common stock
would receive 0.563 shares of Vishay common stock for each share of
General Semiconductor common stock they own, as more fully explained in
the joint proxy statement/prospectus that accompanies this notice; and
2. To transact such other business as may properly be brought before the
special meeting or any adjournment or postponement of the meeting.
As more fully explained in the joint proxy statement/prospectus that
accompanies this notice, only holders of record of General Semiconductor common
stock at the close of business on Monday, October 1, 2001 are entitled to notice
of and to vote at the special meeting or any adjournment or postponement
thereof. The affirmative vote of the holders of shares representing a majority
of the outstanding shares of General Semiconductor common stock is required to
approve and adopt the merger agreement.
You are cordially invited to attend the special meeting of stockholders.
Whether or not you plan to attend, please ensure that your shares will be
represented at the meeting by taking any one of the following actions:
(1) completing, signing and dating the enclosed proxy card and returning it
promptly in the postage-prepaid envelope provided; (2) voting by telephone as
directed on the enclosed proxy card; or (3) voting over the internet as directed
on the enclosed proxy card.
The board of directors of General Semiconductor unanimously recommends that
General Semiconductor stockholders vote FOR the approval and adoption of the
merger agreement.
By Order of the Board of Directors,
[LOGO]
Stephen B. Paige
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Melville, New York
October 2, 2001
VISHAY INTERTECHNOLOGY, INC.
63 LINCOLN HIGHWAY
MALVERN, PENNSYLVANIA 19355-2120
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 2, 2001
------------------------
TO THE STOCKHOLDERS OF
VISHAY INTERTECHNOLOGY, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Vishay
Intertechnology, Inc. will be held at Vishay's corporate office at 63 Lincoln
Highway, Malvern, Pennsylvania 19355-2120, on Friday, November 2, 2001 at
11:00 a.m. Eastern Time for the following purposes:
1. To consider and vote upon a proposal to approve an amendment to Vishay's
Amended and Restated Certificate of Incorporation increasing the number
of authorized shares of Vishay common stock from 150,000,000 to
300,000,000, and increasing the number of authorized shares of Vishay's
Class B convertible common stock from 20,000,000 to 40,000,000;
2. To consider and vote upon a proposal to approve the issuance of Vishay
common stock in connection with the proposed merger as more fully
explained in the joint proxy statement/ prospectus that accompanies this
notice; and
3. To transact such other business as may properly be brought before the
special meeting or any adjournment or postponement of the meeting.
As more fully explained in the joint proxy statement/prospectus that
accompanies this notice, only holders of record of Vishay common stock and
Class B common stock at the close of business on Monday, October 1, 2001 are
entitled to notice of and to vote at the special meeting or any adjournment or
postponement thereof. The affirmative vote of the holders of shares representing
a majority of the outstanding voting power of Vishay is required to approve the
amendment to Vishay's certificate of incorporation providing for the increase of
authorized capital stock. The affirmative vote of the holders of shares
representing a majority of the votes cast is required to approve the issuance of
shares of Vishay common stock in connection with the merger, provided that
shares representing a majority of the outstanding voting power of Vishay are
voted on the proposal.
You are cordially invited to attend the special meeting of stockholders.
Whether or not you plan to attend, please ensure that your shares will be
represented at the meeting by taking any one of the following actions:
(1) completing, signing and dating the enclosed proxy card and returning it
promptly in the postage-prepaid envelope provided; (2) voting by telephone as
directed on the enclosed proxy card; or (3) voting over the internet as directed
on the enclosed proxy card.
The board of directors of Vishay unanimously recommends that Vishay
stockholders vote FOR approval of the proposal to increase the authorized
capital stock of Vishay and FOR approval of the issuance of Vishay common stock
in connection with the proposed merger.
By Order of the Board of Directors,
[LOGO]
William J. Spires
SECRETARY
Malvern, Pennsylvania
October 2, 2001
WHERE YOU CAN FIND MORE INFORMATION
Vishay and General Semiconductor file annual, quarterly and special reports,
proxy statements and other information with the SEC under the Securities
Exchange Act of 1934, as amended. You may read and copy this information at, or
obtain copies of this information by mail from, the SEC's Public Reference Room,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
The filings of Vishay and General Semiconductor with the SEC are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http://www.sec.gov".
You can also inspect reports, proxy statements and other information about
Vishay and General Semiconductor at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
Vishay filed a registration statement on Form S-4 to register with the SEC
the shares of Vishay common stock to be delivered in connection with the merger.
This joint proxy statement/prospectus is a part of that registration statement
and constitutes a prospectus of Vishay, in addition to being a proxy statement
of Vishay and General Semiconductor for the special meetings of Vishay
stockholders and General Semiconductor stockholders. As allowed by SEC rules,
this joint proxy statement/prospectus does not contain all the information you
can find in the registration statement or the exhibits to the registration
statement. You may obtain copies of the Form S-4 (and any amendments to that
document) in the manner described above.
This joint proxy statement/prospectus incorporates by reference the
following documents that Vishay and General Semiconductor have previously filed
with the SEC:
VISHAY SEC FILINGS
(FILE NO. 001-07416) PERIOD
----------------------------------------- -----------------------------------------
Annual Report on Form 10-K Fiscal year ended December 31, 2000
Quarterly Reports on Form 10-Q Quarterly periods ended March 31, 2001
and June 30, 2001
Current Report on Form 8-K Filed on June 18, 2001
Registration Statement on Form 8-A Filed on December 27, 1983
GENERAL SEMICONDUCTOR SEC FILINGS
(FILE NO. 001-05442) PERIOD
----------------------------------------- -----------------------------------------
Annual Report on Form 10-K Fiscal year ended December 31, 2000
Quarterly Reports on Form 10-Q Quarterly periods ended March 31, 2001
and June 30, 2001, as amended by filing
on August 27, 2001
Current Reports on Form 8-K Filed on February 8, 2001, March 12,
2001, April 4, 2001, April 19, 2001,
April 30, 2001, June 15, 2001, July 19,
2001, August 1, 2001, as amended by
filing on August 6, 2001, and August 17,
2001
Registration Statement on Form 8-A/A Filed on August 1, 2001
i
Vishay and General Semiconductor also are incorporating by reference
additional documents that they file with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act between the date of this joint
proxy statement/prospectus and the date of our special meetings. The information
incorporated by reference is considered to be part of this joint proxy
statement/prospectus, except for any information that is superseded by
information that is included in this joint proxy statement/prospectus.
Vishay has supplied all information contained or incorporated by reference
in this joint proxy statement/prospectus relating to Vishay, and General
Semiconductor has supplied all information contained or incorporated by
reference in this joint proxy statement/prospectus relating to General
Semiconductor.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS WHEN DECIDING HOW TO VOTE ON
THE PROPOSALS TO BE CONSIDERED AT THE SPECIAL MEETINGS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED
IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT PROXY STATEMENT/PROSPECTUS
IS DATED OCTOBER 2, 2001. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED
IN THIS JOINT PROXY STATEMENT/ PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THIS DATE, AND NEITHER THE MAILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR
THE DELIVERY OF SHARES OF VISHAY COMMON STOCK IN CONNECTION WITH THE MERGER WILL
CREATE ANY IMPLICATION TO THE CONTRARY.
ii
TABLE OF CONTENTS
PAGE
--------
WHERE YOU CAN FIND MORE INFORMATION... i
QUESTIONS AND ANSWERS ABOUT THE
VISHAY/GENERAL SEMICONDUCTOR
MERGER.............................. 1
SUMMARY............................... 5
The Companies....................... 5
The Special Meetings................ 6
The Merger.......................... 7
Opinion of Financial Advisor to
General Semiconductor............. 10
Comparison of Rights of Stockholders
of General Semiconductor and
Vishay............................ 10
RISK FACTORS.......................... 11
FORWARD-LOOKING INFORMATION........... 16
SELECTED CONSOLIDATED FINANCIAL DATA
OF VISHAY AND GENERAL
SEMICONDUCTOR....................... 17
Selected Consolidated Historical
Financial Data of Vishay.......... 18
Selected Consolidated Historical
Financial Data of General
Semiconductor..................... 19
Selected Unaudited Pro Forma
Consolidated Financial Data....... 20
UNAUDITED COMPARATIVE PER SHARE
DATA................................ 21
COMPARATIVE MARKET VALUE DATA......... 22
CURRENT DEVELOPMENTS.................. 22
GENERAL SEMICONDUCTOR SPECIAL
MEETING............................. 23
Joint Proxy Statement/Prospectus.... 23
Date, Time and Place................ 23
Purpose of the General Semiconductor
Special Meeting................... 23
Record Date; Voting Rights; Quorum;
Required Vote..................... 23
Share Ownership and Voting Power of
Management........................ 23
PAGE
--------
Recommendation of the Board of
Directors of General
Semiconductor..................... 23
Voting and Revocation of Proxies;
Shares Held in "Street Name"...... 24
Solicitation of Proxies............. 25
VISHAY SPECIAL MEETING................ 26
Joint Proxy Statement/Prospectus.... 26
Date, Time and Place................ 26
Purpose of the Vishay Special
Meeting........................... 26
Record Date; Voting Rights; Quorum;
Required Vote..................... 26
Share Ownership and Voting Power of
Management........................ 26
Recommendation of the Board of
Directors of Vishay............... 27
Voting and Revocation of Proxies;
Shares Held in "Street Name"...... 27
Solicitation of Proxies............. 28
THE MERGER............................ 29
Background of the Merger............ 29
Recommendation of the Board of
Directors of General
Semiconductor; Reasons of General
Semiconductor for the Merger...... 33
Opinion of Financial Advisor to
General Semiconductor............. 35
Recommendation of the Board of
Directors of Vishay; Reasons of
Vishay for the Merger............. 43
Issuance of Shares in Connection
with the Merger................... 45
Interests of Certain Persons in the
Merger............................ 45
Material United States Federal
Income Tax Consequences........... 47
Accounting Treatment................ 49
Regulatory Approvals Required for
the Merger........................ 49
iii
PAGE
--------
Federal Securities Law
Consequences...................... 50
Dividends........................... 50
Stock Exchange Listing.............. 51
Appraisal Rights.................... 51
THE MERGER AGREEMENT.................. 52
The Merger.......................... 52
Effective Time...................... 52
Merger Consideration................ 52
Representations and Warranties...... 53
Conduct of Business by General
Semiconductor..................... 54
Conduct of Business by Vishay....... 55
No Solicitation..................... 56
Certain Other Covenants............. 58
Conditions to Completion of the
Merger............................ 59
Termination......................... 61
Fees and Expenses................... 63
Amendment and Waiver; Parties in
Interest.......................... 64
Voting Agreements................... 65
COMPARATIVE PER SHARE PRICES AND
DIVIDENDS........................... 66
UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS...... 67
PAGE
--------
VISHAY CAPITAL INCREASE PROPOSAL...... 72
Authorized and Outstanding Capital
Stock............................. 73
The Class B Common Stock............ 73
The LYONs........................... 74
The Siliconix Offer and Other
Possible Transactions............. 74
Miscellaneous....................... 75
COMPARISON OF RIGHTS OF STOCKHOLDERS
OF GENERAL SEMICONDUCTOR AND
VISHAY.............................. 76
Capitalization...................... 76
Board of Directors.................. 77
Stockholders Meetings............... 78
Amendments to Organizational
Documents......................... 80
Limitation of Liability of
Directors......................... 80
Indemnification of Directors and
Officers.......................... 80
Delaware Business Combination Law... 82
Stockholder Rights Plan............. 82
LEGAL MATTERS......................... 83
EXPERTS............................... 83
SUBMISSION OF STOCKHOLDER PROPOSALS... 83
ANNEXES
Annex A--Agreement and Plan of
Merger
Annex B--Opinion of Credit Suisse
First Boston
iv
QUESTIONS AND ANSWERS ABOUT THE
VISHAY/GENERAL SEMICONDUCTOR MERGER
Q. WHY ARE VISHAY AND GENERAL SEMICONDUCTOR PROPOSING THE MERGER?
A. We believe that a merger of Vishay and General Semiconductor will create one
of the world's leading manufacturers and distributors of discrete
semiconductor products. The products of our two companies are complementary,
and the combination is expected to yield cost savings and economies of scale
in manufacturing, marketing, research and development and product
innovation. These anticipated benefits should be particularly important to
our companies, as we continue to experience challenging times in the
electronic components industry.
For stockholders of General Semiconductor, the merger will allow
participation in a larger and more diversified public company. It will also
give them a significant premium for their shares when compared to the ratios
of the price of General Semiconductor stock to the price of Vishay stock in
the period prior to the announcement of the merger.
For stockholders of Vishay, the merger is an opportunity to assume a
leadership role in important segments of the discrete semiconductor market
and to position their company for continuing growth when the
telecommunication and computer industries emerge from today's difficult
economic environment.
The reasons General Semiconductor and Vishay are proposing the merger are
discussed in more detail later in this joint proxy statement/prospectus. See
"Recommendation of the Board of Directors of General Semiconductor; Reasons
of General Semiconductor for the Merger" beginning on page 33 and
"Recommendation of the Board of Directors of Vishay; Reasons of Vishay for
the Merger" beginning on page 43.
Q. WHAT WILL I RECEIVE IN THE MERGER?
A. If the merger is completed, holders of General Semiconductor common stock
will receive 0.563 of a share of Vishay common stock in exchange for each of
their shares of General Semiconductor common stock. Vishay will pay cash
instead of issuing fractional shares to General Semiconductor stockholders.
Vishay stockholders will not receive any additional shares as a result of
the merger.
Q. WHAT WILL BE THE INTERESTS OF THE CURRENT VISHAY AND GENERAL SEMICONDUCTOR
STOCKHOLDERS IN THE COMBINED COMPANY?
A. Immediately following the merger, the current stockholders of Vishay will
hold approximately 86.6% of the equity and 92.9% of the voting power of the
combined company, and the current stockholders of General Semiconductor will
hold approximately 13.4% of the equity and 7.1% of the voting power of the
combined company.
Q. WHY ARE STOCKHOLDERS OF VISHAY BEING ASKED TO APPROVE AN INCREASE IN
VISHAY'S AUTHORIZED CAPITAL STOCK?
A. Vishay's stockholders are being asked to approve an increase in the
authorized number of shares of common stock from 150 million to 300 million
and an increase in the authorized number of shares of Class B common stock
from 20 million to 40 million. At present, the number of authorized but
unissued shares of Vishay common stock is insufficient for issuance of all
shares deliverable on conversion or exercise of all outstanding convertible
securities and stock options of Vishay, and there are no available
authorized but unissued shares of Vishay common stock for issuance in the
merger or for any other purpose. Increasing the authorized shares of common
stock is necessary to complete the merger and satisfy all existing
obligations to issue common stock. In addition, the
1
proposed increase will provide Vishay with flexibility to effect future
option grants, future stock distributions or future acquisitions. Increasing
the authorized shares of Class B common stock is necessary to permit Vishay
to make required pro rata stock distributions on the Class B common stock if
it elects to make stock distributions on its common stock.
Q. WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A. The merger is subject to various conditions described in the merger
agreement. We anticipate that the last of these conditions to be satisfied
will be the stockholder approvals at the special meetings of General
Semiconductor and Vishay stockholders described in this joint proxy
statement/ prospectus. Accordingly, if our stockholders approve the
merger-related proposals, the merger should be completed shortly after the
meetings.
Q. WHAT STOCKHOLDER APPROVALS ARE NEEDED?
A. Approval and adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of General
Semiconductor stock. Vishay stockholders are not required to approve the
merger or the merger agreement. However, under the rules of the New York
Stock Exchange, on which Vishay's shares are listed, Vishay stockholders
must approve the issuance of Vishay common stock in the merger. The vote
required is a majority of the votes cast, provided that a majority of the
outstanding voting power participates in the vote. The increase in Vishay's
authorized capital stock requires an amendment to Vishay's certificate of
incorporation that must be approved by the holders of shares representing a
majority of the outstanding voting power of Vishay.
Q. WHAT IF I DON'T VOTE?
A. Because approval and adoption of the merger agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of
General Semiconductor, failing to cast a vote or abstaining from voting will
have the same effect as voting against approval and adoption of the merger
agreement. A proxy card for the General Semiconductor special meeting that
has been properly completed and returned but that does not indicate how the
stockholder wishes to vote will be counted as a vote in favor of approval
and adoption of the merger agreement.
The founding stockholders of Vishay, who together control approximately 54%
of Vishay's outstanding voting power, have agreed to vote in favor of the
increase in Vishay's authorized capital stock and the issuance of Vishay
common stock in connection with the merger. Accordingly, these measures will
be adopted regardless of how any other Vishay stockholder votes.
Q. WHAT SHOULD I DO NOW?
A. After carefully reading and considering the information contained in this
joint proxy statement/prospectus, you should cast your vote:
- by completing, signing and dating your proxy card and returning it
promptly in the postage-prepaid envelope provided; or
- by telephone as directed on the enclosed proxy card; or
- over the internet as directed on the enclosed proxy card.
You also can attend the special stockholders meeting of your company and
vote in person.
The General Semiconductor board of directors recommends that you vote FOR
approval and adoption of the merger agreement.
The Vishay board of directors recommends that you vote FOR approval of the
amendment to Vishay's certificate of incorporation to increase the
authorized number of shares of Vishay capital stock and FOR the issuance of
Vishay common stock in connection with the merger.
2
Q. WHEN SHOULD I DELIVER MY PROXY? CAN I CHANGE MY VOTE?
A. You should deliver your proxy as soon as possible to ensure that your shares
will be voted at the special stockholders meeting of your company. You can
change your vote at any time prior to the special stockholders meeting by
submitting a later dated, signed proxy card or by subsequently submitting
your changed vote by telephone or over the internet. You can also change
your vote by attending the special stockholders meeting of your company and
voting in person.
Q. IF MY SHARES OF STOCK ARE HELD IN "STREET NAME" BY MY BANK OR BROKER, HOW
CAN I VOTE?
A. Your bank or broker will vote your shares only if you provide it with
instructions on how to vote. You should have received with this joint proxy
statement/prospectus a voting form from your bank, broker or other custodian
that you can use to provide these instructions. Complete the voting form in
accordance with its directions. The voting form should also indicate whether
voting by telephone or over the internet is available to you and, if so, how
to vote in this manner.
Q. SHOULD STOCKHOLDERS SEND IN THEIR GENERAL SEMICONDUCTOR STOCK CERTIFICATES
NOW?
A. No. After the merger is completed, you will receive written instructions on
how to exchange your General Semiconductor stock certificates for Vishay
stock certificates. Please do not send in your General Semiconductor stock
certificates with your proxy.
Q. WHAT SHOULD I DO IF I HAVE QUESTIONS?
A. General Semiconductor stockholders may call Georgeson Shareholder
Communications Inc., which is assisting General Semiconductor, toll-free at
1-800-223-2064.
Vishay stockholders may call MacKenzie Partners, Inc., which is assisting
Vishay, collect at 1-212-929-5500, or toll-free at 1-800-322-2885.
3
[This page intentionally left blank]
4
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS JOINT PROXY
STATEMENT/PROSPECTUS AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO BETTER UNDERSTAND THE MERGER AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS
ENTIRE JOINT PROXY STATEMENT/PROSPECTUS AND THE DOCUMENTS TO WHICH YOU HAVE BEEN
REFERRED. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE I. IN PARTICULAR,
YOU SHOULD READ THE DOCUMENTS ATTACHED TO THIS JOINT PROXY STATEMENT/
PROSPECTUS. WE HAVE INCLUDED PAGE REFERENCES DIRECTING YOU TO A MORE COMPLETE
DESCRIPTION OF EACH ITEM PRESENTED IN THIS SUMMARY.
THE COMPANIES
VISHAY INTERTECHNOLOGY, INC.
63 Lincoln Highway
Malvern, Pennsylvania 19355-2120
(610) 644-1300
Vishay is a leading international manufacturer and supplier of passive and
active electronic components, particularly resistors, capacitors, inductors,
diodes and transistors. Vishay offers its customers "one-stop" access to one of
the most comprehensive electronic component lines of any manufacturer in the
United States or Europe. Passive electronic components and discrete active
electronic components, along with integrated circuits, are the primary elements
of every electronic circuit. Components manufactured by Vishay are used in
virtually all types of electronic products, including those in the computer,
telecommunications, military/ aerospace, instrument, automotive, medical and
consumer electronics industries.
Since 1985, Vishay has pursued a business strategy that principally consists of
the following elements:
- expansion within the electronic components industry, primarily through the
acquisition of other manufacturers with established positions in major
markets, reputations for product quality and reliability and product lines
with which Vishay has substantial marketing and technical expertise;
- reduction of selling, general and administrative expenses through the
integration or elimination of redundant sales offices and administrative
functions at acquired companies;
- achievement of significant production cost savings through the transfer to
and expansion of manufacturing operations in countries such as Israel,
Mexico, Portugal, the Czech Republic, Taiwan and the People's Republic of
China, where Vishay can take advantage of lower labor costs and available
tax and other government-sponsored incentives; and
- maintenance of significant production facilities in those regions where
Vishay markets the bulk of its products in order to enhance customer
service and responsiveness.
As a result of this strategy, Vishay has grown during the past fifteen years
from a small manufacturer of precision resistors and strain gages to one of the
world's largest manufacturers and suppliers of a broad line of electronic
components.
Shares of Vishay common stock are listed on the New York Stock Exchange under
the symbol "VSH".
For additional information regarding the business of Vishay, please see Vishay's
Annual Report on Form 10-K and other filings of Vishay with the SEC, which are
incorporated by reference into this joint proxy statement/ prospectus. See
"Where You Can Find More Information" on page i.
5
GENERAL SEMICONDUCTOR, INC.
10 Melville Park Road
Melville, New York 11747-3113
(631) 847-3000
General Semiconductor is a market leader in the power semiconductor components
sector of the semiconductor industry. It designs, manufactures and sells a broad
array of power management products, including low-to-medium power rectifiers,
transient voltage suppressors, small signal transistors, diodes and MOSFETs.
Power management products are semiconductor devices and circuits that facilitate
and optimize the efficient use of energy in wired and wireless electronic
systems or subsystems. General Semiconductor is a world leader in the power
rectifier and transient voltage suppressor markets, which products represented
84% of its 2000 net sales. General Semiconductor's products condition current
and voltage, protect electrical circuits from power surges, amplify and switch
small electrical signals and regulate voltage levels in circuits. They are
essential components of most electronic devices and systems.
General Semiconductor's products are primarily targeted for use in the computer,
automotive, telecommunications, lighting and consumer electronics industries.
They are sold primarily to original equipment manufacturers, electronic
distributors and contract equipment manufacturers.
Shares of General Semiconductor common stock are listed on the New York Stock
Exchange under the symbol "SEM".
For additional information regarding the business of General Semiconductor,
please see "Current Developments" on page 22 and General Semiconductor's Annual
Report on Form 10-K and other filings of General Semiconductor with the SEC,
which are incorporated by reference into this joint proxy statement/prospectus.
See "Where You Can Find More Information" on page i.
THE SPECIAL MEETINGS (PAGES 23 AND 26)
GENERAL SEMICONDUCTOR SPECIAL MEETING
The special meeting of General Semiconductor stockholders will be held on
Friday, November 2, 2001, at 10:00 a.m. Eastern Time, at General Semiconductor's
corporate office at 10 Melville Park Road, Melville, New York 11747-3113.
The record date for General Semiconductor stockholders entitled to receive
notice of and to vote at the General Semiconductor special meeting is the close
of business on Monday, October 1, 2001. On that date, there were 37,838,167
shares of General Semiconductor common stock outstanding, of which approximately
1,478,486 were held by directors and executive officers of General
Semiconductor. Each holder of record of General Semiconductor common stock is
entitled to one vote per share on approval and adoption of the merger agreement.
Approval and adoption of the merger agreement requires the affirmative vote of
the holders of a majority of the outstanding shares of General Semiconductor
stock.
VISHAY SPECIAL MEETING
The special meeting of Vishay stockholders will be held on Friday, November 2,
2001, at 11:00 a.m. Eastern Time, at Vishay's corporate office at 63 Lincoln
Highway, Malvern, Pennsylvania 19355-2120.
The record date for Vishay stockholders entitled to receive notice of and to
vote at the Vishay special meeting is the close of business on Monday,
October 1, 2001. On that date, there were 122,456,017 shares of Vishay common
stock and 15,496,634 shares of Class B common stock outstanding, of which
approximately 3,311,000 shares of common stock and 15,397,000 shares of Class B
common stock were held by directors, officers and affiliates of Vishay. Each
holder of record of Vishay common stock is entitled to one vote per share and
each holder of Class B common stock is entitled to 10 votes per share on the
proposals to be presented at the Vishay special meeting of stockholders.
6
The increase in Vishay's authorized capital stock will be accomplished by an
amendment to Vishay's certificate of incorporation that requires approval by the
holders of shares representing a majority of the outstanding voting power of
Vishay. Approval of the issuance of Vishay common stock in connection with the
merger, in accordance with the rules of the New York Stock Exchange, requires
the affirmative vote of the holders of a majority of the votes cast, provided
that a majority of the outstanding voting power participates in the vote.
THE MERGER (PAGE 29)
The proposed merger is to be completed pursuant to a merger agreement among
Vishay, Vishay Acquisition Corp., a wholly owned subsidiary of Vishay, and
General Semiconductor. In the merger, Vishay Acquisition will merge with and
into General Semiconductor, and General Semiconductor will become a wholly owned
subsidiary of Vishay.
THE EXCHANGE RATIO; MERGER CONSIDERATION
Upon completion of the merger, General Semiconductor stockholders will receive
0.563 of a share of Vishay common stock in exchange for each share of General
Semiconductor common stock held. General Semiconductor stockholders will receive
cash instead of any fractional shares.
APPRAISAL RIGHTS
Under Delaware law, which governs the merger, General Semiconductor stockholders
will not have the right to dissent and receive the appraised value of their
shares in connection with the merger.
RESTRICTIONS ON THE ABILITY TO SELL SHARES OF VISHAY COMMON STOCK
All shares of Vishay common stock received by stockholders of General
Semiconductor in connection with the merger will be freely transferable, except
for those shares received by General Semiconductor stockholders who are
considered to be "affiliates" of General Semiconductor under the Securities Act
of 1933 at the time of the General Semiconductor special meeting. See "Federal
Securities Law Consequences" on page 50.
TAX TREATMENT
We anticipate that the merger, as it has been structured, will constitute a
reorganization for United States federal income tax purposes. Neither Vishay nor
General Semiconductor will be obligated to complete the merger unless it
receives a legal opinion to that effect. Assuming the merger qualifies as a
reorganization, the receipt of shares of Vishay common stock in the merger will
generally be tax-free to General Semiconductor stockholders for United States
federal income tax purposes, except for tax with respect to any gain on cash
received for fractional shares of Vishay common stock.
To review the tax consequences of the merger in greater detail, see "Material
United States Federal Income Tax Consequences" beginning on page 47. The tax
consequences to you will depend on the facts and circumstances of your own
situation. Please consult your tax advisor for a full understanding of the tax
consequences to you.
7
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the General Semiconductor board of
directors in favor of approval and adoption of the merger agreement,
stockholders of General Semiconductor should be aware that members of General
Semiconductor's board of directors and its executive officers and key employees
will receive benefits as a result of the merger that will be in addition to or
different from the benefits received by General Semiconductor stockholders
generally. For example, each option to purchase shares of General Semiconductor
common stock held by General Semiconductor's directors and executive officers,
as well as each option held by all other General Semiconductor employees,
whether or not then vested and exercisable, will become fully vested and
exercisable upon completion of the merger. Several of General Semiconductor's
officers will be entitled to various other benefits if the merger is completed.
In addition, various General Semiconductor executive officers and key employees
will be entitled to receive severance benefits upon a qualifying actual or
constructive termination of their employment within specified time periods
following the merger. See "Interests of Certain Persons in the Merger" beginning
on page 45.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
The merger is subject to the premerger notification requirements under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. Both Vishay and General
Semiconductor have filed the requisite notification and report forms under the
HSR Act. The waiting period under the HSR Act expired on October 1, 2001. The
merger is also subject to notification to, and approval by, antitrust
authorities in various foreign countries. Vishay and General Semiconductor have
made or are in the process of making the required filings in these
jurisdictions.
CONDITIONS TO COMPLETION OF THE MERGER
Completion of the merger depends upon satisfaction of a number of conditions,
including:
- continuing effectiveness of the registration statement of which this joint
proxy statement/prospectus is a part;
- approval and adoption by the General Semiconductor stockholders of the
merger agreement;
- approval by the Vishay stockholders of an increase in the authorized
capital stock of Vishay sufficient for the issuance of shares of Vishay
common stock in connection with the merger and the issuance of shares of
Vishay common stock in connection with the merger;
- the absence of legal restraints to the completion of the merger, including
the receipt of all necessary material regulatory clearances;
- approval for listing on the New York Stock Exchange of the Vishay common
stock to be issued or reserved for issuance in connection with the merger;
and
- the receipt of legal opinions regarding the tax-free nature of the merger.
For further details, see "Conditions to Completion of the Merger" beginning on
page 59.
TERMINATION
Either Vishay or General Semiconductor may terminate the merger agreement if:
- both parties consent in writing;
- the merger is not completed by January 31, 2002 through no fault of the
party seeking to terminate the merger;
- the General Semiconductor stockholders do not approve and adopt the merger
agreement;
- the Vishay stockholders do not approve the necessary increase in Vishay's
authorized capital stock or the issuance of shares of Vishay common stock
in connection with the merger;
8
- there are legal restraints preventing the merger;
- a representation or warranty of the other party in the merger agreement
was untrue or, unless such representation or warranty was specifically
made as of a particular date, becomes untrue, which would be reasonably
expected to result in a material adverse effect on that party, which
misrepresentation cannot be remedied; or
- the other party materially breaches any covenant or agreement and that
breach cannot be remedied.
Vishay may also terminate the merger agreement if General Semiconductor's board
of directors:
- withdraws or adversely modifies its approval, adoption or recommendation
of the merger agreement;
- recommends an alternative acquisition transaction with a third party; or
- fails either to include its recommendation of the merger agreement in this
joint proxy statement/prospectus or to solicit proxies in favor of the
merger agreement.
General Semiconductor may terminate the merger agreement to accept an
alternative acquisition proposal if:
- its board of directors determines in good faith, after consultation with a
nationally recognized investment banking firm, that the alternative
proposal is financially more favorable to General Semiconductor
stockholders than the proposed merger;
- General Semiconductor gives Vishay two days notice of its intention to
enter into the alternative transaction and Vishay does not make an offer
that the General Semiconductor board of directors determines is at least
as favorable as the alternative transaction; and
- General Semiconductor pays Vishay the termination fee and expense
reimbursement described below.
General Semiconductor may also terminate the merger agreement if:
- Vishay adversely withdraws or modifies its approval, adoption or
recommendation of the proposals to amend Vishay's certificate of
incorporation to increase the authorized shares of capital stock or to
issue the Vishay common stock in connection with the merger; or
- the Vishay stockholders who have a controlling voting interest in Vishay
and who have executed agreements to vote in favor of the proposals at the
Vishay special stockholders meeting repudiate the agreements or the
agreements are otherwise unenforceable.
For further details, see "Termination" beginning on page 61.
TERMINATION FEE AND EXPENSES; NO SOLICITATION PROVISIONS
If the merger is terminated under specified circumstances, generally involving
an alternative acquisition transaction, General Semiconductor may be required to
pay a termination fee of $22.5 million to Vishay and/or pay reasonable
out-of-pocket expenses of up to $1.0 million in the aggregate to Vishay. Vishay
may be required to pay General Semiconductor up to $1.0 million of General
Semiconductor's reasonable out-of-pocket expenses if the merger is terminated
under some circumstances. See "Fees and Expenses" beginning on page 63 for a
discussion of the circumstances in which the fee and expenses are payable.
General Semiconductor has agreed that it will not solicit or encourage the
initiation of any inquiries or proposals regarding any alternative acquisition
transactions with third parties. General Semiconductor may respond to
unsolicited transaction proposals if required by the fiduciary duties of General
Semiconductor's board of directors. General Semiconductor must promptly notify
Vishay if it receives proposals for any such alternative acquisition
transactions. See "No Solicitation" beginning on page 56.
The termination fee and the no solicitation provisions may have the effect of
discouraging persons who might be interested in entering into an acquisition
transaction with General Semiconductor from proposing an alternative acquisition
transaction.
9
OPINION OF FINANCIAL ADVISOR TO GENERAL SEMICONDUCTOR (PAGE 35)
On July 31, 2001, Credit Suisse First Boston, General Semiconductor's financial
advisor, delivered its oral opinion to the General Semiconductor board of
directors and subsequently confirmed in writing that, as of that date and based
on and subject to the matters described in its written opinion, the exchange
ratio provided for in the merger agreement was fair to the holders of General
Semiconductor common stock from a financial point of view. See "Opinion of
Financial Advisor to General Semiconductor" beginning on page 35. The full text
of the written opinion of Credit Suisse First Boston, dated July 31, 2001, is
attached as Annex B to this joint proxy statement/ prospectus. You should read
this opinion in its entirety for a description of the procedures followed,
assumptions made, matters considered and limitations on the review undertaken in
delivering this opinion. Credit Suisse First Boston's opinion is directed to the
General Semiconductor board of directors and does not constitute a
recommendation to any stockholder as to any matter relating to the merger.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF GENERAL SEMICONDUCTOR AND VISHAY
(PAGE 76)
The rights of General Semiconductor stockholders are governed by Delaware law
and General Semiconductor's Restated Certificate of Incorporation and its
Amended and Restated Bylaws. The rights of Vishay stockholders are governed by
Delaware law and Vishay's Amended and Restated Certificate of Incorporation and
its Amended and Restated Bylaws. For a summary of material differences between
the rights of General Semiconductor stockholders and Vishay stockholders, see
"Comparison of Rights of Stockholders of General Semiconductor and Vishay"
beginning on page 76.
10
RISK FACTORS
In addition to reading and considering the other information we have
included or incorporated by reference in this joint proxy statement/prospectus,
General Semiconductor stockholders should carefully read and consider the
following factors in evaluating the proposal to be considered at the General
Semiconductor special stockholders meeting.
RISKS FACTORS RELATING TO THE PROPOSED MERGER
SINCE THE MARKET PRICE OF VISHAY SHARES WILL VARY, GENERAL SEMICONDUCTOR
STOCKHOLDERS CANNOT BE CERTAIN OF THE VALUE OF THE CONSIDERATION THEY WILL
RECEIVE IN THE MERGER.
Upon completion of the merger, General Semiconductor stockholders will
receive 0.563 of a share of Vishay common stock for each of their shares of
General Semiconductor common stock. Based on the closing price of Vishay common
stock on the New York Stock Exchange of $24.05 on July 31, 2001, the day the
merger agreement was signed, the value of 0.563 of a share of Vishay common
stock was $13.54. The market price for Vishay common stock at the time of the
merger may be different from the July 31, 2001 price because of market
fluctuations. The market value of Vishay common stock fluctuates for many
reasons, including changes in the business, operations or prospects of Vishay,
regulatory considerations or general market or economic conditions. The exchange
ratio will not be adjusted in the event of any increase or decrease in the
market price of Vishay common stock or General Semiconductor common stock. In
particular, General Semiconductor stockholders will not receive a greater number
of shares of Vishay common stock if the price per share of Vishay common stock
at the time of the merger is less than the July 31, 2001 price of $24.05.
Although we expect to complete the merger shortly after the special stockholders
meetings, it is possible that the merger will not be completed until a
significant time has passed after these special meetings. Because of this, at
the time of the General Semiconductor special meeting, General Semiconductor
stockholders will not know the exact market value of the Vishay stock they will
receive when the merger is completed. On October 1, 2001, the last practicable
trading day prior to the date of this joint proxy statement/ prospectus, the
closing price of Vishay common stock on the New York Stock Exchange was $17.40.
Based on this price, the value of 0.563 of a share of Vishay common stock was
$9.80.
THE TRADING PRICE OF VISHAY COMMON STOCK MAY BE AFFECTED BY FACTORS
DIFFERENT FROM THOSE AFFECTING THE PRICE OF GENERAL SEMICONDUCTOR COMMON STOCK.
Upon completion of the merger, holders of General Semiconductor common stock
will become holders of Vishay common stock. Vishay's business differs from that
of General Semiconductor. General Semiconductor is engaged solely in the
manufacture and sale of discrete semiconductor components, particularly power
devices. Vishay began as a manufacturer and distributor of passive electronic
components, and this segment of Vishay continues to represent the largest part
of its business. Accordingly, Vishay's results of operations, as well as the
trading price of shares of Vishay common stock, may be affected by factors
different from those affecting General Semiconductor's results of operations and
the price of General Semiconductor common stock.
THE EXPECTED BENEFITS OF THE COMBINATION MAY NOT BE REALIZED.
We cannot assure you that our two companies will be successfully combined
into a single entity. The combining of companies such as Vishay and General
Semiconductor involves a number of risks, including:
- the diversion of management's attention to the combining of operations;
- difficulties in the combining of our operations and systems, particularly
our sales and marketing organizations, our information and software
systems, and our research and development efforts;
11
- difficulties in the assimilation and retention of employees;
- challenges in keeping customers; and
- potential adverse short-term effects on operating results.
Because of difficulties in combining operations, we may not be able to
realize the cost savings and other benefits that we hope to achieve after
completion of the merger. If we cannot successfully combine our operations, we
may experience a material adverse effect on our business, financial condition or
results of operations.
RISK FACTORS RELATING TO VISHAY'S BUSINESS GENERALLY
VISHAY'S BUSINESS IS CYCLICAL AND THE CURRENT DECLINE IN DEMAND IN THE
ELECTRONIC COMPONENT INDUSTRY MAY CONTINUE AND MAY BECOME MORE PRONOUNCED.
Vishay and others in the electronic and semiconductor component industry
have recently experienced a decline in product demand on a global basis,
resulting in order cancellations and deferrals. This decline is primarily
attributable to a slowing of growth in the personal computer and cellular
telephone product markets. This slowdown may continue and may become more
pronounced. The current slowdown in demand, as well as recessionary trends in
the global economy, makes it more difficult for Vishay to predict its future
sales, which also makes it more difficult to manage its operations, and could
adversely impact Vishay's results of operations. In the past, adverse economic
trends that resulted in a slowdown in demand for electronic components have
materially and adversely impacted Vishay's results of operations. A decrease in
the current demand for Vishay's products, or an increase in supply due to the
expansion of production capacity by Vishay's competitors, could cause a
significant drop in Vishay's average sales prices, which could, in turn, cause a
reduction in Vishay's gross margins and operating profits. In addition, at the
initial stage of a business cycle, increased efforts by distributors to sell
inventory remaining from the prior cycle may cause average selling prices to
decrease. Vishay's published operating results for the first half of 2001
reflect some of these industry trends. For example, during the first half of
2001 restructuring costs were $35.3 million as a result of Vishay's accelerated
effort to streamline operations in response to the continued weakness in the
electronic components market at the time. Vishay estimates that it will incur
additional restructuring costs during 2001 of approximately $35 million.
Because it operates in many of the same markets as Vishay, General
Semiconductor has also been negatively affected by the current downward trends
in the electronic components industry and is subject to many of the same pricing
and other operational pressures as Vishay. However, because their businesses are
not identical, it is possible that the business of General Semiconductor on a
standalone basis could rebound more quickly than Vishay's businesses, taken as a
whole.
IN THE PAST VISHAY HAS GROWN THROUGH ACQUISITIONS BUT THIS MAY NOT CONTINUE.
Vishay's long-term historical growth in revenues and net earnings has
resulted in large part from its strategy of expansion through acquisitions.
However, we cannot assure you that Vishay will identify or complete transactions
with suitable acquisition candidates in the future. We also cannot assure you
that acquisitions Vishay completes in the future will be successful. If an
acquired business fails to operate as anticipated or cannot be successfully
integrated with Vishay's other businesses, Vishay's results of operations,
enterprise value, market value and prospects could all be materially and
adversely affected.
12
FUTURE ACQUISITIONS COULD REQUIRE VISHAY TO ISSUE ADDITIONAL INDEBTEDNESS OR
EQUITY.
If Vishay were to undertake a substantial acquisition for cash, the
acquisition would likely need to be financed in part through bank borrowings or
the issuance of public or private debt. This would likely decrease Vishay's
ratio of earnings to fixed charges and adversely affect other leverage criteria.
Under Vishay's existing credit facility, Vishay is required to obtain the
lenders' consent for certain additional debt financing, is required to comply
with other covenants including the application of specific financial ratios and
is restricted from paying cash dividends on its capital stock.
We cannot assure you that the necessary acquisition financing would be
available to Vishay on acceptable terms when required. If Vishay were to
undertake an acquisition for equity, the acquisition may have a dilutive effect
on the interests of the holders of Vishay common stock.
VISHAY'S RESULTS ARE SENSITIVE TO RAW MATERIAL AVAILABILITY, QUALITY AND
COST.
Many of Vishay's products require the use of raw materials that are produced
in only a limited number of regions around the world or are available from only
a limited number of suppliers. Vishay's results of operations may be materially
and adversely affected if Vishay has difficulty obtaining these raw materials,
the quality of available raw materials deteriorates or there are significant
price increases for these raw materials. For example, the prices for tantalum
and palladium, two raw materials that Vishay uses in its capacitors, are subject
to fluctuation. For periods in which the prices of these raw materials are
rising, Vishay may be unable to pass on the increased cost to Vishay's customers
which would result in decreased margins for the products in which they are used.
For periods in which the prices are declining, Vishay may be required to write
down its inventory carrying cost of these raw materials which, depending on the
extent of the difference between market price and its carrying cost, could have
a material adverse effect on Vishay's net earnings.
Vishay is a major consumer of the world's annual production of tantalum.
Tantalum, a metal purchased in powder or wire form, is the principal material
used in the manufacture of tantalum capacitors. There are currently three major
suppliers that process tantalum ore into capacitor grade tantalum powder. Due to
the strong demand for its tantalum capacitors and difficulty in obtaining
sufficient quantities of tantalum powder from its suppliers, Vishay stockpiled
tantalum ore in 2000 and early 2001. During the six months ended June 30, 2001,
Vishay experienced a significant decrease in sales due to declining orders and
the deferral or cancellation of existing orders. Vishay's tantalum capacitor
business was particularly impacted by the slowdown in sales. Prices for tantalum
ore and powder decreased during this period. As a result, Vishay has recorded
write-downs of $10,000,000 and $20,000,000 on tantalum during the quarter and
six months ended June 30, 2001, respectively. Vishay has entered into long-term
take or pay contracts to purchase specified quantities of tantalum at fixed
prices through 2005. Under these contracts, the annual tantalum purchase
commitments are approximately $47,000,000 for 2001 and $150,000,000 for 2002
through 2005. In addition, Vishay makes purchases of tantalum from its other
suppliers under annual contracts at prices that are subject to periodic
adjustment. Depending on the extent of the downward pricing trend for tantalum
ore, Vishay could again be required to write down the carrying cost of its
inventory of tantalum ore, which could have a material adverse effect on
Vishay's net earnings.
Palladium, a metal used to produce multi-layer ceramic capacitors, is
currently found primarily in South Africa and Russia. Palladium is a commodity
product that is subject to price volatility. The price of palladium fluctuated
in the range of approximately $201 to $970 per troy ounce during the three years
ended December 31, 2000. Since that time, the price of palladium has been as
high as $1,110 per troy ounce, and as of October 1, 2001, it was approximately
$335 per troy ounce.
From time to time there have been short-term market shortages of raw
materials utilized by Vishay. While these shortages have not historically
adversely affected Vishay's ability to increase
13
production of products containing tantalum and palladium, they have historically
resulted in higher raw material costs for Vishay. Vishay cannot assure you that
any of these market shortages in the future would not adversely affect Vishay's
ability to increase production, particularly during periods of growing demand
for Vishay's products.
Because its business consists solely of semiconductor components which do
not utilize materials that are scarce or in short supply, General Semiconductor
is generally not subject to similarly pronounced price fluctuations of its raw
materials.
RISKS FACTORS RELATING TO VISHAY'S OPERATIONS OUTSIDE THE UNITED STATES
VISHAY OBTAINS SUBSTANTIAL BENEFITS BY OPERATING IN ISRAEL, BUT THESE
BENEFITS MAY NOT CONTINUE.
Vishay has increased its operations in Israel over the past several years.
The low tax rates in Israel applicable to earnings of Vishay's operations in
that country, compared to the rates in the United States, have had the effect of
increasing Vishay's net earnings. In addition, Vishay has taken advantage of
various incentive programs in Israel, which take the form of grants designed to
increase employment in Israel. Any significant increase in the Israeli tax rates
or reduction or elimination of the Israeli grant programs that have benefited
Vishay could have an adverse impact on Vishay's results of operations. See
Note 1 to the Consolidated Financial Statements in Vishay's Annual Report on
Form 10-K for the year ended December 31, 2000, incorporated by reference in
this joint proxy statement/prospectus, for a description of Vishay's accounting
policy for grants received by certain subsidiaries from governments outside the
United States.
VISHAY ATTEMPTS TO IMPROVE PROFITABILITY BY OPERATING IN COUNTRIES IN WHICH
LABOR COSTS ARE LOW, BUT THE SHIFT OF OPERATIONS TO THESE REGIONS MAY ENTAIL
CONSIDERABLE EXPENSE.
Vishay's strategy is aimed at achieving significant production cost savings
through the transfer and expansion of manufacturing operations to and in
countries with lower production costs, such as Israel, Mexico, Portugal, the
Czech Republic, Taiwan and China. In this process, Vishay may experience
under-utilization of plants and factories in high labor cost regions and
capacity constraints in plants and factories located in low labor cost regions.
This may result initially in production inefficiencies and higher costs. These
costs include those associated with compensation in connection with workforce
reductions and plant closings in the higher labor cost regions, and start-up
expenses, manufacturing and construction delays, and increased depreciation
costs in connection with the initiation or expansion of production in lower
labor cost regions.
As Vishay implements transfers of some of its operations it may experience
strikes or other types of labor unrest as a result of lay-offs or termination of
Vishay's employees in high labor cost countries.
VISHAY IS SUBJECT TO THE RISKS OF POLITICAL, ECONOMIC AND MILITARY
INSTABILITY IN COUNTRIES OUTSIDE THE U.S. IN WHICH IT OPERATES.
Vishay has operations in 12 countries around the world outside the United
States, and approximately 56% of Vishay's revenues during 2000 were derived from
sales to customers outside the United States. Some of the countries in which
Vishay operates have in the past experienced and may continue to experience
political, economic and military instability or unrest. These conditions could
have an adverse impact on the ability of Vishay to operate in these regions and,
depending on the extent and severity of these conditions, could materially and
adversely affect Vishay's overall financial condition and operating results.
14
RISKS FACTORS RELATING TO VISHAY'S CAPITAL STRUCTURE
THE HOLDERS OF CLASS B COMMON STOCK HAVE VOTING CONTROL OF VISHAY.
Vishay has two classes of common stock: common stock and Class B common
stock. The holders of common stock are entitled to one vote for each share held,
while the holders of Class B common stock are entitled to 10 votes for each
share held. Currently, two principal holders of Class B common stock control
approximately 54% of the outstanding voting power of Vishay. As a result, these
stockholders are able to cause the election of the entire board of directors of
Vishay. These holders of the Class B common stock may also be able to approve
other actions as stockholders without obtaining the votes of other stockholders
of Vishay.
Following the merger, based on the number of shares of General Semiconductor
stock currently outstanding, these two stockholders will control approximately
50.2% of the voting power of Vishay and thus will continue to have voting
control of Vishay.
THE EXISTENCE OF THE CLASS B COMMON STOCK MAY DEPRIVE OTHER STOCKHOLDERS OF
A PREMIUM VALUE FOR THEIR SHARES IN A TAKEOVER.
The effective control of Vishay by holders of the Class B common stock may
make Vishay less attractive as a target for a takeover proposal. It may also
make it more difficult or discourage a merger proposal or proxy contest for the
removal of the incumbent directors, even if such actions were favored by all
stockholders of Vishay other than the holders of the Class B common stock.
Accordingly, this may deprive the holders of common stock of an opportunity they
might otherwise have to sell their shares at a premium over the prevailing
market price in connection with a merger or acquisition of Vishay with or by
another company.
15
FORWARD-LOOKING INFORMATION
Some statements contained in or incorporated by reference into this joint
proxy statement/ prospectus are "forward-looking statements" within the meaning
of the United States Private Securities Litigation Reform Act of 1995. All
forward-looking statements involve risks and uncertainties. In particular, any
statements regarding the timing or benefits of the merger and the value of the
shares of Vishay common stock to be received by General Semiconductor
stockholders as consideration for the merger, as well as expectations with
respect to future sales and other results of operations, operating efficiencies
and product expansion, are subject to known and unknown risks, uncertainties and
contingencies. Many of these risks, uncertainties and contingencies are beyond
the control of Vishay and General Semiconductor and may cause actual results,
performance or achievements to differ materially from anticipated results,
performance or achievements. Factors that might affect these forward-looking
statements include, among other things:
- the impact of fluctuations in the share price of shares of Vishay common
stock;
- overall economic and business conditions;
- the demand for Vishay's and General Semiconductor's goods and services;
- competitive factors in the industries in which Vishay and General
Semiconductor compete;
- the risk factors described above under the heading "Risk Factors";
- changes in United States and non-United States government regulations;
- changes in tax requirements (including tax rate changes, new tax laws and
revised tax law interpretations);
- results of litigation;
- interest rate fluctuations and other capital market conditions, including
foreign currency rate fluctuations;
- economic and political conditions in international markets, including
governmental changes and restrictions on the ability to transfer capital
across borders;
- the terrorist attacks on the United States on September 11, 2001, the
impact of such events on the economy in general and on the demand for
Vishay's and General Semiconductor's goods and services in particular, and
the impact of the foregoing on Vishay's and General Semiconductor's
revenues and earnings;
- the ability to achieve anticipated cost savings and other benefits in
connection with Vishay's acquisition of General Semiconductor, Vishay's
recent acquisition of assets of Infineon Technologies and other
acquisitions; and
- the timing, impact and other uncertainties of future acquisitions by
Vishay.
Accordingly, you should not place undue reliance on the forward-looking
statements contained in this joint proxy statement/prospectus. These
forward-looking statements speak only as of the date on which the statements
were made. In evaluating forward-looking statements, you should consider these
risks and uncertainties, together with the other risks described from time to
time in Vishay's and General Semiconductor's reports and documents filed with
the SEC. Neither Vishay nor General Semiconductor assumes any obligation to
update any such forward-looking statements to reflect events or circumstances
after the date of this joint proxy statement/prospectus.
For additional factors that might affect such forward-looking statements
with respect to Vishay, see the factors identified under the heading "Safe
Harbor Statement" in Vishay's Annual Report on Form 10-K for the year ended
December 31, 2000. For additional factors that might affect these
forward-looking statements with respect to General Semiconductor, see the
factors identified under the heading "Cautionary Statement Regarding Forward
Looking Information" in exhibit 99 to General Semiconductor's Annual Report on
Form 10-K for the year ended December 31, 2000 and Forms 10-Q filed for the
quarterly periods since December 31, 2000. See "Where You Can Find More
Information" on page i.
16
SELECTED CONSOLIDATED FINANCIAL DATA OF
VISHAY AND GENERAL SEMICONDUCTOR
The following information is being provided to assist you in analyzing the
financial aspects of the merger.
The selected historical financial data for Vishay for the six months ended
June 30, 2001 and 2000 was derived from the unaudited consolidated condensed
financial statements included in Vishay's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2001. The data presented for Vishay for the six
months ended June 30, 2001 and 2000 is unaudited and, in the opinion of Vishay's
management, includes all necessary adjustments, consisting of normal recurring
adjustments, and present fairly this data. Vishay's results for the six months
ended June 30, 2001 are not necessarily indicative of the results to be expected
for the fiscal year ending December 31, 2001. The selected historical financial
data for Vishay for the five fiscal years ended December 31, 2000 was derived
from Vishay's audited consolidated financial statements.
The selected historical financial data for General Semiconductor for the six
months ended June 30, 2001 and 2000 was derived from the unaudited consolidated
financial statements included in General Semiconductor's Quarterly Report on
Form 10-Q/A for the quarterly period ended June 30, 2001. The data presented for
General Semiconductor for the six months ended June 30, 2001 and 2000 are
unaudited and, in the opinion of General Semiconductor's management, include all
necessary adjustments, consisting of normal recurring adjustments, and present
fairly this data. General Semiconductor's results for the six months ended
June 30, 2001 are not necessarily indicative of the results to be expected for
the fiscal year ending December 31, 2001. The selected historical financial data
for General Semiconductor for the five fiscal years ended December 31, 2000 was
derived from General Semiconductor's audited consolidated financial statements.
This information should be read in conjunction with the historical financial
statements and related notes contained in the annual, quarterly and other
reports filed by Vishay and General Semiconductor with the SEC. See "Where You
Can Find More Information" on page i.
17
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF VISHAY
(IN MILLIONS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
2001 (1) 2000 2000 1999 (2) 1998 (3) 1997 (4) 1996 (5)
--------- -------- -------- --------- --------- --------- ---------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Net sales........................ $ 941.9 $1,151.7 $2,465.1 $1,760.1 $1,572.7 $1,125.2 $1,098.0
Interest expense................. 6.9 20.4 25.2 53.3 49.0 18.8 17.4
Earnings before income taxes and
minority interest.............. 128.2 281.9 690.2 134.7 42.6 89.6 70.8
Income taxes..................... 31.1 62.8 148.2 36.9 30.6 34.2 17.7
Minority interest................ 3.8 13.0 24.2 14.5 3.8 2.1 0.5
Net earnings..................... 93.3 206.1 517.9 83.2 8.2 53.3 52.6
Basic earnings per share (6)..... $ 0.68 $ 1.55 $ 3.83 $ 0.66 $ 0.07 $ 0.42 $ 0.41
Diluted earnings per
share (6)...................... 0.67 1.52 3.77 0.65 0.07 0.42 0.41
Weighted average shares
outstanding--basic (6)......... 137.7 132.8 135.3 126.7 126.7 126.6 126.6
Weighted average shares
outstanding--diluted (6)....... 140.4 135.3 137.5 128.2 126.8 126.9 126.7
BALANCE SHEET DATA (END OF
PERIOD) (7):
Total assets..................... $2,931.8 $2,783.7 $2,323.8 $2,462.7 $1,719.6 $1,558.5
Long-term debt................... 304.4 140.5 656.9 814.8 347.5 229.9
Working capital.................. 1,283.1 1,057.2 604.2 650.5 455.1 434.2
Stockholders' equity............. 1,906.4 1,833.9 1,013.6 1,002.5 959.6 945.2
--------------------------
(1) Includes restructuring expense of $35.3 million ($0.19 per share).
(2) The sale of Nicolitch, S.A. and a tax rate change in Germany reduced net
earnings by $14.6 million ($0.11 per share).
(3) Includes the results from March 1, 1998 of TEMIC and special charges after
taxes of $55.3 million ($0.44 per share).
(4) Includes the results from July 1, 1997 of Lite-On Power Semiconductor
Corporation and special charges after taxes of $27.7 million ($0.22 per
share). Vishay disposed of its interest in Lite-On on July 12, 2000.
(5) Includes restructuring expense of $38.0 million ($0.21 per share).
(6) Adjusted to reflect a three-for-two stock split distributed June 9, 2000, a
five-for-four stock split distributed June 22, 1999 and 5% stock dividends
paid on June 11, 1998 and June 9, 1997.
(7) Balance Sheet Data (End of Period) for Six Months Ended June 30, 2000
intentionally omitted.
18
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF GENERAL SEMICONDUCTOR
(IN MILLIONS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
2001 (1) 2000 2000 1999 1998 (2) 1997 (3) 1996
--------- --------- -------- -------- --------- --------- --------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Net sales......................... $186.0 $243.3 $493.7 $417.1 $401.1 $380.0 $ 361.9
Interest expense.................. 7.8 10.1 18.8 23.5 20.0 14.4 10.4
Earnings (loss) before income
taxes and minority interest..... (6.1) 30.9 65.4 32.5 27.1 20.5 67.2
Income taxes...................... (1.8) 9.3 18.6 8.1 8.6 11.6 27.4
Earnings (loss) from continuing
operations...................... (4.3) 21.6 46.7 24.4 18.5 8.9 39.8
Basic earnings (loss) per share
from continuing operations...... $(0.11) $ 0.58 $ 1.24 $ 0.66 $ 0.50 $ 0.25 $ 1.20
Diluted earnings (loss) per share
from continuing operations...... (0.11) 0.50 1.08 0.66 0.50 0.25 1.15
Weighted average shares
outstanding--basic.............. 37.8 37.5 37.6 36.8 36.8 35.4 32.9
Weighted average shares
outstanding--diluted............ 37.8 49.8 49.6 37.6 36.9 35.6 36.9
BALANCE SHEET DATA (END OF
PERIOD) (5):
Total assets...................... $581.2 $595.3 $576.3 $563.4 $550.3 $2,057.2
Long-term debt, including current
maturities (4).................. 230.5 216.5 276.5 286.0 268.1 692.3
Working capital................... 50.4 50.1 64.7 51.7 16.7 69.6
Stockholders' equity.............. 184.9 187.7 131.4 105.3 86.4 1,173.2
--------------------------
(1) Includes restructuring charges of $12.9 million ($9.1 million net of tax) or
$0.24 per share.
(2) Includes restructuring charges of $12.3 million ($8.5 million net of tax) or
$0.23 per share.
(3) Includes charges of $33.8 million ($25.3 million net of tax) or $0.69 per
share, primarily related to the separation of General Instrument
Corporation's Taiwan operations.
(4) In 2001, 2000 and 1999, includes $172.5 million of convertible subordinated
notes which were issued in December 1999.
(5) Balance Sheet Data (End of Period) for Six Months Ended June 30, 2000
intentionally omitted.
19
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected unaudited pro forma consolidated financial data have
been derived from and should be read together with the "Unaudited Pro Forma
Consolidated Condensed Financial Statements" and related notes on pages 67
through 71. This data is based on the historical consolidated balance sheets and
statements of operations of Vishay and General Semiconductor, giving effect to
the merger. This data is for illustrative purposes only. The companies may have
performed differently had they been combined for the periods presented. This
selected unaudited pro forma consolidated financial data is not necessarily
indicative of the historical results that would have occurred had the companies
been combined for the periods presented, or the future results that the combined
company will experience after completion of the merger.
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2001 DECEMBER 31, 2000
---------------- -----------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $1,127.9 $2,958.8
Earnings before income taxes and minority interest.......... 124.7 760.6
Net earnings................................................ 91.6 569.7
Basic earnings per share.................................... $ 0.58 $ 3.64
Diluted earnings per share.................................. 0.57 3.47
BALANCE SHEET DATA (END OF PERIOD) (1):
Total assets................................................ $3,878.0
Long-term debt.............................................. 535.0
Working capital............................................. 1,331.0
Stockholders' equity........................................ 2,455.0
------------------------
(1) Balance Sheet Data (End of Period) for Year Ended December 31, 2000
intentionally omitted.
20
UNAUDITED COMPARATIVE PER SHARE DATA
The following table presents:
- Historical earnings (loss) from continuing operations per share and book
value per share data for Vishay and General Semiconductor;
- Unaudited pro forma consolidated per share data of Vishay as if the merger
had occurred on January 1, 2000; and
- General Semiconductor's unaudited pro forma equivalent per share data.
This unaudited pro forma consolidated per share data has been derived from
the "Unaudited Pro Forma Consolidated Condensed Financial Statements" beginning
on page 67. You should read the information below in conjunction with the
financial statements and accompanying notes of Vishay and General Semiconductor
that are incorporated by reference in this joint proxy statement/prospectus and
with the Unaudited Pro Forma Consolidated Condensed Financial Statements
included herein.
The General Semiconductor equivalent pro forma data shows the effect of the
merger from the perspective of an owner of General Semiconductor common stock.
The data was calculated by multiplying the pro forma combined data by the
exchange ratio of 0.563.
Neither Vishay nor General Semiconductor paid cash dividends during the
periods covered by this table.
VISHAY AND
GENERAL GENERAL
GENERAL SEMICONDUCTOR SEMICONDUCTOR
VISHAY SEMICONDUCTOR UNAUDITED EQUIVALENT
HISTORICAL HISTORICAL PRO FORMA UNAUDITED
PER SHARE PER SHARE COMBINED PRO FORMA
DATA DATA PER SHARE DATA PER SHARE DATA
---------- -------------- -------------- --------------
AT OR FOR THE SIX MONTHS ENDED JUNE 30,
2001:
Earnings (loss) from continuing
operations per share of common stock:
Basic................................. $0.68 $(0.11) $ 0.58 $0.33
Diluted............................... 0.67 (0.11) 0.57 0.32
Book value per share of common stock
(1)................................... 13.82 4.89 15.42 8.68
FOR THE YEAR ENDED DECEMBER 31, 2000:
Earnings from continuing operations per
share of common stock:
Basic................................. $3.83 $ 1.24 $ 3.64 $2.05
Diluted............................... 3.77 1.08 3.47 1.95
------------------------
(1) Book value per share of common stock is computed by dividing stockholders'
equity by the number of shares of common stock outstanding as of June 30,
2001. Pro forma book value per share is computed by dividing pro forma
stockholders' equity by the pro forma number of shares of common stock
outstanding as of June 30, 2001.
21
COMPARATIVE MARKET VALUE DATA
The following table presents:
- the closing prices per share on the New York Stock Exchange and aggregate
market value of shares of Vishay common stock and General Semiconductor
common stock on July 31, 2001, the last trading day prior to the public
announcement of the proposed merger, and on October 1, 2001, the last
practicable trading day prior to the date of this joint proxy
statement/prospectus; and
- the value of the Vishay common stock that a General Semiconductor
stockholder would have received for one General Semiconductor share and
the value of the Vishay common stock that all General Semiconductor
stockholders, in total, would have received for all General Semiconductor
shares, assuming the merger had occurred on those dates and applying the
exchange ratio of 0.563.
GENERAL GENERAL
VISHAY SEMICONDUCTOR SEMICONDUCTOR
HISTORICAL HISTORICAL EQUIVALENT
-------------- ------------- -------------
ON JULY 31, 2001:
Closing price per share of common stock......... $ 24.05 $ 11.26 $ 13.54
Market value of common stock (1)................ $3,317,440,309 $425,986,068 $512,242,572
ON OCTOBER 1, 2001:
Closing price per share of common stock......... $ 17.40 $ 9.35 $ 9.80
Market value of common stock (2)................ $2,400,376,127 $353,786,862 $370,814,037
------------------------
(1) Market value based on 137,939,306 shares of Vishay common stock (including
Class B common stock on an as-converted basis) and 37,831,800 shares of
General Semiconductor common stock outstanding as of July 31, 2001,
excluding shares held in treasury or by subsidiaries.
(2) Market value based on 137,952,651 shares of Vishay common stock (including
Class B common stock on an as-converted basis) and 37,838,167 shares of
General Semiconductor common stock outstanding as of October 1, 2001,
excluding shares held in treasury or by subsidiaries.
CURRENT DEVELOPMENTS
On August 17, 2001, General Semiconductor publicly announced the details of
a restructuring program including its decision to close its facility in Macroom,
Ireland by the end of 2001. General Semiconductor will transfer the majority of
the product lines manufactured at this facility to its facilities in Taiwan and
China and outsource production of the remaining products.
Also, on August 17, 2001, General Semiconductor entered into an amendment to
its secured, revolving bank credit agreement. This amendment, among other
things, reduced the total lending commitment from $263.8 million to
$175 million, and revised the method of calculating several key financial
covenants to provide General Semiconductor flexibility to incur restructuring
charges in connection with cost saving initiatives and expenses related to the
merger. The amendment also replaced interest rate and fee margins that varied
with General Semiconductor's financial performance with fixed margins. General
Semiconductor also agreed to decrease the amount of capital expenditures it is
permitted to make in 2001 and 2002.
In addition, General Semiconductor has taken cost reduction initiatives at
all of its facilities and offices worldwide. These initiatives include such
measures as outsourcing production of certain mature products to subcontractors,
making additional reductions in workforce and instituting furlough programs at
both factory and office locations worldwide. The Macroom facility closing
combined with General Semiconductor's other cost reduction initiatives taken in
2001, are expected to reduce General Semiconductor's total workforce of 5,700
employed at December 31, 2000 by approximately 23% and result in cost savings of
approximately $25 million annually.
22
GENERAL SEMICONDUCTOR SPECIAL MEETING
JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus is being furnished to General
Semiconductor stockholders in connection with the solicitation of proxies by
General Semiconductor's board of directors to approve and adopt the merger
agreement.
DATE, TIME AND PLACE
The special meeting of General Semiconductor stockholders will be held on
Friday, November 2, 2001, at 10:00 a.m., Eastern Time, at General
Semiconductor's corporate office at 10 Melville Park Road, Melville, New York
11747-3113.
PURPOSE OF THE GENERAL SEMICONDUCTOR SPECIAL MEETING
At the General Semiconductor special meeting, General Semiconductor
stockholders will consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of July 31, 2001, among Vishay, Vishay
Acquisition Corp., a wholly owned subsidiary of Vishay, and General
Semiconductor. Approval and adoption of the merger agreement will also
constitute approval of the merger and the other transactions contemplated by the
merger agreement. The merger agreement provides, among other things, that Vishay
Acquisition will be merged with and into General Semiconductor and each
outstanding share of General Semiconductor common stock will be converted into
0.563 of a share of Vishay common stock. General Semiconductor is not proposing
any matters other than the approval of the merger agreement at the General
Semiconductor special meeting.
RECORD DATE; VOTING RIGHTS; QUORUM; REQUIRED VOTE
Only holders of record of General Semiconductor common stock at the close of
business on Monday, October 1, 2001, the record date for the General
Semiconductor special meeting, are entitled to receive notice of and to vote at
the special meeting or at any adjournment of the special meeting.
General Semiconductor has one class of capital stock outstanding: common
stock, par value $0.01 per share. Each holder of common stock is entitled to one
vote for each share held. Holders of shares of General Semiconductor common
stock entitled to cast a majority of the votes at the special meeting must be
present at the special meeting, in person or by proxy, to constitute a quorum to
transact business.
On the record date, 37,838,167 shares of General Semiconductor common stock
were outstanding, excluding shares held in treasury, and were held by
approximately 464 holders of record.
The affirmative vote of the holders of a majority of the outstanding shares
of General Semiconductor is required to approve and adopt the merger agreement.
SHARE OWNERSHIP AND VOTING POWER OF MANAGEMENT
General Semiconductor's executive officers and directors held approximately
1,478,486 shares of General Semiconductor common stock, representing
approximately 3.9% of the voting power of General Semiconductor's outstanding
common stock as of the record date. All of the executive officers and directors
of General Semiconductor have advised us that they will vote the shares of
General Semiconductor common stock held by them FOR the approval and adoption of
the merger agreement.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF GENERAL SEMICONDUCTOR
General Semiconductor's board of directors has unanimously approved the
merger agreement and the transactions contemplated by the merger agreement. The
General Semiconductor board has
23
determined that the merger is fair to and in the best interests of General
Semiconductor and its stockholders and unanimously recommends that General
Semiconductor stockholders vote to approve and adopt the merger agreement. See
"Recommendation of the Board of Directors of General Semiconductor; Reasons of
General Semiconductor for the Merger" beginning on page 33 and "Interests of
Certain Persons in the Merger" beginning on page 45.
VOTING AND REVOCATION OF PROXIES; SHARES HELD IN "STREET NAME"
General Semiconductor stockholders who own their shares in their own name
may vote their General Semiconductor shares by attending the General
Semiconductor special meeting and voting their shares in person, or by
completing the enclosed proxy card, signing and dating it and mailing it in the
enclosed postage-prepaid envelope. If a written proxy card is signed by a
General Semiconductor stockholder and returned without instructions, the shares
represented by the proxy will be voted FOR approval and adoption of the merger
agreement.
In addition, General Semiconductor stockholders who own their shares in
their own name may submit their proxies by telephone or over the internet. The
telephone and internet voting procedures are designed to authenticate votes cast
by use of a personal identification number. These procedures allow a General
Semiconductor stockholder to appoint a proxy to vote his or her shares and to
confirm that his or her instructions have been properly recorded.
BY TELEPHONE: Call toll-free 1-800-840-1208 using any touch-tone telephone
and follow the instructions. You will need to enter the
control number located on your proxy card.
BY INTERNET: Go to "http://www.proxyvoting.com/sem" and follow the
instructions. You will need to enter the control number
located on your proxy card.
BY MAIL: Complete, sign and date your proxy card and return it in the
enclosed postage-prepaid envelope.
If you hold shares in "street name", that is, through a bank, broker or
other custodian, you must instruct your custodian to vote on your behalf. You
should receive a voting form from your custodian or its agent for this purpose.
To vote, you should complete the voting form in accordance with its directions.
Please check the voting form supplied by your custodian to see if it offers
telephone or internet voting.
Under the applicable rules of the New York Stock Exchange, brokers who hold
shares in street name for customers who are the beneficial owners of those
shares are prohibited from giving a proxy to vote those customers' shares with
respect to the matters to be voted on at the General Semiconductor special
meeting in the absence of specific instructions from the customer. Brokers are
also required to request these instructions from beneficial owners of General
Semiconductor shares.
If you have questions or requests for assistance in completing and
submitting proxy cards or voting forms or voting by telephone or over the
internet, please contact Georgeson Shareholder Communications Inc., a firm
retained by General Semiconductor, at the following address and telephone
number:
17 State Street, 10th Floor
New York, New York 10004
1-800-223-2064
Votes cast by proxy, including votes cast by telephone or over the internet,
or in person at the General Semiconductor special meeting, will be tabulated and
will determine whether or not a quorum is present. Pursuant to Delaware law,
abstentions and broker non-votes will be counted for the purpose
24
of determining whether a quorum is present. Because approval of the merger
agreement requires the vote of a majority of the outstanding shares of General
Semiconductor, broker non-votes and abstentions will have the effect of votes
against approval and adoption of the merger agreement.
All properly delivered proxies that are not revoked will be voted at the
special meeting as instructed on those proxies. A stockholder who delivers a
proxy may revoke it at any time before it is voted by:
- delivering a proxy bearing a later date;
- subsequently submitting the changed vote by telephone or over the
internet;
- giving written notice of revocation to any of the persons named as proxies
or to General Semiconductor, addressed to the Secretary; or
- attending the special meeting and voting in person.
The General Semiconductor board of directors is unaware of any other matters
that may be presented for action at the General Semiconductor special meeting.
If other matters do properly come before the meeting, however, it is intended
that shares represented by proxies will be voted or not voted by the persons
named in the proxies in their discretion, provided that no proxy that is voted
against approval and adoption of the merger agreement will be voted in favor of
any adjournment or postponement of the General Semiconductor special meeting for
the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
Management of General Semiconductor may use the services of its directors,
officers and employees in soliciting proxies. These persons will not receive any
additional compensation for these services, but will be reimbursed for their
out-of-pocket expenses. General Semiconductor will reimburse banks, brokers,
nominees, custodians and fiduciaries for their expenses in forwarding copies of
the proxy soliciting material to the beneficial owners of the stock held by
these persons and in requesting authority for the execution of proxies. In
addition, General Semiconductor entered into a retainer agreement with Georgeson
Shareholder Communications Inc. and paid Georgeson a retainer of $50,000 in
connection with the original Vishay proposal in April 2001. After completion of
Georgeson's work in connection with the original Vishay proposal, General
Semiconductor had a retainer balance with Georgeson in the amount of $25,000.
Georgeson has agreed to assist with the solicitation of proxies in connection
with the merger for a fee not to exceed $25,000, plus reimbursement of
out-of-pocket expenses. The $25,000 retainer balance will be credited against
this fee. General Semiconductor will pay its expenses incurred in connection
with the mailing of this joint proxy statement/prospectus, and, if the merger is
not completed, will share equally with Vishay in the printing expenses.
25
VISHAY SPECIAL MEETING
JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus is being furnished to Vishay
stockholders in connection with the solicitation of proxies by Vishay's board of
directors to approve an increase in Vishay's authorized capital stock and the
issuance of shares of Vishay common stock in the proposed merger.
DATE, TIME AND PLACE
The special meeting of Vishay stockholders will be held on Friday,
November 2, 2001, at 11:00 a.m., Eastern Time, at Vishay's corporate office at
63 Lincoln Highway, Malvern, Pennsylvania 19355-2120.
PURPOSE OF THE VISHAY SPECIAL MEETING
At the Vishay special meeting, Vishay stockholders will consider and vote
upon the following proposals:
1. to approve an amendment to Vishay's certificate of incorporation
increasing the number of authorized shares of Vishay common stock from
150,000,000 to 300,000,000, and increasing the number of authorized
shares of Vishay's Class B common stock from 20,000,000 to 40,000,000;
and
2. to approve the issuance of Vishay common stock in connection with the
merger.
The merger is conditioned on the approval of these proposals by Vishay
stockholders.
RECORD DATE; VOTING RIGHTS; QUORUM; REQUIRED VOTE
Only holders of record of Vishay common stock and Class B common stock at
the close of business on Monday, October 1, 2001, the record date for the Vishay
special meeting, are entitled to receive notice of and to vote at the special
meeting or at any adjournment of the special meeting.
Vishay has two classes of capital stock outstanding: common stock, par value
$0.10 per share and Class B common stock, par value $0.10 per share. Each holder
of common stock is entitled to one vote for each share held. Each share of
Class B common stock is entitled to ten votes for each share held. Holders of
shares of Vishay common stock and Class B common stock entitled to cast a
majority of the votes at the special meeting must be present at the special
meeting, in person or by proxy, to constitute a quorum to transact business.
On the record date, 122,456,017 shares of Vishay common stock were
outstanding, excluding shares held in treasury, and were held by approximately
1,743 holders of record. Also on that date, 15,496,634 shares of Vishay Class B
common stock were outstanding and were held by 18 holders of record.
Approval of the amendment to Vishay's certificate of incorporation to
increase its authorized capital stock requires the affirmative vote of the
holders of a majority of the outstanding voting power of Vishay. Approval of the
issuance of shares of Vishay common stock in connection with the merger requires
the affirmative vote of a majority of the votes cast on the proposal, provided
that the votes cast constitute a majority of the outstanding voting power of
Vishay.
SHARE OWNERSHIP AND VOTING POWER OF MANAGEMENT
Dr. Felix Zandman, directly and through a voting trust agreement, and
Mrs. Luella B. Slaner, directly, beneficially and as an executrix for the estate
of her late husband Alfred Slaner, have voting power over approximately 54% of
the total outstanding voting power of Vishay. Dr. Zandman, Vishay's
26
chairman and chief executive officer, and Mrs. Slaner, a director of Vishay,
have each entered into a voting agreement under which they have agreed to vote
all of the Vishay shares held by them in favor of the two proposals to be
presented at the Vishay special meeting. All other directors and executive
officers of Vishay held approximately 423,000 shares of common stock,
representing approximately 0.2% of the voting power of Vishay's outstanding
common stock and Class B common stock as of the record date. All of the
executive officers and directors of Vishay have advised us that they will also
vote in favor of the proposals. Accordingly, the proposals will be adopted
regardless of how the other stockholders of Vishay cast their votes.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF VISHAY
Vishay's board of directors has unanimously approved the amendment to
Vishay's certificate of incorporation increasing Vishay's authorized capital
stock and the issuance of Vishay common stock in connection with the merger. The
Vishay board has determined that these proposals are advisable and in the best
interests of Vishay and its stockholders and unanimously recommends that Vishay
stockholders vote to approve them. See "Recommendation of the Board of Directors
of Vishay; Reasons of Vishay for the Merger" beginning on page 43.
VOTING AND REVOCATION OF PROXIES; SHARES HELD IN "STREET NAME"
Vishay stockholders who own their shares in their own name may vote their
Vishay shares by attending the Vishay special meeting and voting their shares in
person, or by completing the enclosed proxy card, signing and dating it and
mailing it in the enclosed postage-prepaid envelope. If a written proxy card is
signed by a Vishay stockholder and returned without instructions, the shares
represented by the proxy will be voted FOR the proposals being considered at the
Vishay special meeting.
In addition, Vishay stockholders who own their shares in their own name may
also submit their proxies by telephone or over the internet. The telephone and
internet voting procedures are designed to authenticate votes cast by use of a
personal identification number. These procedures allow a Vishay stockholder to
appoint a proxy to vote his or her shares and to confirm that his or her
instructions have been properly recorded.
BY TELEPHONE: Call toll-free 1-800-PROXIES or 1-800-776-9437 using any
touch-tone telephone and follow the instructions. You will
need to enter the control number located on your proxy card.
BY INTERNET: Go to "http://www.voteproxy.com" and follow the
instructions. You will need to enter the control number
located on your proxy card.
BY MAIL: Complete, sign and date your proxy card and return it in the
enclosed postage-prepaid envelope.
If you hold shares in "street name", that is, through a bank, broker or
other custodian, you must instruct your custodian to vote on your behalf. You
should receive a voting form from your custodian or its agent for this purpose.
To vote, you should complete the voting form in accordance with its directions.
Please check the voting form used by that firm to see if it offers telephone or
internet voting.
Under the applicable rules of the New York Stock Exchange, brokers who hold
shares in street names for customers who are the beneficial owners of those
shares are prohibited from giving a proxy to vote those customers' shares with
respect to the matters to be voted on at the Vishay special meeting in the
absence of specific instructions from the customer. Brokers are also required to
request these instructions from beneficial owners of Vishay shares.
27
If you have questions or requests for assistance in completing and
submitting proxy cards or voting forms or voting by telephone or over the
internet, please contact MacKenzie Partners, Inc., a firm retained by Vishay, at
the following address and telephone numbers:
156 Fifth Avenue
New York, New York 10010
collect at 1-212-929-5500
or toll-free at 1-800-322-2885
Votes cast by proxy, including votes cast by telephone or over the internet,
or in person at the Vishay special meeting, will be tabulated and will determine
whether or not a quorum is present. Pursuant to Delaware law, abstentions and
broker non-votes will be counted for the purpose of determining whether a quorum
is present. Because approval of the amendment to Vishay's certificate of
incorporation increasing the authorized capital stock of Vishay requires the
vote of a majority of the outstanding shares of Vishay, a broker non-vote or an
abstention will have the effect of votes against this proposal. Approval of the
issuance of shares in connection with the merger requires a majority of the
votes cast. A broker non-vote, which is not regarded as being cast for this
purpose, will have no effect on the proposal to issue shares of common stock in
connection with the merger, but an abstention, which is regarded as being cast,
will have the effect of a vote against this proposal.
All properly delivered proxies that are not revoked will be voted at the
special meeting as instructed on those proxies. A stockholder who delivers a
proxy may revoke it at any time before it is voted by:
- delivering a proxy bearing a later date;
- subsequently submitting the changed vote by telephone or over the
internet;
- giving written notice of revocation to any of the persons named as proxies
or to Vishay, addressed to the Secretary; or
- attending the special meeting and voting in person.
The Vishay board of directors is unaware of any other matters that may be
presented for action at the Vishay special meeting. If other matters do properly
come before the meeting, however, it is intended that shares represented by
proxies will be voted or not voted by the persons named in the proxies in their
discretion, provided that no proxy that is voted against the proposals will be
voted in favor of any adjournment or postponement of the Vishay special meeting
for the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
Management of Vishay may use the services of its directors, officers and
employees in soliciting proxies. These persons will not receive any additional
compensation for these services, but will be reimbursed for their out-of-pocket
expenses. Vishay will reimburse banks, brokers, nominees, custodians and
fiduciaries for their expenses in forwarding copies of the proxy soliciting
material to the beneficial owners of the stock held by these persons and in
requesting authority for the execution of proxies. In addition, Vishay has
retained MacKenzie Partners, Inc. to assist with the solicitation of proxies for
a fee not to exceed $7,500 plus reimbursement of out-of-pocket expenses. Vishay
will pay the expenses incurred in connection with the printing and Vishay's
mailing of this joint proxy statement/prospectus. If the merger is not
completed, the parties will share equally in the printing expenses.
28
THE MERGER
This section, together with the following section, describes the material
aspects of the proposed merger, including the merger agreement. These
discussions are qualified in their entirety by reference to the merger
agreement, which we have attached as Annex A to this joint proxy
statement/prospectus, and to the other agreements and documents that are
discussed in this joint proxy statement/prospectus and that are filed as
exhibits to the registration statement of which this joint proxy statement/
prospectus forms a part. YOU SHOULD READ THE MERGER AGREEMENT IN ITS ENTIRETY AS
IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER.
BACKGROUND OF THE MERGER
Over the last several years, General Semiconductor's board of directors and
management have regularly explored and evaluated General Semiconductor's
strategic alternatives, in light of the increasing consolidation among
semiconductor manufacturers. The General Semiconductor board of directors and
management considered several alternatives, including:
- continuing as a stand-alone company while expanding General
Semiconductor's size and product line through research and development and
acquisitions;
- combining with a similarly sized strategic partner in a merger of equals
transaction; or
- entering into a business combination with a significantly larger strategic
partner, in a transaction such as the merger.
In the course of exploring these alternatives, General Semiconductor engaged
in discussions with numerous third parties. Often, as part of these discussions,
General Semiconductor entered into confidentiality and standstill agreements,
conducted due diligence on third parties and allowed third parties to conduct
due diligence on General Semiconductor. However, prior to 2001, none of those
discussions led to significant negotiations or any agreement.
On January 29, 2001, Ronald A. Ostertag, Chairman of the Board, President
and CEO of General Semiconductor, met with Avi D. Eden, Executive Vice President
and Vice Chairman of Vishay. At that meeting, Mr. Eden informed Mr. Ostertag
that Vishay would be interested in pursuing a business combination transaction
with General Semiconductor, if General Semiconductor was interested in pursuing
such a transaction then or in the future. Mr. Ostertag responded that General
Semiconductor was not interested in pursuing Mr. Eden's proposal at that time.
On April 2, 2001, Dr. Felix Zandman, Chairman of the Board and Chief
Executive Officer of Vishay, sent a letter to Mr. Ostertag, which was
substantially restated in a simultaneous press release issued by Vishay, that
contained a proposal that Vishay acquire General Semiconductor in a transaction
in which one newly issued share of Vishay common stock would be exchanged for
every two outstanding shares of General Semiconductor common stock, representing
an exchange ratio of 0.500. Based on the respective closing prices on the New
York Stock Exchange of Vishay common stock and General Semiconductor common
stock on the trading day immediately preceding the press release, Vishay's
proposal implied a value of $9.51 and would have represented a 2.2% premium over
General Semiconductor's common stock market price as of April 2, 2001. The
letter stated Vishay's view that a business combination between Vishay and
General Semiconductor would be beneficial to the stockholders of both companies.
On April 3, 2001, General Semiconductor issued a press release announcing
receipt of Dr. Zandman's letter.
On April 4, 2001, General Semiconductor issued a press release announcing
that General Semiconductor's board of directors would consider Vishay's proposal
at the next regularly scheduled meeting of its board of directors on April 18,
2001 and that General Semiconductor had retained Credit Suisse First Boston to
act as its financial advisor. Also on April 4, 2001, Mr. Ostertag sent
29
Dr. Zandman a letter indicating that the General Semiconductor board of
directors would consider the Vishay proposal at its April 18, 2001 meeting and
that General Semiconductor would advise Vishay of its response to the Vishay
proposal after that meeting.
During the period from April 4, 2001 until April 18, 2001, management of
General Semiconductor and Credit Suisse First Boston contacted a number of third
parties and responded to inquiries from additional third parties with respect to
a possible transaction with General Semiconductor. General Semiconductor
continued to enter into mutual customary confidentiality and standstill
agreements with third parties that expressed an interest in such a transaction.
At the same time, representatives of General Semiconductor contacted, and
responded to inquiries from, several of General Semiconductor's stockholders
regarding the Vishay proposal.
On April 18, 2001, General Semiconductor's board of directors held its
regularly scheduled meeting at which representatives of General Semiconductor's
financial advisor, Credit Suisse First Boston, and legal advisor, Fried, Frank,
Harris, Shriver & Jacobson, were present. General Semiconductor's senior
management, financial advisor and legal advisor made various presentations
concerning Vishay's proposal and the status of other strategic alternatives
available to General Semiconductor. After discussion, the General Semiconductor
board of directors unanimously determined that Vishay's proposal was not in the
best interests of General Semiconductor, its stockholders, employees and other
constituencies. Following the meeting, Mr. Ostertag sent a letter to
Dr. Zandman, advising him of this determination by the General Semiconductor
board of directors. Later that day, General Semiconductor issued a press
release, including Mr. Ostertag's letter to Dr. Zandman, rejecting the Vishay
proposal. The board authorized management to continue to review other strategic
alternatives available to General Semiconductor. Thereafter, management, with
the assistance of Credit Suisse First Boston, continued discussions with
interested third parties and, at the same time, management continued to review
ways to improve General Semiconductor's performance as an independent company.
On April 24, 2001, Dr. Zandman sent General Semiconductor's board a letter
restating the April 2, 2001 proposal on the same terms and repeating Vishay's
view that the proposed transaction was in the best interests of General
Semiconductor and its stockholders.
On April 25, 2001, Siliconix incorporated, a publicly traded company, 80.4%
of which is owned by Vishay, filed a patent infringement lawsuit against General
Semiconductor in the United States District Court for the Northern District of
California. The Siliconix lawsuit alleged that several of General
Semiconductor's products infringe on two patents held by Siliconix related to
power MOSFET products and sought injunctive relief and unspecified damages.
On April 25, 2001, after discussions with the members of the General
Semiconductor board of directors, Mr. Ostertag sent Dr. Zandman a letter
reiterating General Semiconductor's rejection of Vishay's offer and stating
General Semiconductor's view that the Siliconix lawsuit was disruptive and
coercive in light of the Vishay proposal.
In late April, 2001, Mr. Eden telephoned Mr. Ostertag to request a meeting
to discuss Vishay's desire to complete a business combination with General
Semiconductor. In the following days, representatives of Credit Suisse First
Boston had several telephone conversations with Mr. Eden.
On May 4, 2001, representatives of Credit Suisse First Boston met with
Mr. Eden. During this meeting, Mr. Eden reiterated Vishay's interest in a
business combination with General Semiconductor and outlined several possible
structures for a potential business combination between Vishay and General
Semiconductor. Mr. Eden indicated Vishay's desire to commence negotiations and,
in connection therewith, to perform a due diligence investigation of General
Semiconductor's business. Representatives of Credit Suisse First Boston reported
the results of the meeting to senior management
30
of General Semiconductor and its legal advisor. Mr. Ostertag reported the
substance of this meeting informally to the members of the General Semiconductor
board of directors.
On May 11, 2001, General Semiconductor's board of directors, other than
Professor Gerald T. Wrixon who was unable to attend, held a special telephonic
meeting at which senior management and General Semiconductor's financial and
legal advisors informed the directors of the substance of the May 4, 2001
meeting and reviewed potential responses to Vishay's request to begin a due
diligence investigation of General Semiconductor's business. At this meeting,
the General Semiconductor board of directors also discussed the status of the
Siliconix lawsuit. After discussion, the board directed management to proceed
with discussions with interested third parties who had signed confidentiality
and standstill agreements and to endeavor to obtain a confidentiality and
standstill agreement with Vishay.
During the next several weeks, Mr. Ostertag and representatives of Credit
Suisse First Boston continued discussions with one of the companies that had
expressed a serious interest in a business combination transaction and with
Mr. Eden. In addition, General Semiconductor's counsel, Fried, Frank, Harris,
Shriver & Jacobson, had discussions with Vishay's counsel, Kramer Levin
Naftalis & Frankel LLP, regarding the basis of a possible confidentiality and
standstill agreement between the parties.
On May 24, 2001, at a regularly scheduled meeting of Vishay's board of
directors, Vishay's management reviewed with the board the contacts between
Vishay and General Semiconductor and between Vishay and General Semiconductor's
financial advisor. Management discussed with the board the business of General
Semiconductor and the benefits to Vishay and its stockholders of a business
combination with General Semiconductor, particularly in light of Vishay's
strategy of expanding its active component business. Management also explained
the need to authorize additional capital stock for Vishay in order to provide
Vishay with the flexibility to pursue acquisitions, such as the then proposed
exchange offer for the minority-held shares of Vishay's Siliconix subsidiary and
the proposed business combination with General Semiconductor, and for other
corporate purposes. Following discussion, the Vishay board approved the
acquisition of General Semiconductor and authorized management to continue to
pursue the acquisition, to enter into an agreement with General Semiconductor at
the appropriate time on customary terms and to take other actions necessary to
effect the acquisition. The board authorized payment of consideration in the
transaction consisting of either cash or stock up to a specified value per share
of General Semiconductor common stock that was consistent with the value agreed
to by the parties in the merger agreement. The Vishay board also approved an
amendment to the Vishay certificate of incorporation that would double Vishay's
authorized common stock and Class B common stock and recommended that the
amendment be approved by Vishay's stockholders.
On June 11, 2001, Mr. Ostertag and Mr. Eden had a telephone conversation in
which Mr. Eden expressed Vishay's continued interest in a business combination
with General Semiconductor and Vishay's desire to begin a due diligence
investigation of General Semiconductor's business.
On July 2, 2001, General Semiconductor filed an answer to the Siliconix
lawsuit denying all the allegations made by Siliconix and asserting
counterclaims.
On July 3, 2001, the company that had previously expressed a serious
interest in a business combination with General Semiconductor expressed further
interest in such a business combination and its desire to move the transaction
forward quickly. Credit Suisse First Boston had a telephone conversation with
this company's financial advisor. Through its financial advisor, this company
indicated to Credit Suisse First Boston a preliminary range of consideration it
might be willing to offer General Semiconductor's stockholders in such a
transaction.
31
This discussion was followed by delivery of a nonbinding proposal for a
transaction, which set forth the previously indicated range of consideration.
Mr. Ostertag discussed the company's proposal with members of the board of
directors and its legal and financial advisors and, afterwards, instructed
Credit Suisse First Boston to inform the company's financial advisor that the
proposed range of consideration was too low.
During the period from July 3, 2001 through July 20, 2001, representatives
of Credit Suisse First Boston and Mr. Ostertag had several conversations with
the financial advisors from that company and the chief executive officer of that
company regarding the terms of its proposal.
On July 20, 2001, Mr. Eden telephoned Mr. Ostertag to again express Vishay's
strong interest in a business combination with General Semiconductor and desire
to move quickly to negotiate a transaction.
On July 23, 2001, Mr. Ostertag met with Mr. Eden to discuss further a
potential business combination between Vishay and General Semiconductor. At this
meeting, Mr. Ostertag restated General Semiconductor's position that the
economics of Vishay's April 2, 2001 proposal did not provide adequate
consideration for General Semiconductor stockholders. Mr. Eden stated that
Vishay would be willing to increase the amount of Vishay common stock to be
exchanged for each share of General Semiconductor common stock in the
transaction.
On July 25, 2001, counsel to Vishay provided a draft merger agreement to
General Semiconductor and its counsel.
Beginning on July 27, 2001, after entering into a customary confidentiality
agreement with Vishay, members of General Semiconductor's management,
representatives of Credit Suisse First Boston and attorneys from Fried, Frank,
Harris, Shriver & Jacobson initiated a due diligence investigation of Vishay and
its financial performance, outlook and business, including an evaluation of
various tax, employee benefits, environmental, litigation and other matters
related to Vishay. During the period beginning on July 27, 2001 and continuing
through July 31, 2001, General Semiconductor, Vishay and their respective legal
advisors negotiated the terms of the merger agreement and the voting agreements.
On July 27, 2001, Mr. Ostertag had a telephone conversation with the chief
executive officer of the company that had previously delivered a proposal for a
business combination transaction. Mr. Ostertag explained that the board was
currently considering strategic alternatives before it in light of its fiduciary
responsibilities. Mr. Ostertag then reiterated his earlier inquiries to the
chief executive officer as to whether the chief executive officer's company had
flexibility to improve the exchange ratio contained in its proposal. The chief
executive officer indicated that he would discuss the matter with his board of
directors. Later that day, the chief executive officer called Mr. Ostertag back
and informed him that, after discussion with the company's board of directors,
he had some flexibility to move towards the higher end of the previously
indicated range, but that the company was not prepared to increase its offer.
On July 30, 2001, after Vishay entered into a customary confidentiality
agreement with General Semiconductor, members of Vishay management and lawyers
from Kramer Levin Naftalis & Frankel LLP conducted a due diligence review of
certain information concerning General Semiconductor.
On July 31, 2001, General Semiconductor's board of directors met to review
the terms of the merger agreement and the voting agreements. During this
meeting, Mr. Ostertag and attorneys from Fried, Frank, Harris, Shriver &
Jacobson involved in the transaction negotiations outlined the principal terms
and conditions of the merger agreement, the voting agreements and the related
documents. In addition, attorneys from Fried, Frank, Harris, Shriver & Jacobson
reviewed with the board its fiduciary duties applicable to considering a
proposal such as the merger. Representatives of Credit Suisse First Boston made
a presentation that included the delivery of an oral fairness opinion,
subsequently
32
confirmed in writing, to the effect that, as of July 31, 2001 and subject to the
assumptions, qualifications and limitations set forth in that opinion, the
exchange ratio in the merger agreement was fair to holders of General
Semiconductor common stock, from a financial point of view.
At its July 31, 2001 meeting the board of directors of General Semiconductor
unanimously:
- determined that the terms and conditions of the merger, the merger
agreement and the other transactions contemplated by the merger agreement
are fair to and in the best interests of General Semiconductor and its
stockholders;
- voted to approve the merger agreement, the voting agreements, the merger
and the other transactions contemplated thereby and to amend General
Semiconductor's stockholder rights agreement to provide that the merger
would not trigger the rights issued under that agreement; and
- recommended that the General Semiconductor stockholders approve and adopt
the merger agreement.
Later on July 31, 2001, representatives of Vishay and General Semiconductor
executed and delivered the merger agreement. In addition, on July 31, 2001,
General Semiconductor entered into voting agreements with each of Dr. Zandman
and Mrs. Luella B. Slaner and entered into an amendment to the rights agreement
with the rights agent. Vishay and General Semiconductor issued a joint press
release announcing the merger prior to the commencement of trading on the New
York Stock Exchange on the morning of August 1, 2001.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF GENERAL SEMICONDUCTOR; REASONS OF
GENERAL SEMICONDUCTOR FOR THE MERGER
General Semiconductor's board of directors, at its meeting on July 31, 2001,
unanimously approved the merger agreement and the merger as fair to and in the
best interests of General Semiconductor and its stockholders and unanimously
recommended that General Semiconductor stockholders vote FOR the approval and
adoption of the merger agreement.
In making its decision, the board of directors consulted with its legal and
financial advisors and considered a number of factors, including the following
principal factors that were material to its decision:
- the merger would provide General Semiconductor stockholders approximately
a 19% premium for their shares of General Semiconductor common stock based
on the closing prices of Vishay common stock and General Semiconductor
common stock on July 30, 2001, the last trading day before the day of the
board meeting;
- the exchange ratio of 0.563 represents a 12.6% increase in the number of
Vishay shares to be received by holders of General Semiconductor common
stock from Vishay's April 2, 2001 proposed exchange ratio of 0.500 and
resulted in an increase, as compared to the April 2, 2001 proposal, in the
implied dollar value of the consideration to be received of 40.1%, based
on the closing prices of Vishay common stock and General Semiconductor
common stock on April 2, 2001 and July 30, 2001;
- the presentation of Credit Suisse First Boston and its opinion that the
exchange ratio provided in the merger agreement was fair to holders of
General Semiconductor common stock from a financial point of view; the
written opinion is attached as Annex B to this joint proxy statement/
prospectus;
- General Semiconductor's outlook for its operating performance through 2002
and the current downturn in the semiconductor industry;
33
- management's belief that larger, stronger capitalized semiconductor
manufacturers are better situated to operate in cyclical downturns and
that General Semiconductor, as a stand-alone company, would be at a
relative disadvantage;
- the various alternatives to the merger, including remaining independent,
and the risks associated with those alternatives;
- that General Semiconductor stockholders would receive Vishay common stock
and therefore would have the opportunity to share in any increase in the
value of General Semiconductor and Vishay through the ownership of Vishay
stock; in this regard, the board of directors considered:
- that the merger would be accretive to the earnings of Vishay and yield
significant operational synergies and cost savings;
- that General Semiconductor would benefit from being part of a larger
enterprise and, in particular, from Vishay's strong balance sheet, giving
General Semiconductor an enhanced ability to invest in and expand its
existing businesses, particularly the MOSFET area, and to pursue
strategic acquisitions;
- the combined company's potential to serve as a platform for growth, both
internally and through acquisition, in the semiconductor component area;
and
- that the complementary nature of the two companies' products will give
the combined company an expanded range of discrete electronic component
and power management products, thus allowing the combined company to meet
a broader range of customer needs;
- that Ronald A. Ostertag, General Semiconductor's Chairman and CEO, will
join Vishay's board of directors;
- the terms of the merger agreement, including:
- General Semiconductor's ability, under certain conditions, to provide
information to and negotiate with a third party that has made an
unsolicited acquisition proposal that the board of directors determines
is superior to the merger; and
- General Semiconductor's ability to terminate the merger agreement if the
General Semiconductor board were presented with a superior offer, upon
the payment of a termination fee of $22.5 million to Vishay, plus
reimbursement of Vishay's expenses incurred in connection with the merger
agreement up to an additional $1 million;
- that Vishay stockholders controlling approximately 54% of the outstanding
voting power of Vishay capital stock agreed to cast all their votes in
favor of the proposals facilitating the merger at the Vishay special
stockholders meeting;
- the likelihood of completing the merger, including Vishay's and General
Semiconductor's ability to obtain the necessary governmental approvals;
and
- that the merger would be a tax-free reorganization for federal income tax
purposes.
The board of directors also considered a variety of risks and other
potentially negative factors concerning the merger. These included the
following:
- the risk that the merger may not be completed;
- that approximately 54% of the voting power of Vishay common stock, and
thus election of directors and other corporate decisions requiring a
stockholder vote, is controlled by two stockholders and that, upon
completion of the merger, these two stockholders will still control over
50% of the voting power of the combined company;
34
- the risks associated with integrating the operations of General
Semiconductor with the existing operations of Vishay, including the risk
that the combined company may not realize the cost savings and other
benefits expected from the merger; and
- that the termination fee that would be payable in various circumstances by
General Semiconductor may have the effect of discouraging competing offers
to acquire General Semiconductor, although the board of directors did not
believe that any competing offers would be forthcoming.
The General Semiconductor board of directors also considered in its
deliberations concerning the merger the interests of officers of General
Semiconductor (including one who is a director) in the merger, as described
under "Interests of Certain Persons in the Merger" beginning on page 45, the
effects of the merger on General Semiconductor's employees and other
constituencies, and the terms of the merger agreement relating to these matters.
The above factors are not intended to be exhaustive but are intended to
include all material factors considered by General Semiconductor's board of
directors. In reaching its decision to approve the merger agreement and the
merger, and to recommend that General Semiconductor stockholders vote to adopt
and approve the merger agreement, the General Semiconductor board of directors
did not view any single factor as determinative and did not find it necessary or
practicable to assign any relative or specific weights to the various factors
considered. Furthermore, individual directors may have given different weights
to different factors.
See "Background of the Merger" beginning on page 29, "Opinion of Financial
Advisor to General Semiconductor" below, "Interests of Certain Persons in the
Merger" beginning on page 45, "Material United States Federal Income Tax
Consequences" beginning on page 47 and "Unaudited Comparative Per Share Data" on
page 21.
OPINION OF FINANCIAL ADVISOR TO GENERAL SEMICONDUCTOR
Credit Suisse First Boston has acted as General Semiconductor's financial
advisor in connection with the merger. General Semiconductor selected Credit
Suisse First Boston as its financial advisor based on Credit Suisse First
Boston's experience, expertise and reputation. Credit Suisse First Boston is an
internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, General
Semiconductor requested that Credit Suisse First Boston evaluate the fairness,
from a financial point of view, to the holders of General Semiconductor common
stock of the exchange ratio provided for in the merger agreement. On July 31,
2001, at a meeting of General Semiconductor's board of directors, Credit Suisse
First Boston rendered to the General Semiconductor board an oral opinion, which
opinion was subsequently confirmed by delivery of a written opinion dated
July 31, 2001, the date of the merger agreement, to the effect that, as of that
date and based on and subject to the matters described in its opinion, the
exchange ratio provided for in the merger agreement was fair to the holders of
General Semiconductor common stock from a financial point of view.
THE FULL TEXT OF CREDIT SUISSE FIRST BOSTON'S OPINION DATED JULY 31, 2001 TO
THE GENERAL SEMICONDUCTOR BOARD OF DIRECTORS, WHICH SETS FORTH, AMONG OTHER
THINGS, THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERE AS ANNEX B AND IS
INCORPORATED INTO THIS JOINT PROXY STATEMENT/PROSPECTUS BY REFERENCE. HOLDERS OF
GENERAL SEMICONDUCTOR COMMON STOCK ARE URGED TO READ THIS OPINION CAREFULLY AND
IN ITS ENTIRETY. CREDIT SUISSE FIRST BOSTON'S OPINION IS ADDRESSED TO THE
GENERAL SEMICONDUCTOR BOARD OF DIRECTORS AND
35
RELATES ONLY TO THE FAIRNESS TO THE HOLDERS OF GENERAL SEMICONDUCTOR COMMON
STOCK OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW. CREDIT SUISSE FIRST
BOSTON'S OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY
RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
AS TO ANY MATTER RELATING TO THE MERGER. THE SUMMARY OF THE CREDIT SUISSE FIRST
BOSTON OPINION IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In arriving at its opinion, Credit Suisse First Boston reviewed certain
publicly available business and financial information relating to General
Semiconductor and Vishay, as well as the merger agreement and certain related
documents. Credit Suisse First Boston also reviewed certain other information,
including financial forecasts, provided to or discussed with Credit Suisse First
Boston by General Semiconductor and Vishay, and discussed the business and
prospects of General Semiconductor and Vishay with management of General
Semiconductor and Vishay. Credit Suisse First Boston also considered certain
financial and stock market data of General Semiconductor and Vishay, and
compared those data with similar data for other publicly held companies in
businesses that Credit Suisse First Boston considered similar to General
Semiconductor and Vishay. Credit Suisse First Boston also reviewed, to the
extent publicly available, the financial terms of certain other business
combinations and other transactions which have recently been effected. Credit
Suisse First Boston also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
Credit Suisse First Boston deemed relevant.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the foregoing information
and relied on such information being complete and accurate in all material
respects. With respect to the financial forecasts, Credit Suisse First Boston
was advised and it assumed, that such forecasts were reasonably prepared on
bases reflecting the best currently available estimates and judgments of General
Semiconductor's and Vishay's managements as to the future financial performance
of General Semiconductor and Vishay and as to the potential synergies, including
the amount, timing and achievability thereof, anticipated to result from the
merger. General Semiconductor also advised Credit Suisse First Boston, and
Credit Suisse First Boston has assumed, that the merger will be treated as a
tax-free reorganization for United States federal income tax purposes. With the
consent of General Semiconductor, Credit Suisse First Boston assumed that in the
course of obtaining the necessary regulatory and third party approvals and
consents for the merger, no delay, limitation, restriction or condition will be
imposed that will have a material adverse effect on the anticipated benefits of
the merger and that the merger will be completed in accordance with the terms of
the merger agreement, without waiver, amendment or modification of any material
term, condition or agreement. Credit Suisse First Boston was not requested to
make, and did not make, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of General Semiconductor or Vishay, nor
was it furnished with any such evaluations or appraisals. Credit Suisse First
Boston's opinion is necessarily based upon information available to it, and
financial, economic, market and other conditions as they existed and could be
evaluated on the date of its opinion. Credit Suisse First Boston's opinion does
not address the relative merits of the merger as compared to other transactions
or business strategies that might be available to General Semiconductor, nor
does it address the underlying business decision of General Semiconductor to
engage in the merger. Credit Suisse First Boston did not express any opinion as
to the actual value of Vishay common stock when and if issued to General
Semiconductor's stockholders pursuant to the merger or the prices at which
Vishay common stock will trade at any time.
In preparing its opinion to the General Semiconductor board of directors,
Credit Suisse First Boston performed a variety of financial and comparative
analyses including those described below. The summary of Credit Suisse First
Boston's analyses described below is not a complete description of the analyses
underlying its opinion. The preparation of a fairness opinion is a complex
analytical process involving various determinations as to the most appropriate
and relevant methods of financial analysis
36
and the application of those methods to the particular circumstances and,
therefore, a fairness opinion is not readily susceptible to partial analysis or
summary description. In arriving at its opinion, Credit Suisse First Boston made
qualitative judgments as to the significance and relevance of each analysis and
factor that it considered. Accordingly, Credit Suisse First Boston believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and factors or focusing on information presented in tabular format,
without considering all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the processes
underlying its analyses and opinion.
In its analyses, Credit Suisse First Boston considered industry performance,
regulatory, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of General Semiconductor and
Vishay. No company, transaction or business used in Credit Suisse First Boston's
analyses as a comparison is identical to General Semiconductor and Vishay or the
proposed merger, and an evaluation of the results of those analyses is not
entirely mathematical. Rather, the analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed.
The estimates contained in Credit Suisse First Boston's analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by the analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, Credit Suisse First Boston's
analyses and estimates are inherently subject to substantial uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one of
many factors considered by the General Semiconductor board of directors in its
evaluation of the proposed merger and should not be viewed as determinative of
the views of the General Semiconductor board of directors or management with
respect to the merger or the exchange ratio.
Although Credit Suisse First Boston evaluated the exchange ratio in the
merger agreement from a financial point of view, Credit Suisse First Boston was
not requested to, and did not, recommend the specific consideration payable in
the merger, which consideration was determined between Vishay and General
Semiconductor.
The following is a summary of the material financial analyses underlying
Credit Suisse First Boston's opinion dated July 31, 2001 delivered to the
General Semiconductor board of directors in connection with the merger.
The financial analyses summarized below include information presented in
tabular format. In order to fully understand Credit Suisse First Boston's
financial analyses, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data in the tables below without considering
the full narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could create a misleading
or incomplete view of Credit Suisse First Boston's financial analyses.
For this summary of Credit Suisse First Boston's fairness opinion, the
abbreviation LTM means the last twelve months, the abbreviation EBIT means
earnings before interest and taxes, the abbreviation EBITDA means earnings
before interest, taxes, depreciation and amortization and the abbreviation EPS
means earnings per share.
Credit Suisse First Boston's approach was to value each company separately
using relevant valuation technique, arrive at a reference range for each company
and then determine an exchange ratio range against which it compared the
proposed exchange ratio.
37
VALUATION OF GENERAL SEMICONDUCTOR. Credit Suisse First Boston used the
following valuation analyses in deriving values of General Semiconductor common
stock:
- Selected Comparable Public Companies Analysis,
- Comparable Transactions Analysis;
- Discounted Cash Flow Analysis; and
- Future Discounted Stock Price Analysis.
SELECTED COMPARABLE PUBLIC COMPANIES ANALYSIS. Credit Suisse First Boston
compared financial, operating and stock market data of General Semiconductor to
corresponding data of the following publicly traded companies in the
semiconductor industry:
- Fairchild Semiconductor Corporation;
- International Rectifier Corporation;
- IXYS Corporation; and
- ON Semiconductor Corporation.
Credit Suisse First Boston's analysis involved a review of the following
financial data (LTM preceding June 30, 2001) for the comparable companies:
- LTM sales;
- LTM EBITDA;
- LTM EBIT;
- estimated EBITDA for 2001 and 2002;
- LTM EPS; and
- estimated EPS for 2001 and 2002.
Estimated 2001 EPS and estimated 2002 EPS of the comparable semiconductor
companies were as reported by First Call. Estimated EBITDA for 2001 and 2002
were from Wall Street research. Credit Suisse First Boston's analysis suggested
the following reference ranges for the selected multiples:
SELECTED
COMPARABLE PUBLIC
COMPANIES
REFERENCE RANGE
-----------------------
VALUATION PARAMETER LOW HIGH
------------------- -------- --------
LTM Sales................................................... 1.4x 1.8x
LTM EBITDA.................................................. 7.0x 8.0x
LTM EBIT.................................................... 11.0x 13.0x
2001 Estimated EBITDA....................................... 10.0x 12.0x
2002 Estimated EBITDA....................................... 8.0x 10.0x
LTM EPS..................................................... 13.0x 15.0x
2001 Estimated EPS.......................................... 26.0x 30.0x
2002 Estimated EPS.......................................... 18.0x 22.0x
Applying the indicated reference ranges of the selected multiples to
corresponding estimated financial data of General Semiconductor provided by
General Semiconductor's management indicated an implied valuation range for
General Semiconductor common stock of $9.50 to $12.00 per share.
38
COMPARABLE TRANSACTIONS ANALYSIS. Credit Suisse First Boston analyzed
publicly available information on selected announced corporate transactions in
the semiconductor industry. Below are the comparable transactions:
- Vishay/Siliconix (expired July 2001);
- Vishay/Siliconix (revised May 2001);
- Vishay/Siliconix (February 2001);
- Intersil Corporation/Fairchild Semiconductor Corporation (January 2001);
- Intersil Corporation/Citicorp Venture Capital (June 1999);
- ON Semiconductor Corporation/Texas Pacific Group (May 1999);
- Power Device Division (Samsung)/Fairchild Semiconductor Corporation
(December 1998);
- Mitel Corporation/GEC Plessey (January 1998);
- TEMIC Semiconductor/Vishay (December 1997); and
- Fairchild Semiconductor Corporation/Citicorp Venture Capital
(January 1997).
In examining these transactions, Credit Suisse First Boston compared the
enterprise value of the acquired company, calculated as the value of
fully-diluted common equity plus net debt, implied by each of these
transactions, other than the proposed Vishay/Siliconix transactions, as a
multiple of the following financial data:
- LTM sales;
- LTM EBITDA; and
- LTM EBIT.
Credit Suisse First Boston's analysis suggested the following reference
ranges for the selected multiples:
COMPARABLE
TRANSACTIONS
REFERENCE RANGE
-----------------------
VALUATION PARAMETER LOW HIGH
------------------- -------- --------
LTM Sales................................................... 1.0x 1.7x
LTM EBITDA.................................................. 5.3x 6.3x
LTM EBIT.................................................... 10.8x 18.0x
Credit Suisse First Boston's analysis indicated an implied valuation range
for General Semiconductor common stock of $8.00 to $14.00 per share.
DISCOUNTED CASH FLOW ANALYSIS. Credit Suisse First Boston calculated, based
upon projections and assumptions contained in the financial forecasts provided
by General Semiconductor's management, the present value of the stand-alone,
unlevered, after-tax free cash flows of General Semiconductor for the period
commencing June 30, 2001 and ending December 31, 2005. The discounted unlevered,
after-tax free cash flow was calculated using discount rates ranging from 13.5%
to 16.5%, based on a weighted average cost of capital analysis of General
Semiconductor, and terminal multiples of estimated EBITDA for General
Semiconductor's fiscal year ending December 31, 2005 ranging from 5.0x to 7.0x.
This analysis indicated an implied valuation range for General Semiconductor
common stock of $8.50 to $14.25 per share.
39
FUTURE DISCOUNTED STOCK PRICE ANALYSIS. Credit Suisse First Boston
calculated the present value of the hypothetical end-of-year future share prices
of General Semiconductor common stock for the years ending December 31, 2001
through 2004 using equity discount rates of 16.0% and 22.0%, based upon an
equity cost of capital analysis of General Semiconductor, with forward PE
multiples ranging from 14.0x to 18.0x. This analysis indicated an implied
valuation range for General Semiconductor common stock of $8.50 to $13.50 per
share.
Based on the results of these valuation analyses, Credit Suisse First Boston
derived a reference range for the implied value of General Semiconductor common
stock of $9.00 to $13.00 per share.
VALUATION OF VISHAY. Credit Suisse First Boston used the following
valuation analyses in deriving values of Vishay common stock:
- Selected Comparable Public Companies Analysis;
- Discounted Cash Flow Analysis; and
- Future Discounted Stock Price Analysis.
SELECTED COMPARABLE PUBLIC COMPANIES ANALYSIS. Credit Suisse First Boston
compared financial, operating and stock market data of Vishay to corresponding
data of the following publicly traded companies in the semiconductor industry:
- AVX Corporation;
- KEMET Corporation; and
- Technitrol, Inc.
Credit Suisse First Boston's analysis involved a review of the following
financial data (LTM preceding March 31, 2001) for the comparable companies:
- LTM sales;
- LTM EBITDA;
- LTM EBIT;
- estimated EBITDA for 2001 and 2002;
- LTM EPS; and
- estimated EPS for 2001 and 2002.
40
Estimated 2001 EPS and estimated 2002 EPS of the comparable semiconductor
companies were as reported by First Call. Estimated EBITDA for 2001 and 2002
were from Wall Street research. Credit Suisse First Boston's analysis suggested
the following reference ranges for the selected multiples:
SELECTED
COMPARABLE PUBLIC
COMPANIES
REFERENCE RANGE
-----------------------
VALUATION PARAMETER LOW HIGH
------------------- -------- --------
LTM Sales................................................... 1.2x 1.5x
LTM EBITDA.................................................. 3.5x 5.5x
LTM EBIT.................................................... 4.5x 7.5x
2001 Estimated EBITDA....................................... 8.0x 9.0x
2002 Estimated EBITDA....................................... 9.0x 10.0x
LTM EPS..................................................... 6.0x 9.0x
2001 Estimated EPS.......................................... 18.0x 24.0x
2002 Estimated EPS.......................................... 16.0x 20.0x
Applying the indicated reference ranges of the selected multiples to
corresponding estimated financial data of Vishay provided by Vishay's management
indicated an implied valuation range for Vishay common stock of $22.00 to $27.00
per share.
DISCOUNTED CASH FLOW ANALYSIS. Credit Suisse First Boston calculated, based
upon projections and assumptions contained in the financial forecasts provided
by Vishay's management, the present value of the stand-alone, unlevered,
after-tax free cash flows of Vishay for the period commencing June 30, 2001, and
ending December 31, 2003. The discounted, unlevered, after-tax free cash flow
was calculated using discount rates ranging from 13.5% to 15.5%, based on a
weighted average cost of capital analysis of Vishay, and terminal multiples of
estimated EBITDA for Vishay's fiscal year ending December 31, 2003 ranging from
6.0x to 8.0x. This analysis indicated an implied valuation range for Vishay
common stock of $17.00 to $23.00 per share.
FUTURE DISCOUNTED STOCK PRICE ANALYSIS. Credit Suisse First Boston
calculated the present value of the hypothetical end-of-year future share prices
of Vishay common stock for the years ending December 31, 2001 through 2003 using
equity discount rates of 14.5% and 17.0%, based upon an equity cost of capital
analysis of Vishay, with forward PE multiples ranging from 15.0x to 20.0x. This
analysis indicated an implied valuation range for Vishay common stock of $16.50
to $22.00 per share.
Based on the results of these valuation analyses, Credit Suisse First Boston
derived a reference range for the implied value of Vishay common stock of $19.00
to $24.00 per share.
In arriving at its opinion as to the fairness, from a financial point of
view, to the holders of General Semiconductor common stock of the exchange ratio
provided for in the merger agreement, Credit Suisse First Boston used the
derived reference ranges of General Semiconductor common stock and Vishay common
stock and calculated a range of implied exchange ratios from 0.375x to 0.684x
and compared this range to the proposed exchange ratio of 0.563 contained in the
merger agreement. Credit Suisse First Boston also considered the other factors
described below.
41
ADDITIONAL ANALYSES. In the course of preparing its opinion, Credit Suisse
First Boston also considered the following information and data in addition to
the valuation analyses described above:
- Historical Exchange Ratio Analysis;
- Premiums Paid Analysis;
- Contribution Analysis; and
- Pro Forma Combined Company Analysis.
HISTORICAL EXCHANGE RATIO ANALYSIS. Credit Suisse First Boston compared the
average daily closing stock prices for General Semiconductor and Vishay for the
one-month, two-month, three-month, four-month, six-month and one-year periods
ending July 27, 2001. This comparison yielded an implied exchange ratio
reference range of 0.420 to 0.485 as indicated in the following table as
compared to an exchange ratio in the merger agreement of 0.563.
PERIOD IMPLIED EXCHANGE RATIO
-----------------------------
One month................................................... 0.420
Two months.................................................. 0.465
Three months................................................ 0.474
Four months................................................. 0.482
Six months.................................................. 0.485
One year.................................................... 0.443
PREMIUMS PAID ANALYSIS. Credit Suisse First Boston reviewed the premiums
paid in 60 stock acquisitions with values between $500 million and $1 billion
over the last two years. Credit Suisse First Boston calculated the median and
the average premiums paid in these transactions based on the closing stock
prices of the target company one week and one month prior to the public
announcement of the relevant transaction. This analysis indicated an implied
valuation range for General Semiconductor common stock of $12.50 to $14.25 per
share as compared to an implied offer price of $13.31 per share based on the
exchange ratio contained in the merger agreement and the closing price of Vishay
common stock on July 27, 2001 of $23.65.
CONTRIBUTION ANALYSIS. Credit Suisse First Boston analyzed the relative pro
forma contributions of General Semiconductor and Vishay to the cash net income,
diluted cash net income, basic cash EPS and diluted cash EPS for the combined
company for the actual calendar year 2000, estimated third and fourth quarters
of 2001 and estimated calendar years 2001, 2002 and 2003. This analysis did not
take into account the projected synergies from the transaction. For purposes of
this analysis, estimated cash net income and diluted cash net income were
derived from General Semiconductor and Vishay management projections. This
analysis indicated a pro forma contribution by General Semiconductor to the
combined company's cash net income ranging from 5.0% to 15.7% for the selected
periods and a pro forma contribution by General Semiconductor to the combined
company's diluted cash net income ranging from 8.2% to 17.2% for the selected
periods. This compares to pro forma ownership by the stockholders of General
Semiconductor of a 13.4% economic interest and a 7.1% voting interest in the
combined company, assuming an exchange ratio of 0.563 and the conversion of all
options of General Semiconductor into options of Vishay. The analysis of the
contributions of General Semiconductor and Vishay to the basic cash EPS for the
combined company indicated an implied exchange ratio ranging from 0.193 to 0.676
for the selected periods and the analysis of the contributions of General
Semiconductor and Vishay to the diluted cash EPS for the combined company
indicated an implied exchange ratio ranging from 0.179 to 0.629 for the selected
periods as compared to an exchange ratio in the merger agreement of 0.563.
42
PRO FORMA COMBINED COMPANY ANALYSIS. Credit Suisse First Boston analyzed
the potential pro forma effect of the merger on Vishay's estimated EPS for the
calendar years 2002 and 2003 based on estimates of the managements of General
Semiconductor and Vishay, both before and after giving effect to potential
synergies anticipated by the managements of General Semiconductor and Vishay.
The following table illustrates the potential percentage accretion or (dilution)
of the merger on Vishay's EPS based on the exchange ratio provided for in the
merger agreement:
2002 2003
-------- --------
Basic EPS with synergies.................................... 9.1% 16.4%
Diluted EPS without synergies............................... (1.4%) 1.8%
The actual results achieved by Vishay may vary from projected results and
the variations may be material.
In addition to analyzing the income statement effect of the merger, Credit
Suisse First Boston also reviewed the pro forma effect on the balance sheet of
the combined company of the merger and Vishay's $120 million acquisition of the
infrared components business of Infineon Technologies A.G., and noted that pro
forma leverage, which is defined as net debt/LTM EBITDA (LTM as of June 30, 2001
for General Semiconductor and Vishay and as of March 31, 2001 for the infrared
components business of Infineon), was substantially higher for General
Semiconductor on a stand-alone basis than for the combined company.
MISCELLANEOUS. Credit Suisse First Boston acted as financial advisor to
General Semiconductor in connection with the merger and will receive a fee for
its services, a majority of which is contingent upon the completion of the
merger. Credit Suisse First Boston also received a fee upon delivery of its
opinion. General Semiconductor also has agreed to reimburse Credit Suisse First
Boston for its out-of-pocket expenses, including fees and expenses of legal
counsel and any other advisor retained by Credit Suisse First Boston, and to
indemnify Credit Suisse First Boston and related parties against liabilities,
including liabilities under the federal securities laws, arising out of its
engagement.
Credit Suisse First Boston or its affiliates have in the past provided, and
may in the future provide, certain financial and investment banking services to
General Semiconductor and Vishay unrelated to the merger for which Credit Suisse
First Boston or its affiliates have received, and expect to receive,
compensation. In the ordinary course of its business, Credit Suisse First Boston
and its affiliates may actively trade the debt and equity securities and other
financial obligations of both General Semiconductor and Vishay for its own and
its affiliates' own accounts and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities and
obligations. In the past two years, Credit Suisse First Boston has participated,
and at times lead or co-lead, securities offerings for Vishay and General
Semiconductor. It received customary compensation in connection with these
engagements.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF VISHAY; REASONS OF VISHAY FOR THE
MERGER
At a meeting of the Vishay board of directors, after careful consideration,
the Vishay board determined:
- that an acquisition of General Semiconductor would be in the best
interests of Vishay and its stockholders; and
- that it was appropriate to recommend to the stockholders of Vishay that
they take the action necessary to effect the acquisition, including
approval of an amendment to Vishay's certificate of incorporation to
authorize sufficient shares of common stock for issuance in connection
with the merger and to approve the issuance of shares in connection with
the merger.
43
In these determinations, Vishay's board of directors considered the
following material factors:
- Vishay's strategy of incrementally expanding its presence in the market
for active electronic components, which began in 1998 with the
acquisitions of its Siliconix subsidiary and its Telefunken unit and which
continued most recently with the acquisition of the infrared component
business of Infineon AG;
- General Semiconductor's leadership position in diodes, voltage rectifiers
and power MOSFETs, products that are complementary to Vishay's own
offerings of discrete, active semiconductor components;
- the expectation that General Semiconductor's business could be readily
integrated with Vishay's business, enabling Vishay to broaden and fill in
its line of offerings of discrete semiconductor products;
- the quality of General Semiconductor's research and development pipeline
and the innovative products that it continues to produce, for example, its
recently developed 200 million cell-per-square-inch power MOSFET, which
Vishay believes is the highest performing unit of its kind worldwide;
- the expectation that the merger, assuming the realization of certain of
the cost savings referred to below and other synergies, would be
immediately accretive to Vishay's earnings per share;
- the current downturn in the electronic components market, the special
focus that this environment requires on cost-cutting, operational
efficiencies and synergies and the expectation that these objectives could
be better realized by the two companies on a combined rather than a
stand-alone basis;
- the belief that management of General Semiconductor shares Vishay's view
of the need to cut costs and promote efficiencies, as evidenced by General
Semiconductor's implementation of its own cost-cutting plan, and the
belief that the plan can be enhanced following the merger;
- the cost-saving opportunities that may be achieved through a reduction of
corporate overhead costs, combination of facilities, marketing
efficiencies and combined purchases of services and materials;
- Vishay's strong balance sheet and net cash position, which should enable
the combined company to pursue acquisitions and capital expansion,
especially in light of attractive opportunities that may present
themselves in the current economic slowdown;
- the belief that the merger would facilitate a resolution of the pending
patent infringement litigation between Vishay's Siliconix subsidiary and
General Semiconductor involving trench MOSFET technology that would be
financially equitable to both parties and would promote the combined
development of this promising technology;
- the aggregate number of Vishay shares to be delivered to General
Semiconductor's securityholders in connection with the merger; and
- Vishay's history of growth through acquisitions, including its experience
in integrating acquired businesses with existing operations and thereby
achieving synergies and cost savings.
The board of directors of Vishay unanimously recommends that Vishay
stockholders vote FOR approval of the amendment to Vishay's certificate of
incorporation to increase the number of shares of authorized capital stock of
Vishay and FOR approval of the issuance of Vishay common stock in connection
with the merger.
44
ISSUANCE OF SHARES IN CONNECTION WITH THE MERGER
The rules of the New York Stock Exchange, on which Vishay's common stock is
listed, require stockholder approval for issuance of shares of common stock in
any transaction where the number of shares to be issued will be equal to
20 percent or more of the number of shares of common stock outstanding before
the issuance. Vishay currently has outstanding 122,456,017 shares of its common
stock and 15,496,634 shares of its Class B common stock, after deducting
treasury shares.
Based upon the currently outstanding number of shares of General
Semiconductor common stock of 37,838,167 and the exchange ratio of 0.563 of a
Vishay share for each General Semiconductor share, 21,302,888 Vishay shares
would be issuable directly in the merger. In addition, General Semiconductor has
issued options to acquire 7,538,033 shares of common stock, at an average
exercise price of $10.20. Under the terms of the merger agreement, these options
will be exercisable for a total of 4,243,913 shares of Vishay common stock, at
an average exercise price of $18.12, following the merger.
Also, General Semiconductor has outstanding $172,500,000 principal amount of
5.75% convertible subordinated notes due December 2006. These notes are
convertible into shares of General Semiconductor common stock at a conversion
price of $15.55, corresponding to 64.3087 shares per $1,000 principal amount of
the notes. Following the merger, the notes will become convertible into shares
of Vishay common stock at the existing conversion price divided by the exchange
ratio. If the notes were converted in full, whether prior to or following the
merger, a total of 6,245,499 shares of Vishay common stock would be issuable in
respect of the notes. Under the terms of the indenture governing the convertible
notes, Vishay will be required to cause General Semiconductor, as the surviving
corporation in the merger, within 25 business days after completion of the
merger, to make an offer to purchase all of the convertible notes. The offer
must be at a cash price equal to 100% of the principal amount of the notes plus
accrued and unpaid interest and liquidated damages, if any, owed under the
related registration rights agreement up to, but excluding, the date on which
the notes are actually purchased pursuant to the offer. Each holder of notes may
accept this offer with respect to all or a portion of its notes. The offer must
remain open for 20 business days following its commencement.
The issuance of the Vishay common stock described above requires stockholder
approval of the amendment to Vishay's certificate of incorporation increasing
the authorized number of shares of Vishay common stock, discussed under "Vishay
Capital Increase Proposal" beginning on page 72, and stockholder approval of the
issuance of Vishay common stock in accordance with the rules of the New York
Stock Exchange.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the General Semiconductor board of
directors to vote FOR approval and adoption of the merger agreement,
stockholders of General Semiconductor should be aware that members of General
Semiconductor's board of directors and its executive officers and key employees
will receive benefits as a result of the merger that will be in addition to or
different from the benefits received by General Semiconductor stockholders
generally. The board of General Semiconductor recognized those interests and
considered them when it approved the merger and the merger agreement.
SEVERANCE PROTECTION AGREEMENTS. Ronald A. Ostertag, Robert J. Gange, W.
John Nelson, Stephen B. Paige and 32 other key employees are each party to a
severance protection agreement with General Semiconductor. Under his or her
respective agreement, each individual is entitled to receive the benefits
described below if his or her employment with General Semiconductor or its
affiliates is terminated other than for cause, disability or death or if he or
she resigns for good reason, or any reason in the case of Mr. Ostertag, in each
case, within 24 months after completion of the merger or if he or she is
terminated without cause within six months prior to completion of the merger or
at any
45
time prior to completion of the merger at the request of Vishay or otherwise in
connection with the merger.
The severance benefits payable under the severance protection agreements
consist, in general, of:
- unpaid compensation accrued through the date of termination and the amount
of the target annual bonus payable to the individual under General
Semiconductor's annual incentive plans in respect of the fiscal year of
the date of termination or the fiscal year in which completion of the
merger occurs, whichever is greater, prorated through the date of
termination;
- a severance payment equal to 2.5 times in the case of Mr. Ostertag, 2.0
times in the case of Messrs. Gange, Nelson and Paige, 1.5 times in the
case of 21 individuals, and 1 times in the case of 11 individuals, the sum
of (1) the individual's annual base salary as of June 1, 2001 or, if
greater, at any time thereafter and (2) the amount of the target annual
bonus payable to the individual under General Semiconductor's annual
incentive plans in respect of the fiscal year of the date of termination
or the fiscal year in which completion of the merger occurs, whichever is
greater;
- for a period of 30 months in the case of Mr. Ostertag, 24 months in the
case of Messrs. Gange, Nelson and Paige, 18 months in the case of 21
individuals, and 12 months in the case of 11 individuals, continuation of
the benefit coverage provided to the individual and his or her dependents
as of the date of completion of the merger, or if greater, at any time
thereafter;
- reimbursement of certain costs relating to outplacement, tax and financial
planning assistance and, in the case of certain employees, relocation; and
- in the case of Messrs. Ostertag, Gange, Nelson and Paige, an additional
amount to reimburse each individual, on an after-tax basis, for any excise
tax under section 4999 of the Internal Revenue Code (and any related
interest and penalties) on amounts payable under the agreements or
otherwise.
The term of the severance protection agreements automatically renews
January 1 of each year unless earlier terminated by the individual or General
Semiconductor, except that the term may not expire prior to 24 months following
completion of the merger. The severance protection agreements may not be amended
without the written consent of the individual party to the agreement.
NEW RETENTION AGREEMENTS. Vishay and General Semiconductor have agreed that
Mr. Ostertag may, at any time, grant retention bonuses for post-merger
employment with General Semiconductor to any or all of four executive officers,
including Mr. Ostertag, and two vice presidents of General Semiconductor. The
bonuses may not exceed $4.0 million in the aggregate without Vishay's consent
and are to be based on business performance objectives and paid at the end of
the applicable retention period of up to six months, as determined in the sole
discretion of Mr. Ostertag. The retention periods, performance standards,
amounts, form of consideration and non-competition agreements, if any, for the
bonuses will be determined by Mr. Ostertag after consultation with Vishay.
STOCK OPTIONS. Upon completion of the merger, each option to purchase
shares of General Semiconductor outstanding immediately prior to completion of
the merger will become immediately vested and exercisable in full. The options
will become exercisable for Vishay shares, as described under the heading "Stock
Options" on page 52. In the event that an optionholder's employment with General
Semiconductor terminates for any reason following (a) completion of the merger,
in the case of options under the General Semiconductor Amended and Restated 1998
Long-Term Incentive Plan, or (b) stockholder approval of the merger, in the case
of options under the Amended and Restated General Semiconductor 1993 Long-Term
Incentive Plan, then the optionholder's options will remain exercisable for the
remainder of their term.
46
MANAGEMENT INCENTIVE PLAN. The management incentive plan is General
Semiconductor's annual cash bonus incentive plan for its chief executive officer
and various other key employees. Participants in the management incentive plan
are eligible to receive annual bonuses, calculated as a percentage of salary,
based upon the achievement of specified performance objectives. Within 60 days
after completion of the merger, General Semiconductor will pay to each
individual who is a participant in the management incentive plan immediately
prior to completion of the merger (regardless of whether such participant
remains in the employ of General Semiconductor following completion of the
merger) a pro rata portion of his or her bonus award, calculated as if all
performance percentages equal 100%.
SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS. General Semiconductor maintains
a supplemental executive retirement plan, which is a non-qualified retirement
plan for a select group of management or highly compensated employees that
provides supplemental retirement benefits in respect of each participant's
compensation in excess of certain limits imposed by the Internal Revenue Code.
General Semiconductor also has entered into supplemental executive retirement
agreements with two key employees that, in general, provide for payment to these
employees (or their beneficiaries) of additional pension benefits that would
have been payable to these employees under General Semiconductor's tax-qualified
pension plan had all of their respective service with General Instrument
Corporation been credited under that plan. Upon completion of the merger, the
actuarial equivalent of each participant's benefit under the supplemental
executive retirement plan or agreement, as applicable, on the date of completion
of the merger will immediately be paid to the participant in a lump sum cash
payment.
ELECTION OF MR. OSTERTAG TO VISHAY'S BOARD OF DIRECTORS. Subject to
applicable fiduciary obligations of Vishay's board of directors, Vishay has
agreed to take all actions required to appoint Ronald A. Ostertag as a director
of Vishay at or as soon as practicable following the merger. Thereafter, Vishay
will take all action necessary to cause Mr. Ostertag to continue to serve as a
director of Vishay until at least the date of the third annual meeting of
stockholders following the merger. Mr. Ostertag will be entitled, as a Vishay
director, to the same compensation, indemnification and other benefits as
provided to the other members of the Vishay board of directors.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is the opinion of Kramer Levin Naftalis & Frankel
LLP and Fried, Frank, Harris, Shriver & Jacobson as to the material United
States federal income tax consequences of the exchange of General Semiconductor
common stock by citizens or residents or domestic corporations of the United
States, referred to in this section as "United States persons", for shares of
Vishay common stock in the merger. The discussion which follows is based on the
United States Internal Revenue Code, Treasury Regulations promulgated
thereunder, administrative rulings and pronouncements and judicial decisions as
of the date hereof, all of which are subject to change, possibly with
retroactive effect. Any of these changes could alter the tax consequences
discussed in this joint proxy statement/ prospectus. The discussion below
assumes that the merger and related transactions will be completed on the terms
and conditions of the merger agreement and as described in this joint proxy
statement/ prospectus without waiver or modification of any of these terms or
conditions.
The discussion below is for general information only and, except where
specifically noted, does not address the effects of any state, local or non-U.S.
tax laws. In addition, the discussion below relates to United States persons who
hold General Semiconductor common stock as capital assets (as defined in
section 1221 of the United States Internal Revenue Code). The tax treatment of a
General Semiconductor stockholder may vary depending upon the stockholder's
particular situation, and some stockholders may be subject to special rules not
discussed below, including, for example, partners of partnerships that hold
General Semiconductor common stock, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, traders in securities,
persons whose functional currency is not the United States dollar, persons
holding General Semiconductor common stock as part
47
of a hedge, straddle, conversion, constructive sale, synthetic security or other
integrated transaction, non-U.S. persons, and individuals who received General
Semiconductor common stock pursuant to the exercise of employee stock options or
otherwise as compensation.
The obligation of Vishay to complete the merger is conditioned upon the
receipt of an opinion, dated as of the date of the merger, of Kramer Levin
Naftalis & Frankel LLP, and the obligation of General Semiconductor to complete
the merger is conditioned upon the receipt of an opinion, dated as of the date
of the merger, of Fried, Frank, Harris, Shriver & Jacobson, subject in each case
to the assumptions and qualifications set forth below and in those opinions, to
the effect that the merger will qualify as a reorganization within the meaning
of section 368(a) of the Internal Revenue Code. If the conditions relating to
delivery of these opinions are waived and there is a material change in the tax
consequences of the merger, General Semiconductor and Vishay will recirculate
proxy materials regarding the merger and resolicit proxies. These opinions will
be based on, among other things, current provisions of the United States
Internal Revenue Code, Treasury Regulations promulgated under the United States
Internal Revenue Code, administrative rulings and pronouncements and judicial
decisions as of the date thereof, all of which are subject to change, possibly
with retroactive effect, as well as facts existing as of the date of the
opinions, various representations as to factual matters made by Vishay, Vishay
Acquisition and General Semiconductor and the assumption that the merger is
completed in accordance with the terms of the merger agreement and as described
in this joint proxy statement/prospectus without waiver or modification of any
of these terms or conditions. These representations or this assumption, if
incorrect in certain material respects, could jeopardize the conclusions reached
in the opinions. None of Vishay, Vishay Acquisition, or General Semiconductor
will seek a ruling from the United States Internal Revenue Service as to the
United States federal income tax treatment of the merger, and these opinions are
not binding on the United States Internal Revenue Service or the courts. A copy
of the opinions in the form to be delivered to Vishay and General Semiconductor
is filed as an exhibit to the registration statement on Form S-4, of which this
joint proxy statement/prospectus is a part.
Subject to the opinions that are required to be delivered to satisfy the
conditions to completion of the merger described above, in the opinion of Kramer
Levin Naftalis & Frankel LLP and Fried, Frank, Harris, Shriver & Jacobson, the
following material United States federal income tax consequences will result
from the merger:
- General Semiconductor stockholders will not recognize any gain or loss on
the exchange of General Semiconductor common stock for shares of Vishay
common stock in the merger (except for gain or loss with respect to cash
received instead of fractional shares);
- the tax basis to a General Semiconductor stockholder of the shares of
Vishay common stock received in exchange for General Semiconductor common
stock pursuant to the merger, including any fractional share interest in
shares of Vishay common stock for which cash is received instead, will
equal such General Semiconductor stockholder's tax basis in the General
Semiconductor common stock surrendered in exchange;
- the holding period of a General Semiconductor stockholder for the shares
of Vishay common stock received pursuant to the merger will include the
holding period of the General Semiconductor common stock surrendered in
exchange;
- a General Semiconductor stockholder who receives cash instead of an
interest in a fractional share of Vishay common stock pursuant to the
merger will be treated as having received that cash in exchange for that
fractional share interest and generally will recognize capital gain or
loss on the deemed exchange in an amount equal to the difference between
the amount of cash received and the basis of the General Semiconductor
stock allocable to that fractional share; and
48
- no income, gain or loss will be recognized by Vishay, Vishay Acquisition
or General Semiconductor as a result of the transfer to General
Semiconductor stockholders of the shares of Vishay common stock pursuant
to the merger.
A General Semiconductor stockholder who exchanges General Semiconductor
common stock for shares of Vishay common stock will be required to retain in
such stockholder's records and file with such stockholder's federal income tax
return for the taxable year in which the merger takes place a statement setting
forth all relevant facts in respect of the nonrecognition of gain or loss upon
the exchange. The statement is required to include:
- the stockholder's tax basis in the General Semiconductor common stock
surrendered in the merger; and
- the fair market value of the shares of Vishay common stock received in the
merger as of the effective time of the merger.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY AND DOES NOT PURPORT
TO BE A COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A
DECISION WHETHER TO VOTE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT. GENERAL
SEMICONDUCTOR STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING
THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE
MERGER TO THEM.
ACCOUNTING TREATMENT
The merger will be treated as a purchase for accounting and financial
reporting purposes. Under this method of accounting, the assets and liabilities
of General Semiconductor will be recorded in Vishay's consolidated financial
statements at their estimated fair value at the date of the merger, with the
remaining purchase price reflected as goodwill.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
Each of Vishay and General Semiconductor has agreed to use its reasonable
best efforts to obtain all regulatory approvals required in order to complete
the merger. Vishay, Vishay Acquisition and General Semiconductor have either
filed, or intend to file promptly after the date of this joint proxy
statement/prospectus, applications and notifications to obtain the required
regulatory approvals. Vishay and General Semiconductor cannot assure you that
the required regulatory approvals will be obtained or, if obtained, what the
timing of these approvals will be. Vishay and General Semiconductor also cannot
assure you that, if obtained, these approvals will not face legal challenges.
Vishay and General Semiconductor are not aware of any other material
governmental approvals or actions that are required prior to completion of the
merger other than those described below.
ANTITRUST MATTERS
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits Vishay
and General Semiconductor from completing the merger until certain information
and materials have been furnished to the United States Federal Trade Commission
and the Antitrust Division of the United States Department of Justice and the
applicable waiting periods have expired or been terminated. On August 31, 2001,
Vishay and General Semiconductor filed their Premerger Notification and Report
Forms pursuant to the HSR Act with the FTC and the Antitrust Division. The
waiting period expired on October 1, 2001. Even though the waiting period has
expired, the FTC or the Antitrust Division retains the authority to challenge
the merger on antitrust grounds, before or after the merger is completed.
The merger is also subject to notification to, and approval by, antitrust
authorities in several other jurisdictions. Vishay and General Semiconductor
have made, or intend to make shortly after the date of this joint proxy
statement/prospectus, filings under the pre-merger notification statutes in
these and
49
other jurisdictions in which those filings are required. It is a condition to
completion of the merger that all clearances and approvals under all relevant
non-U.S. antitrust laws have been obtained except as would not have a material
adverse effect on Vishay or General Semiconductor.
Neither Vishay nor General Semiconductor believes that completion of the
merger will result in a violation of any applicable antitrust laws. However, we
cannot assure you that no governmental agency will challenge the merger on
antitrust grounds. State antitrust authorities and private parties in certain
circumstances may bring legal action under the antitrust laws seeking to enjoin
the merger or to impose conditions on the merger.
FEDERAL SECURITIES LAW CONSEQUENCES
General Semiconductor stockholders who receive shares of Vishay common stock
in the merger can freely transfer such shares, except that persons who are
deemed to be "affiliates", as such term is defined under the Securities Act, of
General Semiconductor at the time of the General Semiconductor special meeting
may only sell shares they receive in the merger in transactions permitted by the
resale provisions of Rule 145 under the Securities Act, or as otherwise
permitted under the Securities Act. People who may be deemed to be "affiliates"
of General Semiconductor generally include individuals or entities that control,
are controlled by, or are under common control with, General Semiconductor, and
would not include General Semiconductor stockholders who are not executive
officers, directors or significant stockholders of General Semiconductor.
In general, under Rule 145, for one year following completion of the merger,
General Semiconductor affiliates will be subject to the following restrictions
on the public sale of shares of Vishay common stock acquired in the merger:
- a General Semiconductor affiliate, together with certain related persons,
may sell only through unsolicited "broker transactions" or in transactions
directly with a "market maker", as such terms are defined in Rule 144
under the Securities Act;
- the number of shares of Vishay common stock a General Semiconductor
affiliate may sell, together with specified related persons and specified
persons acting in concert, within any three-month period may not exceed
the greater of 1% of the outstanding shares of Vishay common stock or the
average weekly trading volume of such shares during the four calendar
weeks preceding the sale; and
- a General Semiconductor affiliate may sell only if Vishay remains current
with its informational filings with the SEC under the Exchange Act.
After one year from completion of the merger, a General Semiconductor
affiliate may sell shares of Vishay common stock received in the merger without
the limitations on the manner of sale or volume, provided that Vishay is current
with its Exchange Act informational filings and the General Semiconductor
affiliate is not then an affiliate of Vishay. After two years from completion of
the merger, an affiliate of General Semiconductor may sell its shares of Vishay
common stock received in the merger without any restrictions, so long as the
affiliate has not been an affiliate of Vishay for at least three months prior to
the sale.
DIVIDENDS
Vishay has never paid cash dividends on its common stock, and it does not
anticipate paying any cash dividends in the foreseeable future. Vishay's policy
is to retain earnings to support the growth of its business, and Vishay does not
intend to change this policy at the present time. In addition, Vishay is
restricted from paying cash dividends under the terms of its revolving credit
agreement.
50
General Semiconductor has not paid any cash dividends since it changed its
name from General Instrument Corporation and spun off its broadband
communication business and its coaxial and other cable business in July 1997.
STOCK EXCHANGE LISTING
It is a condition to the merger that the New York Stock Exchange authorize
for listing the shares of Vishay common stock to be delivered in connection with
the merger. Vishay has agreed to use its best efforts to cause the shares of
Vishay common stock to be listed on the New York Stock Exchange prior to
completion of the merger.
APPRAISAL RIGHTS
Both Vishay and General Semiconductor are incorporated under Delaware law.
Under the Delaware General Corporation Law, holders of General Semiconductor
common stock will not be entitled to appraisal rights by reason of the merger
agreement or completion of the merger.
51
THE MERGER AGREEMENT
This section describes the material provisions of the merger agreement. The
full text of the merger agreement is attached as Annex A to this joint proxy
statement/prospectus. We encourage stockholders to read the merger agreement in
its entirety. In addition, important information about the merger agreement and
the merger is provided in the previous section entitled "The Merger" beginning
on page 29.
THE MERGER
Under the merger agreement and in accordance with Delaware law, Vishay
Acquisition Corp., a wholly owned subsidiary of Vishay, will merge with and into
General Semiconductor. As a result of the merger, General Semiconductor will
become a wholly owned subsidiary of Vishay, the separate corporate existence of
Vishay Acquisition will cease and General Semiconductor will continue as the
surviving corporation.
EFFECTIVE TIME
Unless the merger agreement is terminated, as soon as possible, but no later
than two days after the satisfaction or waiver of the closing conditions
contained in the merger agreement, the merger will become effective when General
Semiconductor files a certificate of merger with the Secretary of State of
Delaware. See "Conditions to Completion of the Merger" beginning on page 59 and
"Termination" beginning on page 61.
MERGER CONSIDERATION
EXCHANGE RATIO
In the merger, each share of General Semiconductor common stock outstanding
immediately prior to the merger, except as described below under "Cancellation",
will be converted into 0.563 shares of Vishay common stock. YOU SHOULD NOT SEND
YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD OR VOTING FORM.
If, before completion of the merger, any change in the outstanding shares of
capital stock of Vishay or General Semiconductor occurs, including the
exercisability or exchange of rights under General Semiconductor's rights plan,
the amount of Vishay shares and any other amounts payable pursuant to the merger
or the merger agreement will be adjusted appropriately.
FRACTIONAL SHARES OF VISHAY COMMON STOCK
No fractional shares of Vishay common stock will be issued for General
Semiconductor shares in the merger. A General Semiconductor stockholder who
would otherwise have been entitled to a fraction of a share of Vishay common
stock will instead receive a cash payment, without interest, determined by
multiplying the fractional share interest to which such holder would otherwise
be entitled by the closing share price of Vishay common stock on the New York
Stock Exchange trading day immediately prior to the effective time of the
merger.
STOCK OPTIONS
Upon completion of the merger, each option to purchase shares of General
Semiconductor common stock that is outstanding immediately before completion of
the merger will become fully exercisable for that number of whole shares of
Vishay common stock equal to the number of General Semiconductor shares that
were subject to the option immediately before completion of the merger,
multiplied by 0.563, rounded to the nearest whole number of shares of Vishay
common stock. The exercise price per share for the Vishay common stock issuable
upon exercise of the stock option will be
52
equal to the exercise price per share of General Semiconductor common stock
immediately prior to completion of the merger divided by 0.563, rounded to the
nearest whole cent.
Each General Semiconductor stock option will otherwise be subject to the
same terms and conditions as were applicable to the option immediately prior to
completion of the merger.
CANCELLATION
Each share of General Semiconductor common stock held in General
Semiconductor's treasury and each share owned by Vishay immediately prior to
completion of the merger will be cancelled and retired without payment of any
consideration.
EXCHANGE OF GENERAL SEMICONDUCTOR COMMON STOCK
As soon as practicable after completion of the merger, Vishay will instruct
American Stock Transfer & Trust Co., the exchange agent, to mail to each holder
of record of General Semiconductor common stock a letter of transmittal
containing instructions regarding the surrender of General Semiconductor stock
certificates in exchange for certificates representing Vishay common stock.
Commencing immediately after completion of the merger, upon surrender of
stock certificates representing General Semiconductor shares in accordance with
the instructions contained in the letter of transmittal, General Semiconductor
stockholders will be entitled to receive stock certificates representing shares
of Vishay common stock, together with any unpaid dividends declared by Vishay
after completion of the merger and any cash due instead of a fractional share of
Vishay common stock. Taxes will be withheld if required. For all other corporate
purposes, certificates that represented shares of General Semiconductor common
stock prior to completion of the merger will represent, from and after
completion of the merger, the number of shares of Vishay common stock and cash
in respect of fractional Vishay shares into which the shares of General
Semiconductor common stock are converted by law in the merger. After completion
of the merger, there will be no further registration of transfers of General
Semiconductor stock on the books of the surviving corporation.
Any Vishay stock certificates and any cash deposited by Vishay with the
exchange agent that remain unclaimed by former General Semiconductor
stockholders on the first anniversary of the merger will be delivered to Vishay.
Any former General Semiconductor stockholders who have not complied with the
exchange procedures before the first anniversary of the merger may look only to
Vishay for issuance of their Vishay common stock and payment of any cash instead
of fractional shares and any unpaid dividends or distributions on the shares of
Vishay common stock. None of Vishay, Vishay Acquisition, General Semiconductor
and the exchange agent will be liable for any amount delivered to a public
official pursuant to any abandoned property, escheat or similar law.
If your General Semiconductor stock certificates have been lost, stolen or
destroyed, you will be entitled to the merger consideration if you sign an
affidavit to that effect. Vishay also may, in its discretion, require you to
deliver a bond in an amount sufficient to protect Vishay, the surviving
corporation and the exchange agent against claims related to your General
Semiconductor stock certificates.
Shares of General Semiconductor common stock held in book-entry form will be
exchanged by The Depository Trust Company in accordance with its customary
procedures.
REPRESENTATIONS AND WARRANTIES
General Semiconductor and Vishay have made various customary mutual
representations and warranties in the merger agreement about themselves and
their respective subsidiaries.
53
CONDUCT OF BUSINESS BY GENERAL SEMICONDUCTOR
Except as otherwise permitted by the merger agreement or as consented to in
writing by Vishay, during the period from the date of the merger agreement to
completion of the merger, General Semiconductor has agreed that it will:
- conduct its business only in the ordinary and usual course of business
consistent with past practice;
- use reasonable commercial efforts to preserve its business organization;
- use reasonable commercial efforts to keep available the services of its
officers and key employees; and
- use reasonable commercial efforts to preserve its present relationships
with customers, suppliers and others having significant business relations
with it.
Vishay and General Semiconductor have agreed that General Semiconductor will
be permitted to implement its recently announced restructuring plan before the
merger notwithstanding its course of conduct covenant described above.
Except as otherwise permitted by the merger agreement or as consented to in
writing by Vishay, the merger agreement prohibits General Semiconductor and any
of its subsidiaries from taking specific actions, including:
- amending its organizational documents;
- issuing, selling, pledging, encumbering or otherwise disposing of shares
of its capital stock or options to acquire shares of its capital stock,
other than the issuance of shares of its common stock upon the exercise of
stock options or convertible notes outstanding on the date of the merger
agreement, or pursuant to other limited exceptions;
- selling, pledging, encumbering or otherwise disposing of any of its
assets, other than in the ordinary course of business consistent with past
practice or pursuant to other limited exceptions;
- declaring or paying any dividend or making any other distribution on any
of its capital stock, except that a wholly owned subsidiary of General
Semiconductor may declare and pay a dividend to its parent that is not a
cross-border dividend;
- making any changes in its equity capital structure or purchasing or
redeeming any of its or its subsidiaries' securities;
- settling any claim arising out of a stockholder equity interest in General
Semiconductor;
- making any acquisitions;
- incurring any indebtedness for borrowed money, except under its existing
credit facilities in effect on the date of the merger agreement in the
ordinary course of business and other borrowings not in excess of
$1,000,000 in total;
- issuing debt securities, or assuming, guaranteeing or otherwise becoming
responsible for the obligations of any person, or making any loans or
advances, other than in the ordinary course of business consistent with
past practice; except that General Semiconductor may not make loans and
advances to its employees to fund the exercise price of its options or to
purchase shares of its common stock;
- authorizing any capital expenditures or purchases of fixed assets with a
value exceeding $40 million over the 12-month period beginning on the date
of the merger agreement;
54
- entering into or materially amending any contract, agreement, commitment
or arrangement to effect an acquisition, incur indebtedness, issue debt
securities or authorize capital expenditures as listed above;
- increasing the compensation or severance of directors, officers, employees
or consultants, except as a result of promotions and in accordance with
past practice or as required by an existing obligation or law;
- granting an employee any severance or termination pay or entering into or
amending any employment or severance agreement, except for some new hires
and except as required by an existing obligation or law;
- entering into or amending any collective bargaining agreement or employee
plans, except as required by an existing obligation or law;
- changing accounting policies or procedures except as required by generally
accepted accounting principles;
- making any material tax election or settling or compromising any material
tax liability;
- paying or satisfying any claims, liabilities or obligations that exceed
$1 million in total, other than in the ordinary course of business
consistent with past practice; or
- taking, or agreeing to take, any of the actions described above or any
action which would make any representation or warranty of General
Semiconductor untrue or prevent General Semiconductor from performing its
covenants under the merger agreement.
CONDUCT OF BUSINESS BY VISHAY
Except as otherwise permitted by the merger agreement or as consented to in
writing by General Semiconductor, during the period from the date of the merger
agreement to completion of the merger, Vishay has agreed that it will conduct
its business only in the ordinary and usual course of business consistent with
past practice.
Except as otherwise permitted by the merger agreement or as consented to in
writing by General Semiconductor, the merger agreement prohibits Vishay from
taking specific actions, including:
- amending its organizational documents;
- making or agreeing to make any acquisition or disposition which would
materially delay or prevent the completion of the merger and the other
transactions contemplated by the merger agreement, or materially altering
the nature or character of the business of Vishay as it is presently
conducted;
- declaring or paying any dividend or making any other distribution on any
of its capital stock, other than a dividend paid by a wholly owned
subsidiary of Vishay to its parent;
- changing accounting policies or procedures except as required by generally
accepted accounting principles; or
- taking, or agreeing to take, any actions described above or any action
that would make any representation or warranty of Vishay Acquisition
untrue or prevent Vishay Acquisition from performing its obligations under
the merger agreement.
55
NO SOLICITATION
General Semiconductor will not, directly or indirectly, through any officer,
director, employee representative or agent, solicit or encourage the initiation
of an alternative transaction. The merger agreement defines "alternative
transaction" as:
- any transaction in which a third party would acquire more than 25% of any
class of outstanding shares of General Semiconductor capital stock;
- a merger or other business combination involving General Semiconductor in
which a third party would acquire more than 25% of the outstanding equity
securities of General Semiconductor or the surviving entity;
- any transaction in which a third party would acquire control of General
Semiconductor assets, or any of its subsidiaries assets, with a fair
market value equal to more than 25% of the fair market value of all the
assets of General Semiconductor and its subsidiaries, taken as a whole,
just before that transaction; or
- any other consolidation, business combination, recapitalization or similar
transaction involving General Semiconductor or any of its significant
subsidiaries, other than transactions contemplated by the merger
agreement.
Until the General Semiconductor stockholders approve and adopt the merger
agreement, if General Semiconductor's board of directors, following consultation
with independent legal counsel, reasonably determines in good faith that the
following action is or is reasonably likely to be required to discharge properly
its fiduciary duties, General Semiconductor's board of directors, after notice
to Vishay, is permitted to:
- furnish information to a third party which has made a bona fide
acquisition proposal that General Semiconductor's board of directors
concludes in good faith after consulting with a nationally recognized
investment banking firm would, if completed, constitute a superior
proposal not solicited in violation of the merger agreement, provided that
the third party has executed an agreement with confidentiality provisions
substantially similar to those in effect between General Semiconductor and
Vishay; and
- consider and negotiate a bona fide acquisition proposal that General
Semiconductor's board of directors concludes in good faith after
consulting with a nationally recognized investment banking firm would, if
completed, constitute a superior proposal not solicited in violation of
the merger agreement.
The merger agreement defines an "acquisition proposal" as any inquiry or
proposal by a third party to effect an alternative transaction and a "superior
proposal" as any proposal made by a third party to acquire, directly or
indirectly, for cash and/or securities, 90% or more of General Semiconductor's
common stock entitled to vote generally in the election of directors or all or
substantially all of General Semiconductor's assets on terms that General
Semiconductor's board of directors reasonably believes, after consultation with
a nationally recognized financial advisor, to be more favorable from a financial
point of view to General Semiconductor stockholders than the merger and the
transactions contemplated by the merger agreement, taking into account at the
time of determination any changes to the financial terms of the merger proposed
by Vishay; provided, however, that the proposal may be subject to a due
diligence review of confidential information and to other customary closing
conditions.
Neither General Semiconductor nor General Semiconductor's board of directors
may withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Vishay or Vishay Acquisition, General Semiconductor's board of directors'
approval of the merger agreement or the merger, except to the extent that
General Semiconductor's board of directors reasonably determines in good faith
and
56
after consultation with independent legal counsel that it is or is reasonably
likely to be required to do so in order to discharge properly its fiduciary
duties.
In addition, unless the merger agreement has been terminated in accordance
with its terms, neither General Semiconductor nor General Semiconductor's board
of directors may:
- redeem the rights issued under the Rights Agreement, dated as of
January 6, 1997, as amended, between General Semiconductor and Mellon
Investor Services LLC (formerly known as ChaseMellon Shareholder Services,
L.L.C.), as rights agent, or waive or amend any provision of the rights
agreement, in any such case to permit or facilitate the completion of any
acquisition proposal or alternative transaction; or
- enter into any agreement, other than a confidentiality agreement, with
respect to, or otherwise approve or recommend, or propose to approve or
recommend, any acquisition or alternative transaction.
The merger agreement provides that these obligations do not prohibit General
Semiconductor from taking and disclosing to its stockholders a position
regarding an alternative transaction or acquisition proposal as required by the
securities laws or from making any disclosure to its stockholders required by
applicable law, rule or regulation or by the New York Stock Exchange.
General Semiconductor further agreed:
- as of the date of the merger agreement, to terminate any existing
discussions or negotiations with any third party that were ongoing at the
time of the execution of the merger agreement;
- not to release any third party from the confidentiality agreement and,
except as contemplated by the merger agreement, the standstill provisions
of any agreement to which General Semiconductor is a party;
- to notify Vishay orally and in writing promptly, but in no event later
than 5:00 p.m. New York time on the next business day, after receipt of,
or modification or amendment to, all acquisition proposals or any request
for nonpublic information relating to General Semiconductor or any of its
subsidiaries in connection with an acquisition proposal or for access to
the books and records;
- to disclose to Vishay the terms of all acquisition proposals and the
identity of the person making any acquisition proposal;
- to keep Vishay informed in all material respects of the status and details
of any acquisition proposal; and
- to notify Vishay orally and in writing promptly if it enters into
negotiations concerning any acquisition proposal.
General Semiconductor is not required to make any disclosure to Vishay if it
would violate a confidentiality agreement existing at the time of the merger,
provided, however, that General Semiconductor has agreed not to furnish
information to or negotiate with any third party without notifying Vishay.
General Semiconductor also agreed to ensure that the officers and directors
of General Semiconductor and its subsidiaries and any investment banker or other
advisor or representative retained by General Semiconductor in connection with
the merger are aware of the no solicitation restrictions described above.
57
CERTAIN OTHER COVENANTS
INDEMNIFICATION AND INSURANCE
For six years following the merger, General Semiconductor will:
- include in its certificate of incorporation and bylaws the same
indemnification provisions as are currently set forth in its certificate
of incorporation and bylaws, and those provisions will not be amended,
modified or otherwise repealed in any way that would adversely affect the
rights of individuals who are directors, officers, employees or agents of
General Semiconductor at the time the merger is completed, unless
otherwise required by law; and
- indemnify and hold harmless each present and former director, officer or
employee of General Semiconductor or any of its subsidiaries against all
losses and damages in connection with any lawsuit, claim or investigation
arising out of or pertaining to the transactions contemplated by the
merger agreement or otherwise with respect to any acts or omissions
occurring at or before the merger, to the same extent as provided in its
certificate of incorporation or bylaws or any applicable contract or
agreement as in effect on the date of the merger agreement.
Following the merger, General Semiconductor will also honor and fulfill in
all respects its obligations under the indemnification agreements, employment
agreements, severance agreements, retention bonuses and similar agreements with
its officers and directors existing at or before the merger.
In addition, for a period of not less than six years after the merger,
Vishay will provide or cause General Semiconductor to provide to its current and
former directors and officers that are currently covered under its current
insurance and indemnification policy an insurance and indemnification policy
that provides coverage for events occurring at or before the merger that is no
less favorable than its existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage. Vishay and
General Semiconductor will not be required to pay an annual insurance premium in
excess of 250% of the annual premium currently paid by General Semiconductor for
this insurance, but in such case will purchase as much coverage as possible for
such amount.
EFFORTS TO COMPLETE THE MERGER
Upon the terms and subject to the conditions set forth in the merger
agreement, Vishay, Vishay Acquisition and General Semiconductor will use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things necessary, proper or advisable to complete
and make effective as promptly as practicable the transactions contemplated by
the merger agreement, to obtain in a timely manner all necessary waivers,
consents and approvals, to effect all necessary registrations and filings, and
otherwise to satisfy or cause to be satisfied all of the conditions to the
completion of the merger.
Vishay and General Semiconductor have agreed that this covenant will not
require either to agree to divest, abandon, license, hold separate or take
similar action with respect to any assets which are, in the aggregate, material
to Vishay or General Semiconductor.
TAX TREATMENT
Each of Vishay, Vishay Acquisition and General Semiconductor will use its
reasonable best efforts to ensure that the merger qualifies as a reorganization
under section 368(a) of the Internal Revenue Code and will not take any actions
that might reasonably be expected to prevent the merger from qualifying as a
reorganization.
58
VISHAY COMMON STOCK
Vishay is required to prepare and submit a listing application with respect
to the shares of Vishay common stock to be issued in connection with the merger
and to use its best efforts to obtain approval for the listing of those shares
of Vishay common stock on the New York Stock Exchange before the completion of
the merger.
CERTAIN EMPLOYEE BENEFITS
For the period from the effective time of the merger through December 31,
2001, Vishay shall cause General Semiconductor to provide each person who is an
employee of General Semiconductor or any subsidiary of General Semiconductor at
the effective time with salary and employee benefits that are comparable in the
aggregate to those provided to such employee immediately prior to the effective
time. In addition, for a period of six months from the effective time, General
Semiconductor will not terminate or amend in a manner adverse to any employee
the General Semiconductor Severance Plan, as in effect on the date of the merger
agreement. After December 31, 2001, Vishay will cause General Semiconductor to
provide each employee with salary and employee benefits that are comparable in
the aggregate to those provided to similarly situated employees of Vishay or
subsidiaries of Vishay. Service accrued by employees during their employment
with General Semiconductor or any subsidiary of General Semiconductor prior to
the effective time of the merger will be recognized for all employee benefits
purposes except for benefit accruals under defined benefit plans.
After the merger, Vishay shall cause General Semiconductor to honor in
accordance with their terms all benefits and obligations under all benefit
plans, programs, agreements or arrangements of General Semiconductor as in
effect on the date of the merger agreement or as amended after that date in
accordance with the terms of the merger agreement or with the consent of Vishay.
Except as precluded by law or the terms of these plans, programs, agreements or
arrangements, and subject to the provisions of the merger agreement summarized
above, the terms of the merger agreement do not prevent General Semiconductor or
any other subsidiary of Vishay from amending or modifying any such plan,
program, agreement or arrangement or terminating or modifying the terms and
conditions of employment or other service of any person.
General Semiconductor will amend its 401(k) plan to preclude additional
purchases of General Semiconductor common stock as of two days prior to
completion of the merger.
These provisions are subject to certain limitations and qualifications set
forth in the merger agreement and may not be enforced by any employee of General
Semiconductor.
VISHAY DIRECTOR
Subject to applicable fiduciary obligations of Vishay's board of directors,
Vishay will take all actions required to appoint Ronald A. Ostertag as a
director of Vishay at or as soon as practicable following the merger.
Thereafter, Vishay will take all action necessary to cause Mr. Ostertag to
continue to serve as a director of Vishay until at least the date of the third
annual meeting of stockholders following the merger.
CONDITIONS TO COMPLETION OF THE MERGER
The obligations of Vishay, Vishay Acquisition and General Semiconductor to
complete the merger are subject to the satisfaction of the following conditions:
- the registration statement on Form S-4, of which this joint proxy
statement/prospectus is a part, becoming and remaining effective under the
Securities Act;
- the General Semiconductor stockholders approving and adopting the merger
agreement;
59
- the Vishay stockholders approving:
- an increase in the authorized capital of Vishay in an amount at least
sufficient for:
- the issuance of Vishay common stock in the merger as provided in
the merger agreement;
- the issuance of Vishay common stock upon conversion of the
outstanding General Semiconductor convertible notes; and
- the issuance of Vishay common stock upon exercise of all
outstanding General Semiconductor stock options as provided in the
merger agreement; and
- the authorization of the issuance of Vishay common stock described
above;
- all waiting periods under the HSR Act having expired or terminated, and
all necessary clearances and approvals for the merger under any non-U.S.
antitrust laws having been obtained, other than those which if not
obtained would not reasonably be expected to have a material adverse
effect on General Semiconductor or Vishay; and
- the absence of any order, decree, injunction or other legal restraint in
effect that prohibits the completion of the merger or compels Vishay or
any of its subsidiaries, including General Semiconductor and its
subsidiaries, to dispose of or hold separate assets which are material
overall to Vishay or its subsidiaries taken as a whole, or to General
Semiconductor and its subsidiaries taken as a whole.
The obligations of Vishay and Vishay Acquisition to complete the merger are
also subject to the following additional conditions:
- the representations and warranties of General Semiconductor in the merger
agreement being true and correct, except where the failure to be true and
correct, individually or combined, would not reasonably be expected to
have a material adverse effect on Vishay or General Semiconductor and
except for certain representations and warranties that must be true and
correct in all material respects;
- General Semiconductor having performed in all material respects all
agreements and covenants required by the merger agreement to be performed
by it on or before the date of the merger;
- General Semiconductor having received all material consents, waivers,
approvals, authorizations or orders required to be obtained, and having
made all filings required to be made, for the authorization, execution and
delivery of the merger agreement and the completion of the merger, except
where the failure to do so would not reasonably be expected, individually
or combined with all other such failures, to have a material adverse
effect on Vishay or General Semiconductor;
- a distribution date having not occurred under General Semiconductor's
rights agreement and the rights issued under the rights agreement not
becoming exercisable as a result of the merger; and
- Vishay having received a written opinion of Kramer Levin Naftalis &
Frankel LLP, delivered and dated as of the date of the merger, to the
effect that the merger will qualify as a reorganization within the meaning
of section 368(a) of the Internal Revenue Code.
The obligation of General Semiconductor to complete the merger is also
subject to the following additional conditions:
- the representations and warranties of Vishay and Vishay Acquisition in the
merger agreement being true and correct, except where the failure to be
true and correct, individually or combined, would not reasonably be
expected to have a material adverse effect on Vishay or General
60
Semiconductor and except for certain representations and warranties that
must be true and correct in all material respects;
- Vishay and Vishay Acquisition having performed in all material respects
all agreements and covenants required by the merger agreement to be
performed by them on or before the date of the merger;
- Vishay and Vishay Acquisition having received all material consents,
waivers, approvals, authorizations or orders required to be obtained, and
having made all filings required to be made, for the authorization,
execution and delivery of the merger agreement and the completion of the
merger, except where the failure to do so would not reasonably be
expected, individually or combined with all other such failures, to have a
material adverse effect on General Semiconductor or Vishay;
- the New York Stock Exchange having authorized for listing the Vishay
common stock to be issued by Vishay in connection with the merger; and
- General Semiconductor having received a written opinion of Fried, Frank,
Harris, Shriver & Jacobson, delivered and dated as of the date the merger,
to the effect that the merger will qualify as a reorganization within the
meaning of section 368(a) of the Internal Revenue Code.
TERMINATION
The merger agreement may be terminated at any time prior to completion of
the merger on any of the following grounds:
1. By mutual written consent of Vishay and General Semiconductor;
2. By either Vishay or General Semiconductor, if:
- the merger has not been completed by January 31, 2002 (other than due
to the failure of Vishay's or General Semiconductor's stockholders to
approve the proposals to be considered at their special meetings),
unless caused by or resulting from a failure to fulfill any obligation
under the merger agreement by the party seeking to terminate the merger
agreement; or
- a court or other governmental authority issues a non-appealable final
order, ruling or other action which permanently prohibits the merger;
3. By either Vishay or General Semiconductor, if:
- the stockholders of General Semiconductor have not approved the merger
agreement at the General Semiconductor special stockholders meeting; or
- the stockholders of Vishay have not approved the amendment to Vishay's
certificate of incorporation increasing the number of authorized shares
of Vishay common stock and the issuance of common stock in connection
with the merger at the special meeting of Vishay stockholders.
Neither Vishay nor General Semiconductor can exercise this termination
right as a result of its own stockholders failing to approve a proposal
if it fails to call the special meeting or fails to solicit proxies from
its stockholders as required by the merger agreement;
4. By either Vishay or General Semiconductor, if either:
- any representation or warranty of the other party set forth in the
merger agreement was untrue when made, or has since become untrue,
which would reasonably be expected, individually or combined, to result
in a material adverse effect on that party;
61
- specified representations or warranties of the other party are not
correct in all material respects; or
- the other party materially breaches any covenant or agreement and that
breach cannot be remedied.
If the misrepresentation or breach is curable prior to January 31, 2002,
however, this right to terminate is not available so long as the party in
breach continues to exercise its reasonable best efforts to cure the
misrepresentation or breach;
5. By Vishay, if General Semiconductor or General Semiconductor's board of
directors, whether or not permitted to do so by the merger agreement:
- has withdrawn or modified in a manner adverse to Vishay its approval,
adoption or recommendation of the merger agreement or the merger, or
has resolved to do so;
- has approved or recommended to General Semiconductor stockholders an
alternative transaction, or that the stockholders tender their shares
in any tender or exchange offer that is an alternative transaction; or
- has failed either to include in this joint proxy statement/prospectus
the recommendation of General Semiconductor's board of directors in
favor of approval and adoption of the merger agreement or solicit from
General Semiconductor's stockholders proxies in favor of approval of
the merger agreement and to take all other reasonable action necessary
or advisable to secure the vote or consent of General Semiconductor's
stockholders in favor of that approval and adoption.
A communication by General Semiconductor's board of directors to General
Semiconductor's stockholders shall not be deemed to constitute a basis of
termination, however, if that communication is made in satisfaction of an
obligation of General Semiconductor, under the federal tender offer
rules, to take a position with respect to a tender offer for shares of
General Semiconductor, or states that on or before a specified date
General Semiconductor will provide its opinion with respect to a tender
offer or exchange offer;
6. By General Semiconductor, if its board of directors has authorized it to
enter into a definitive agreement with respect to a superior proposal and
each of the following additional conditions is met:
- General Semiconductor has notified Vishay in writing that it intends to
enter into a definitive agreement with respect to a superior proposal;
- within two full business days of receipt of such notification, Vishay
has not made an offer that General Semiconductor's board of directors
determines, in good faith after consultation with its financial
advisors, is at least as favorable, from a financial point of view, to
the General Semiconductor stockholders as the superior proposal;
- General Semiconductor has paid Vishay the fees and expenses required to
be paid pursuant to the merger agreement, as described under "Fees and
Expenses" beginning on page 63;
- the merger agreement has not already been approved by the General
Semiconductor stockholders at the General Semiconductor special
meeting; and
- General Semiconductor has complied with its obligations as described
under "No Solicitation" beginning on page 56; or
7. By General Semiconductor, if:
- whether or not permitted to do so by the merger agreement, the board of
directors of Vishay has withdrawn or modified in a manner adverse to
General Semiconductor its approval, adoption or recommendation of the
amendment to Vishay's certificate of
62
incorporation increasing the authorized shares of Vishay common stock
and of the issuance of Vishay common stock in connection with the
merger or has failed to recommend approval of the amendment to Vishay's
certificate of incorporation increasing the authorized shares of Vishay
common stock and of the issuance of Vishay common stock in connection
with the merger; or
- any party to a voting agreement repudiates the agreement or the
agreement is otherwise unenforceable, unless as a result of the death
or incapacity of either of the stockholders that are parties to the
voting agreements, or any circumstances arising from death or
incapacity.
The term "material adverse effect" means any change, effect or circumstance
that is materially adverse to the business, assets, financial condition or
results of operations of General Semiconductor or Vishay, and their respective
subsidiaries; provided, however, that each of the following are excluded from
the definition of material adverse effect and from any determination as to
whether a material adverse effect has occurred or may occur: changes, effects or
circumstances, that are applicable to:
- the semiconductor industry or the discrete electronics components industry
generally;
- the United States securities markets generally;
- personnel and other changes customarily attendant to transactions of the
type contemplated by the merger agreement, including, without limitation,
any disruption of customer, supplier or employee relationships;
- changes in economic, regulatory or political conditions generally;
- the litigation brought against General Semiconductor by Siliconix in the
United States District Court for the Northern District of California and
any related claims between the current parties to such litigation or
between General Semiconductor and Vishay; or
- the General Semiconductor restructuring program.
FEES AND EXPENSES
Except as set forth below, each of Vishay and General Semiconductor will pay
its own fees and expenses incurred in connection with the merger agreement and
the related transactions, whether or not the merger is completed. However, if
the merger is not completed, Vishay and General Semiconductor will share equally
all SEC filing fees and printing expenses incurred in connection with the
printing and filing of this joint proxy statement/prospectus and the related
registration statement and any amendments or supplements thereto and all
conveyance and similar taxes required to be paid or which Vishay has agreed
should be paid prior to completion of the merger.
General Semiconductor must pay Vishay a fee of $22.5 million and must also
pay Vishay and Vishay Acquisition their respective actual, documented and
reasonable out-of-pocket expenses, other than financial advisor fees, relating
to the transactions contemplated by the merger agreement in a combined amount
not to exceed $1.0 million, if any of the following events occur:
- Vishay or General Semiconductor terminates the merger agreement following
the failure of the General Semiconductor stockholders to approve the
merger agreement at the General Semiconductor special meeting and the
alternative transaction conditions are satisfied;
- Vishay terminates the merger agreement because General Semiconductor has
willfully breached any covenant or agreement of General Semiconductor in
the merger agreement, as described in "Termination", item number 4, above
and the alternative transaction conditions are satisfied;
- Vishay terminates the merger agreement for any of the reasons described
under "Termination", item number 5, above; or
63
- General Semiconductor terminates the merger agreement due to the
acceptance by General Semiconductor's board of directors of a superior
proposal as permitted by the merger agreement and described under
"Termination", item number 6, above.
The "alternative transaction conditions" will be satisfied if:
- General Semiconductor or any third party publicly announces an alternative
transaction during the period beginning on the date of the merger
agreement and ending 6 months following the date of termination of the
merger agreement; and
- such transaction is at any time thereafter completed on terms
substantially equivalent to or more favorable to General Semiconductor or
its stockholders than the terms of the alternative transaction previously
announced.
For purpose of the definition of alternative transaction condition, the term
"alternative transaction" is deemed to have a 40% threshold rather than the 25%
threshold described in "No Solicitation" above.
General Semiconductor must pay Vishay's reasonable, out-of-pocket expenses
relating to the transactions contemplated by the merger agreement in an amount
not to exceed $1.0 million if Vishay terminates the merger agreement because:
- General Semiconductor has breached a covenant or agreement in the merger
agreement, as described under "Termination", item number 4, above, and the
alternative transaction conditions are not satisfied; or
- a representation or warranty of General Semiconductor was untrue when
made, as described under "Termination", item number 4, above.
Vishay must pay General Semiconductor's reasonable, out-of-pocket expenses
relating to the transactions contemplated by the merger agreement in an amount
not to exceed $1.0 million if General Semiconductor terminates the merger
agreement because Vishay has willfully breached a covenant or agreement or
because a representation or warranty of Vishay was untrue when made, as
described under "Termination", item number 4, above.
The fee and/or expenses described above are payable within one business day
after a demand for payment following the occurrence of the event requiring such
payment. Neither party will be required to pay such fee and/or expenses to the
other if, immediately prior to the termination of the merger agreement, the
other was in material breach of its obligations under the merger agreement. The
fee and/or expenses described above are the sole and exclusive remedy of the
parties in the event of a termination of the merger agreement, unless the
termination is in connection with a willful breach or willful misrepresentation.
The $22.5 million fee is intended, among other things, to compensate Vishay
for its costs, including lost opportunity costs, if certain actions or inactions
by General Semiconductor or its stockholders lead to the abandonment of the
merger. This may have the effect of increasing the likelihood that the merger
will be completed in accordance with the terms of the merger agreement. The fee
may also have the effect of discouraging persons from making an offer to acquire
all of or a significant interest in General Semiconductor by increasing the cost
of any such acquisition.
AMENDMENT AND WAIVER; PARTIES IN INTEREST
The parties to the merger agreement may amend the merger agreement in
writing by action taken by or on behalf of their respective boards of directors
at any time prior to the completion of the merger. However, after approval and
adoption of the merger agreement by the General Semiconductor
64
stockholders, the merger agreement cannot be amended without stockholder
approval, if stockholder approval of the amendment is required by law.
At any time prior to the completion of the merger, any party to the merger
agreement may extend the time for the performance of any of the obligations or
other acts by the other, waive any inaccuracies in the representations and
warranties contained in the merger agreement or in any document delivered
pursuant to the merger agreement, or waive compliance with any of the agreements
or conditions contained in the merger agreement. Any such extension or waiver
will be valid only if set forth in writing by the party or parties granting such
extension or waiver.
The merger agreement is binding upon and inures solely to the benefit of the
parties to the merger agreement, and nothing in the merger agreement, expressed
or implied, confers upon any other person any right, benefit or remedy of any
nature whatsoever under or by reason of the merger agreement, including, without
limitation, by way of subrogation, other than specified indemnification,
employment and insurance obligations of Vishay and General Semiconductor
following the completion of the merger, which are intended for the benefit of
certain specified officers and directors of General Semiconductor and may be
enforced by such individuals and other than the right of General Semiconductor
stockholders to receive the merger consideration if the merger is completed.
VOTING AGREEMENTS
As an inducement to General Semiconductor to enter into the merger
agreement, on July 31, 2001, Dr. Felix Zandman, Chairman and Chief Executive
Officer of Vishay, and Mrs. Luella B. Slaner, a member of the Vishay board of
directors, each entered into a separate voting agreement with General
Semiconductor. Together, Dr. Zandman and Mrs. Slaner hold or beneficially own a
total of 2,888,239 shares of Vishay common stock and 14,702,033 shares of Vishay
class B common stock, representing approximately 54% of the outstanding voting
power of Vishay, as of the date of this joint proxy statement/prospectus.
Under the terms of the voting agreements, Dr. Zandman and Mrs. Slaner have
agreed, among other things, to vote all of the Vishay common stock and Vishay
Class B common stock owned of record or beneficially owned by them or over which
they otherwise have voting control in favor of proposals for:
- the amendment to Vishay's certificate of incorporation increasing Vishay's
authorized common stock; and
- the issuance of shares of Vishay common stock in connection with the
merger;
as described under "Conditions to Completion of the Merger" on page 59.
These Vishay stockholders have also agreed not to transfer or encumber any
of the Vishay shares owned by them unless the transferee agrees in writing to be
bound by the terms of the voting agreement, provided that no such transfer may
result in a diminution of the voting power represented by the shares subject to
the voting agreements.
The voting agreements will terminate upon the earlier to occur of the
termination of the merger agreement and the completion of the merger.
The form of the voting agreements has been filed as an exhibit to the
registration statement of which this joint proxy statement/prospectus forms a
part. Stockholders should refer to the full text of the form of voting
agreements for a complete understanding of its terms.
65
COMPARATIVE PER SHARE PRICES AND DIVIDENDS
Each of Vishay common stock and General Semiconductor common stock is listed
and traded on the New York Stock Exchange. Vishay common stock trades under the
symbol "VSH", and General Semiconductor common stock trades under the symbol
"SEM". The following table sets forth the high and low sales prices per share of
Vishay common stock and General Semiconductor common stock, as reported on the
New York Stock Exchange for the quarterly periods presented below. The prices of
the Vishay common stock have been adjusted to reflect a three-for-two stock
split distributed June 9, 2000, and a five-for-four stock split distributed
June 22, 1999.
GENERAL
VISHAY SEMICONDUCTOR
COMMON STOCK COMMON STOCK
------------------- -------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
1999:
First Quarter............................................... $ 8.27 $ 5.90 $ 9.63 $ 5.75
Second Quarter.............................................. 14.04 7.80 10.06 6.13
Third Quarter............................................... 17.50 12.04 12.69 7.50
Fourth Quarter.............................................. 21.33 14.17 15.25 8.25
2000:
First Quarter............................................... $40.88 $18.58 $21.63 $12.75
Second Quarter.............................................. 62.63 35.00 21.13 14.75
Third Quarter............................................... 44.75 26.00 15.88 11.81
Fourth Quarter.............................................. 31.75 13.88 12.63 6.13
2001:
First Quarter............................................... $22.75 $13.75 $11.25 $ 6.50
Second Quarter.............................................. 27.98 17.00 13.65 9.25
Third Quarter............................................... 25.25 16.08 13.42 8.66
Fourth Quarter (through October 1, 2001).................... 18.36 17.02 9.95 9.35
Vishay has never paid cash dividends on its common stock, and it does not
anticipate paying any cash dividends in the foreseeable future. Under the terms
of the merger agreement, Vishay is not permitted to declare, set aside, make or
pay any dividend or distribution in respect of its capital stock from the date
of the merger agreement until the earlier of the termination of the merger
agreement and completion of the merger.
General Semiconductor has not paid any dividends since it changed its name
from General Instrument Corporation and spun off its broadband communication
business and its coaxial and other cable business in July 1997. Under the terms
of the merger agreement, General Semiconductor is not permitted to declare, set
aside, make or pay any dividend or distribution in respect of its capital stock
from the date of the merger agreement until the earlier of the termination of
the merger agreement and the completion of the merger.
On July 31, 2001, the last trading day prior to the public announcement of
the proposed merger, the closing prices of Vishay common stock and General
Semiconductor common stock reported on the New York Stock Exchange were $24.05
per share and $11.26 per share. On October 1, 2001, the most recent practicable
date prior to the printing of this joint proxy statement/prospectus, the closing
prices of Vishay common stock and General Semiconductor common stock on the New
York Stock Exchange were $17.40 per share and $9.35 per share. Stockholders
should obtain current market quotations prior to making any decision with
respect to the merger.
66
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated condensed financial
statements give pro forma effect to the merger using the purchase method of
accounting and the assumptions and adjustments set forth in the accompanying
notes to the pro forma financial statements. This presentation assumes the
issuance of 21,301,102 shares of Vishay common stock, valued at $23.46 per
share, in connection with the merger. The pro forma adjustments are subject to
change pending a final analysis of the fair values of the assets acquired and
liabilities assumed. The impact of these changes could be material.
The unaudited pro forma consolidated condensed statements of operations for
the year ended December 31, 2000 and the six months ended June 30, 2001 are
based on the individual historical statements of operations of Vishay and
General Semiconductor and combine the results of operations of Vishay and
General Semiconductor for the year ended December 31, 2000 and the six months
ended June 30, 2001, as if the merger had occurred as of January 1, 2000. The
unaudited pro forma consolidated condensed balance sheet as of June 30, 2001 is
based on the individual historical balance sheets of Vishay and General
Semiconductor and gives effect to the merger as if it had occurred on June 30,
2001.
The unaudited pro forma consolidated condensed financial statements are
based on estimates and assumptions. These estimates and assumptions are
preliminary and have been made solely for purposes of developing this pro forma
information. Unaudited pro forma consolidated financial information is presented
for illustrative purposes only and is not necessarily indicative of the combined
financial position or results of operations of future periods or the results
that actually would have occurred had the merger occurred on the dates
indicated. The pro forma consolidated financial information does not give effect
to any cost savings or restructuring and integration costs that may result from
the integration of Vishay's and General Semiconductor's businesses. Costs
related to restructuring and integration, and any one-time write-off of acquired
in process research and development, have not yet been determined.
This unaudited pro forma consolidated financial information is based upon
the respective historical consolidated financial statements of Vishay and
General Semiconductor and related notes thereto, included or incorporated by
reference in this joint proxy statement/prospectus and should be read in
conjunction with those statements and the related notes.
67
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED JUNE 30, 2001
----------------------------------------------------
HISTORICAL
HISTORICAL GENERAL PRO FORMA PRO FORMA
VISHAY SEMICONDUCTOR ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
Net sales........................................ $941.9 $186.0 $ -- $1,127.9
Cost of products sold............................ 642.0 138.9 -- 780.9
------ ------ ------ --------
Gross profit..................................... 299.9 47.1 -- 347.0
Selling, general and administrative expenses..... 136.4 30.1 -- 166.5
Restructuring expense............................ 35.3 12.9 -- 48.2
Amortization of goodwill......................... 5.7 2.6 (2.6) 5.7
------ ------ ------ --------
Operating income................................. 122.5 1.5 2.6 126.6
Other income (expense):
Interest expense................................. (6.9) (7.8) -- (14.7)
Other............................................ 12.6 0.2 -- 12.8
------ ------ ------ --------
Earnings before income taxes and minority
interest....................................... 128.2 (6.1) 2.6 124.7
Income taxes..................................... 31.1 (1.8) -- 29.3
Minority interest................................ 3.8 -- -- 3.8
------ ------ ------ --------
Net income (loss)................................ $ 93.3 $ (4.3) $ 2.6 $ 91.6
====== ====== ====== ========
Basic earnings (loss) per share.................. $ 0.68 $(0.11) $ 0.58
Diluted earnings (loss) per share................ $ 0.67 $(0.11) $ 0.57
Weighted average shares outstanding--basic....... 137.7 37.8 159.0
Weighted average shares outstanding--diluted..... 140.4 37.8 162.1
See accompanying notes.
68
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 2000
----------------------------------------------------
HISTORICAL
HISTORICAL GENERAL PRO FORMA PRO FORMA
VISHAY SEMICONDUCTOR ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
Net sales....................................... $2,465.1 $493.7 $ -- $2,958.8
Cost of products sold........................... 1,459.8 339.5 -- 1,799.3
-------- ------ ------- --------
Gross profit.................................... 1,005.3 154.2 -- 1,159.5
Selling, general and administrative expenses.... 297.3 64.9 -- 362.2
Amortization of goodwill........................ 11.5 5.1 (5.1) 11.5
-------- ------ ------- --------
Operating income................................ 696.5 84.2 5.1 785.8
Other income (expense):
Interest expense................................ (25.2) (18.8) -- (44.0)
Other........................................... 18.9 (0.1) -- 18.8
-------- ------ ------- --------
Earnings before income taxes and minority
interest...................................... 690.2 65.3 5.1 760.6
Income taxes.................................... 148.2 18.6 -- 166.8
Minority interest............................... 24.1 -- -- 24.1
-------- ------ ------- --------
Net income...................................... $ 517.9 $ 46.7 $ 5.1 $ 569.7
======== ====== ======= ========
Basic earnings per share........................ $ 3.83 $ 1.24 $ 3.64
Diluted earnings per share...................... $ 3.77 $ 1.08 $ 3.47
Weighted average shares outstanding--basic...... 135.3 37.6 156.5
Weighted average shares outstanding--diluted.... 137.5 49.6 166.0
See accompanying notes.
69
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(IN MILLIONS)
JUNE 30, 2001
----------------------------------------------------
HISTORICAL
HISTORICAL GENERAL PRO FORMA PRO FORMA
VISHAY SEMICONDUCTOR ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
Assets
Current assets
Cash and cash equivalents...................... $ 452 $ 1 $ -- $ 453
Accounts receivable............................ 389 50 -- 439
Inventories.................................... 603 54 -- 657
Prepaid expenses and other current assets...... 146 12 -- 158
Deferred income taxes.......................... 31 12 -- 43
------ ---- ---- ------
Total current assets............................. 1,621 129 -- 1,750
Net property plant & equipment................... 964 255 -- 1,219
Goodwill......................................... 305 150 (150) 821
516
Other assets..................................... 41 47 -- 88
------ ---- ---- ------
Total assets..................................... $2,931 $581 $366 $3,878
====== ==== ==== ======
Liabilities and stockholders' equity
Current liabilities
Notes payable to banks......................... $ 4 $ -- $ -- $ 4
Trade accounts payable......................... 77 37 -- 114
Other accrued expenses......................... 257 40 3 300
Deferred income taxes.......................... -- 1 -- 1
------ ---- ---- ------
Total current liabilities........................ 338 78 3 419
Long-term debt................................... 304 231 -- 535
Deferred income taxes............................ 74 27 -- 101
Deferred income.................................. 54 -- -- 54
Minority interest................................ 66 -- -- 66
Other liabilities................................ 94 27 -- 121
Accrued pension costs............................ 94 33 -- 127
------ ---- ---- ------
Total liabilities................................ 1,024 396 3 1,423
Stockholders' equity
Common stock................................... 12 -- 2 14
Class B common stock........................... 2 -- -- 2
Capital in excess of par value................. 1,319 13 (13) 1,865
498
48
Treasury stock................................. -- (7) 7 --
Retained earnings.............................. 709 179 (179) 709
Accumulated other comprehensive loss........... (134) -- -- (134)
Unearned compensation.......................... (1) -- -- (1)
------ ---- ---- ------
Total stockholders' equity....................... 1,907 185 363 2,455
------ ---- ---- ------
Total liabilities and stockholders' equity....... $2,931 $581 $366 $3,878
====== ==== ==== ======
See accompanying notes.
70
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
Pro forma adjustments to record the merger as of June 30, 2001 reflect the
following:
- the exchange of 0.563 of a share of Vishay common stock for each of
37,834,994 outstanding shares of General Semiconductor common stock. The
Vishay common stock issued was valued based on a price per share of
$23.46, which is the average market price of the Vishay common stock for
the seven-day period beginning three days before the date the merger was
announced;
- an increase in equity of $48 million relating to the issuance of options
to purchase 4,252,899 shares of Vishay common stock in exchange for all of
the 7,553,994 outstanding options to purchase shares of General
Semiconductor common stock, based on a value per share of Vishay common
stock of $23.46, calculated using the Black-Scholes option pricing model;
- an increase in accrued expenses of approximately $3 million relating to
estimated transaction costs incurred by Vishay in connection with the
merger;
- the elimination of $150 million of General Semiconductor's pre-existing
goodwill;
- the preliminary allocation of the excess of the $551 million purchase
price, including transaction costs, over the book value of the net assets
acquired to goodwill in the amount of $516 million. The final allocation
of the purchase price will be determined after completion of the merger
based on an evaluation of the fair value of General Semiconductor's
tangible and identifiable intangible assets acquired and liabilities
assumed at the date of the merger; and
- a decrease in stockholders' equity of $185 million relating to the
elimination of General Semiconductor's historical stockholders' equity.
Pro forma adjustments to record the merger for the six months ended
June 30, 2001 and the year ended December 31, 2000 reflect decreases of
$2.6 million and $5.1 million, respectively, in amortization of goodwill
relating to the elimination of General Semiconductor's pre-existing goodwill.
Under Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets", goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests. Vishay is required to adopt this new standard effective
January 1, 2002, except that the new rules are effective for any business
combination completed after June 30, 2001. The pro forma financial statements,
therefore, do not reflect any amortization expense relating to the goodwill
arising from the merger. Beginning January 1, 2002, Vishay will no longer record
amortization on its pre-existing goodwill, but no adjustment for this has been
reflected in the pro forma presentation.
Pro forma earnings per share have been adjusted to reflect the issuance of
additional shares of Vishay common stock in the merger, based on General
Semiconductor's historical weighted average shares outstanding for the periods
presented and an exchange ratio of 0.563 to one. Diluted pro forma earnings per
share reflect the dilutive effect of Vishay stock options issued in exchange for
General Semiconductor options and, for the year ended December 31, 2000, the
dilutive effect of the assumed conversion of the 5.75% convertible subordinated
notes of General Semiconductor into Vishay common stock. Assumed conversion of
the 5.75% convertible subordinated notes is not reflected in pro forma earnings
per share for the six months ended June 30, 2001 because the effect would be
antidilutive.
71
VISHAY CAPITAL INCREASE PROPOSAL
At the Vishay special meeting, Vishay stockholders are being asked to
approve an amendment to Vishay's Amended and Restated Certificate of
Incorporation increasing the authorized number of shares of common stock from
150,000,000 to 300,000,000 and increasing the authorized number of shares of
Class B common stock from 20,000,000 to 40,000,000. Under the terms of the
merger agreement, Vishay is required to solicit the approval of its stockholders
for an increase in the number of authorized shares of common stock sufficient
for the issuance of shares in connection with the merger. This includes not only
the shares directly issuable in the merger but also shares issuable upon
conversion of General Semiconductor's convertible notes, which following the
merger will be convertible into shares of Vishay common stock, and shares
issuable upon exercise of General Semiconductor stock options, which following
the merger will be exercisable for shares of Vishay common stock. See
"Recommendation of the Board of Directors of Vishay; Reasons of Vishay for the
Merger" beginning on page 43. For the reasons described in this section, Vishay
is requesting stockholders to approve an increase in the authorized capital of
Vishay that exceeds the minimum required under the merger agreement.
Vishay now has 150,000,000 authorized shares of common stock, none of which
is available for future issuance. After allowing for the outstanding shares of
Vishay common stock, the number of remaining authorized shares is not sufficient
to allow for the issuance of all the shares of common stock issuable upon the
conversion of Vishay's Class B common stock and Vishay's convertible debt
securities and upon exercise of all outstanding Vishay options. The number of
shares needed to satisfy the requirements of all of these conversions and
exercises exceeds the number of authorized shares of Vishay common stock by
approximately 2,796,000 shares. Thus, in addition to the need to authorize
approximately 21,301,000 additional shares of common stock for issuance in
connection with the merger, Vishay must increase the number of authorized shares
in order to fulfill its obligation to reserve for issuance a number of shares of
Vishay common stock sufficient to cover the conversion or exercise of all
currently outstanding convertible securities and options.
Vishay is proposing to increase the authorized number of shares of common
stock beyond the number needed for issuances in connection with the merger and
under the terms of outstanding convertible securities and options. Vishay
believes that this increase is advisable in order to give Vishay the necessary
flexibility to issue common stock when and as Vishay's board of directors
determines that it is in the interests of Vishay to do so. These circumstances
are likely to include:
- future acquisitions in which Vishay's shares are exchanged for those of a
target company;
- future offerings by Vishay of common stock or securities convertible into
or exchangeable for common stock;
- future stock splits and stock dividends;
- future option grants to employees; and
- assumption of options and/or convertible securities issued by acquired
companies in future acquisitions.
In addition to an increase in the number of authorized shares of common
stock, Vishay is proposing to increase the authorized number of shares of
Class B common stock. The purpose of the increase is to have a sufficient number
of these shares available for future stock splits and stock dividends. Under
Vishay's certificate of incorporation, Vishay may not issue shares of common
stock in a stock split or stock dividend in respect of the common stock unless a
proportional stock split or dividend is declared on the Class B common stock.
72
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
There are currently authorized 150,000,000 shares of common stock and
20,000,000 shares of Class B common stock. As of October 1, 2001,
122,456,017 shares of common stock were issued and outstanding, after deducting
the 274,173 shares in treasury, and 15,496,634 shares of Class B common stock
were issued and outstanding, after deducting the 279,453 shares in treasury.
Treasury shares are classified as issued but not outstanding. Vishay also has
1,000,000 authorized shares of preferred stock, none of which is outstanding.
In addition to the outstanding shares:
- 15,496,634 shares of common stock are issuable upon conversion of the
Class B common stock;
- 9,717,730 shares of common stock are issuable upon conversion of the
Vishay's LYONs, the convertible debt securities described below; and
- 1,390,781 shares of common stock are issuable upon the exercise of options
granted under Vishay's 1997 stock option plan, and 3,748,672 shares of
common stock are issuable upon the exercise of options granted under
Vishay's 1998 stock option plan.
No options to acquire additional shares of common stock may be issued under
the 1997 plan, and options to acquire a total of 760,000 additional shares of
common stock may be issued under the 1998 plan.
Vishay effected a three-for-two stock split by means of a stock dividend on
June 9, 2000 and a five-for-four stock split by means of a stock dividend on
June 22, 1999. Vishay also issued a 5% stock dividend on June 11, 1998.
In May 2000, Vishay issued 8,392,500 shares of common stock in an
underwritten public offering at a price of $49.00 per share (adjusted to reflect
the June 2000 stock split). Vishay has filed a "shelf" registration statement
for the issuance of up to $1 billion of equity and debt securities. This
registration statement has not been declared effective by the SEC.
THE CLASS B COMMON STOCK
Pursuant to section 2(E) of Vishay's certificate of incorporation, shares of
Class B common stock are convertible into shares of common stock on a
one-for-one basis at any time at the election of the holder. The Class B common
stock is not transferable except to a holder's spouse, various of a holder's
relatives, various trusts established for the benefit of a holder, a holder's
spouse or relatives, corporations and partnerships beneficially owned and
controlled by such holder, such holder's spouse or relatives, charitable
organizations and such holder's estate. Upon any transfer made in violation of
these restrictions, shares of Class B common stock will be automatically
converted into shares of common stock on a one-for-one basis.
Except in connection with stock splits and stock dividends, Vishay may not
issue additional shares of Class B common stock unless authorized by the vote of
the holders of a majority of the common stock and a majority of the Class B
common stock, each voting separately as a class.
You are urged to read Vishay's certificate of incorporation for a complete
description of the terms of the Class B common stock. A copy of Vishay's
certificate of incorporation is incorporated by reference into the registration
statement of which this joint proxy statement/prospectus forms a part.
73
THE LYONS
On June 4, 2001, Vishay completed the private offering of a series of
zero-coupon convertible subordinated notes due 2021, known as Liquid Yield
Option-TM- Notes, or LYONs. The LYONs have a yield to maturity of 3.0%, computed
on a semi-annual bond-equivalent basis, and Vishay is required to pay contingent
cash interest to the holders of LYONs under specified circumstances. The LYONs
were issued at a price of $551.26 per LYON, which is 55.126% of the principal
amount at maturity. The gross proceeds from the offering were approximately
$303.2 million. The net proceeds from the offering were approximately
$294.1 million. The principal amount of the LYONs at maturity is $550 million.
The LYONs are convertible into common stock at a rate of 17.6686 shares of
common stock per $1,000 principal amount at maturity of the LYONs. In total, the
LYONs are convertible into approximately 9.7 million shares of common stock. The
conversion ratio is subject to adjustment in some circumstances. Holders may
convert each of their LYONs into shares of common stock at any time on or before
the maturity date. The LYONs are not convertible into Class B common stock.
Vishay agreed, for the benefit of holders of the LYONs, to file with the SEC
within 90 days after the date of the original issue of the LYONs a shelf
registration statement covering resales of the LYONs and the shares of common
stock issuable upon conversion of the LYONs. Vishay has agreed to use its
reasonable efforts to cause the registration statement to become effective
within 180 days after the date of the original issue of the LYONs and to keep
such shelf registration statement effective until the earlier of (1) the sale
pursuant to the shelf registration statement of all the LYONs and the shares of
common stock issuable upon conversion of the LYONs and (2) the expiration of the
holding period applicable to those securities held by non-affiliates of Vishay
under Rule 144(k) under the Securities Act, or any successor provision, subject
to specified permitted exceptions. The registration statement has been filed
with the SEC but has not yet been declared effective.
At the time of the issuance of the LYONs, the Siliconix exchange offer
referred to below was pending. After reserving for the shares issuable in the
exchange offer, the number of authorized but unissued shares of common stock was
smaller than the number of shares issuable upon conversion of the LYONs and of
all outstanding shares of Class B common stock. Therefore, various officers and
directors of Vishay owning an aggregate of 11,886,200 shares of Class B common
stock agreed that, until the time when Vishay's certificate of incorporation is
amended to authorize enough additional shares of common stock, they would
neither exercise their right to convert their Class B common stock into common
stock, nor effect any transfer of their Class B common stock nor take any other
action that would cause the automatic conversion of their Class B common stock
into common stock. Various executive officers also agreed at the time not to
exercise outstanding options held by them to acquire common stock, except to the
extent that authorized common stock was available for exercise after providing
for any potential conversion of the LYONs and potential exchange of Siliconix
common stock.
THE SILICONIX OFFER AND OTHER POSSIBLE TRANSACTIONS
On May 25, 2001, Vishay commenced an offer to exchange 1.5 shares of its
common stock for each share of common stock of Siliconix not already owned by
Vishay. This exchange offer expired on July 5, 2001. The exchange offer was
conditioned on there having been tendered, and not withdrawn prior to the
expiration of the offer, a majority of the shares of Siliconix common stock not
already owned by Vishay. Because only approximately 40% of the publicly held
shares of Siliconix common stock were tendered pursuant to the offer, the offer
expired on July 5, 2001 without Vishay accepting any of the tendered shares.
------------------------
-TM- Trademark of Merrill Lynch & Co., Inc.
74
Vishay looks at acquisition opportunities in the ordinary course of its
business from time to time. Vishay believes that it is advisable and in the best
interest of Vishay to have authorized stock available for acquisitions in which
the consideration to be paid to target stockholders is payable wholly or
partially in shares of Vishay common stock. Other than the proposed merger with
General Semiconductor, there is no transaction under consideration at the
present time which would require the issuance of shares by Vishay.
Vishay also believes that it is in its best interest to have available
authorized shares of common stock for issuance in the public or private markets
if opportunities occur for the sale on financially attractive terms of shares of
common stock or securities convertible into shares. Often the window of
opportunity for the issuance of securities on favorable terms is narrow. By
having available sufficient amounts of authorized equity capital, Vishay will be
positioned to take advantage of these market opportunities when they arise.
Vishay has no specific current plans for the issuance of additional securities
in the capital markets.
The rules of the New York Stock Exchange on which the shares of Vishay's
common stock are listed require stockholder approval for the issuance of shares
in some circumstances, notwithstanding that such shares are authorized for
issuance under Vishay's organizational documents. Vishay will seek separate
stockholder approval for the issuance of shares in those circumstances.
MISCELLANEOUS
Subject to applicable laws and regulations, Vishay does not intend to
solicit further consents from the holders of common stock for the issuance of
the common stock authorized by the amendment.
No holder of shares of common stock is entitled as such, as a matter of
right, to subscribe for or purchase any part of any new or additional issue of
any stock of any class, series or kind whatsoever, or to subscribe for or
purchase securities convertible into stock of any class, series or kind
whatsoever.
THE BOARD OF DIRECTORS OF VISHAY UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF
VISHAY VOTE FOR THE PROPOSAL TO INCREASE THE AUTHORIZED CAPITAL OF VISHAY.
75
COMPARISON OF RIGHTS OF STOCKHOLDERS OF GENERAL SEMICONDUCTOR AND VISHAY
After the merger, stockholders of General Semiconductor will become
stockholders of Vishay. Their rights will then be governed by the Vishay
certificate of incorporation and bylaws. Presently, General Semiconductor
stockholders' rights are governed by the General Semiconductor certificate of
incorporation and bylaws. Both companies are incorporated in Delaware, so the
Delaware General Corporation Law will continue to govern the rights of General
Semiconductor stockholders after the merger. The following summary discusses the
material differences between the General Semiconductor certificate of
incorporation and bylaws and the Vishay certificate of incorporation and bylaws.
This summary is not, however, a complete statement of all differences between
rights of the holders of Vishay common stock and General Semiconductor common
stock and is qualified by the full text of each document and the Delaware
General Corporation Law. For information as to how to obtain copies of each
company's certificate of incorporation and bylaws, see "Where You Can Find More
Information" on page i.
CAPITALIZATION
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
General Semiconductor has two classes of authorized capital stock,
designated "new common stock" and "preferred stock", each with a par value of
$0.01 per share. General Semiconductor is authorized to issue 400,000,000 shares
of common stock, and as of October 1, 2001 there were 37,838,167 shares of
common stock outstanding. General Semiconductor is authorized to issue
20,000,000 shares of preferred stock, with any rights that the board of
directors of General Semiconductor may determine, and has designated a
"Series A Junior Participating Preferred Stock" consisting of 400,000 shares
issuable upon exercise of the preferred stock purchase rights issued under
General Semiconductor's rights agreement. However, there are no shares of
General Semiconductor preferred stock outstanding.
Vishay has three classes of authorized stock, designated "common stock" and
"Class B convertible common stock", each with a par value of $0.10 per share,
and "preferred stock" with a par value of $1.00 per share. Vishay is authorized
to issue 150,000,000 shares of common stock, and as of October 1, 2001, there
were 122,456,017 shares of common stock outstanding, after deducting shares held
in treasury. Vishay is authorized to issue 20,000,000 shares of Class B common
stock, and as of October 1, 2001, there were 15,496,634 shares of Class B common
stock outstanding, after deducting shares held in treasury. Further, Vishay is
authorized to issue 1,000,000 shares of preferred stock, with any rights the
board of directors of Vishay may determine. However, there are no shares of
Vishay preferred stock outstanding.
Vishay's Class B common stock is convertible into shares of common stock on
a one-to-one basis at any time at the option of the holder. The Class B common
stock is not transferable except to a holder's spouse, various relatives of a
holder, various trusts established for the benefit of a holder, a holder's
spouse or relatives, corporations and partnerships beneficially owned and
controlled by the holder, the holder's spouse or relatives, charitable
organizations and the holder's estate. Upon any transfer made in violation of
these restrictions, shares of Class B common stock will be automatically
converted into shares of common stock on a one-for-one basis.
Holders of Vishay's common stock and Class B common stock, after any
required payment on shares of preferred stock, are entitled to receive, and
share ratably, on a per-share basis, all dividends and other distributions
declared by the board of directors of Vishay. In the event of a stock dividend
or distribution, holders of common stock will receive shares of common stock and
holders of Class B common stock will receive shares of Class B common stock.
Neither the common stock nor the Class B common stock may be split, divided or
combined unless the other is split, divided or combined equally.
76
VOTING RIGHTS
Holders of General Semiconductor common stock are entitled to one vote on
all matters submitted to General Semiconductor stockholders for their approval
for each share of common stock held, including the election of directors. There
are no cumulative voting rights.
Holders of Vishay common stock are entitled to one vote on all matters
submitted to Vishay stockholders for their approval for each share of common
stock held, including the election of directors. Holders of Vishay Class B
common stock are entitled to ten votes on all matters submitted to Vishay
stockholders for their approval for each share of Class B common stock held. The
common stock and the Class B common stock vote together as one class on all
matters subject to stockholder approval; provided, however, that the approval of
the holders of a majority of the outstanding shares of common stock and of
Class B common stock, each voting separately as a class, is required to
authorize issuances of additional shares of Class B common stock other than in
connection with stock splits and stock dividends. Vishay also does not have
cumulative voting rights.
BOARD OF DIRECTORS
BOARD SIZE
Under the certificate of incorporation of General Semiconductor, the size of
General Semiconductor's board of directors is determined by the bylaws.
Currently, General Semiconductor's bylaws provide that the number of members of
the board of directors shall be between one and twenty-one, the exact number of
which is to be fixed from time to time by affirmative vote of a majority of the
entire board of directors. At present, the size of the General Semiconductor
board of directors has been fixed at six. Following the resignation in
July 2001 of Professor Gerald T. Wrixon, the board of directors currently
consists of five members.
According to the bylaws of Vishay, the number of directors shall be between
three and fifteen, except that, where all the shares of stock of the corporation
are owned beneficially and of record by less than three stockholders, the number
of directors may be less than three but not less than the number of such
stockholders. Subject to the foregoing limitation, the number of directors may
be fixed from time to time by action of the stockholders or of the directors,
or, if the number is not fixed, the number shall be three. The number of
directors may be increased or decreased by action of the stockholders or the
directors. At present, the size of the Vishay board of directors has been fixed
at thirteen, and there are currently thirteen board members. Upon the completion
of the merger, Vishay will expand the size of the board to fourteen and elect
Ronald A. Ostertag to the board.
BOARD CLASSIFICATION
Neither the board of directors of General Semiconductor nor the board of
directors of Vishay is divided into classes. Accordingly, all directors for both
companies are elected at each annual meeting of each company's stockholders.
REMOVAL OF DIRECTORS
According to the General Semiconductor certificate of incorporation, subject
to the rights, if any, of the holders of shares of preferred stock outstanding,
any or all of the directors may be removed from office, with or without cause,
at any time by the affirmative vote of the holders of a majority of the
outstanding shares of General Semiconductor then entitled to vote generally in
the election of directors.
According to the Vishay bylaws, any or all of the directors may be removed
for cause or without cause by the stockholders. Directors may be removed for
cause by the board of directors.
77
BOARD VACANCIES
Under the bylaws of General Semiconductor, any vacancy in the board of
directors, whether arising from death, resignation, removal (with or without
cause), an increase in the number of directors or any other cause, may be filled
by the vote of a majority of the directors then in office (even if less than a
quorum), or by the sole remaining director or by the stockholders at the next
annual meeting or at a special meeting. Each director so elected shall hold
office until such director's successor shall have been elected and qualified.
Under the bylaws of Vishay, any vacancy may be filled by the vote of a
majority of the remaining directors then in office, although less than a quorum,
or by the sole remaining director.
STOCKHOLDERS MEETINGS
STOCKHOLDER ACTION BY WRITTEN CONSENT
Under the General Semiconductor bylaws, any action required to be taken or
which may be taken at any annual or special meeting of the stockholders of
General Semiconductor may be taken without a meeting and without a vote, if a
written consent, setting forth the action so taken, is signed by the holders of
outstanding stock having at least the minimum number of votes that would be
necessary to authorize or take that action at a meeting at which all shares
entitled to vote were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than the unanimous written consent is
required to be given to those stockholders who have not consented in writing.
The General Semiconductor bylaws provide that any person seeking to have the
stockholders take corporate action by written consent shall, by written notice,
request the board of directors to fix a record date. The record date shall not
precede the date the board resolution fixing the record date is adopted and
shall not be more than ten days after the date the board resolution fixing the
record date is adopted. If no record date has been fixed pursuant to the
preceding sentence or otherwise within ten business days after the date on which
such a request is received, and if no prior action by the board of directors is
required by applicable law, the record date shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to General Semiconductor. If no record date has been fixed by the
board of directors and prior action is required by applicable law, the record
date shall be the close of business on the date on which the board of directors
adopts the resolution taking the prior action.
General Semiconductor's bylaws provide that, if a written consent is
delivered to General Semiconductor, the secretary of General Semiconductor shall
provide for the safe-keeping of the consent and shall conduct such reasonable
investigation deemed necessary for determining the validity of the consent.
However, if the consent relates to the election, designation, appointment,
removal or replacement of a board member, the secretary is required to engage
nationally recognized inspectors of elections to perform these actions.
The Vishay certificate of incorporation and bylaws provide that any action
required to be taken, or any action which may be taken at any meeting of
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing setting forth the action so taken is signed by the
holders of the outstanding stock having at least the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written consent
is also required to be given to those stockholders who have not consented in
writing.
78
ABILITY TO CALL SPECIAL MEETINGS
Under General Semiconductor's bylaws, special meetings of stockholders may
be called by the board of directors, the chairman of the board of directors or
the president. A special meeting shall be called by the secretary upon the
request in writing of a stockholder or stockholders holding of record at least a
majority of the voting power of the issued and outstanding shares of capital
stock of General Semiconductor entitled to vote at such meeting.
Under Vishay's bylaws, special meetings of stockholders may be called by the
directors or by any officer instructed by the directors to call the meeting.
QUORUM REQUIREMENTS
The General Semiconductor bylaws provide that, except as otherwise provided
by applicable law or the certificate of incorporation, the holders of a majority
of the voting power of the issued and outstanding shares of capital stock of
General Semiconductor entitled to vote shall constitute a quorum at all meetings
of stockholders.
The Vishay bylaws provide that, except as otherwise provided by applicable
law or the bylaws, the holders of a majority of the outstanding shares of stock
entitled to vote shall constitute a quorum at a meeting of stockholders.
ADVANCE NOTICE PROVISIONS FOR ELECTION OF DIRECTORS
Under the bylaws of General Semiconductor, stockholder nominations of
directors will not be considered at any meeting of General Semiconductor
stockholders unless timely made. Stockholder nominations of directors are timely
made only if delivered to General Semiconductor's principal executive offices
(1) in the case of an annual meeting, at least 60 days, but not more than
90 days, before the date of the annual meeting; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the annual meeting is given or made to stockholders, to be timely, notice must
be received no later than the earlier to occur of the close of business 10 days
after the date notice of the annual meeting was mailed or public disclosure of
the date of the annual meeting was made; and (2) in the case of a special
meeting for the election of directors, the close of business 10 days after the
earlier to occur of the date that notice of the special meeting was mailed or
public disclosure of the date of the special meeting was made. In addition,
valid stockholder nominations of directors must contain detailed information
regarding the nominees for election to the board of directors.
The certificate of incorporation and bylaws of Vishay do not have any
advance notice provisions for election of directors.
ADVANCE NOTICE PROVISIONS FOR BUSINESS TO BE TRANSACTED AT ANNUAL MEETING
Under the bylaws of General Semiconductor, business will not be brought
before an annual meeting by a stockholder proposal unless the proposal to bring
that business before the meeting is timely made. Stockholder proposals for
business to be transacted are timely made only if such proposals are delivered
to General Semiconductor's principal executive offices at least 60 days, but not
more than 90 days, before the date of the annual meeting; provided, however,
that in the event that less than 70 days' notice or prior public disclosure of
the date of the annual meeting is given or made to stockholders, to be timely,
notice must be received by General Semiconductor no later than the close of
business 10 days after the earlier to occur of the date notice of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made. In addition, valid stockholder proposals for business to be transacted at
an annual meeting must contain detailed information regarding each matter that
such stockholder proposes to bring before the annual meeting.
79
The certificate of incorporation and bylaws of Vishay do not have any
advance notice provisions for the conduct of business.
AMENDMENTS TO ORGANIZATIONAL DOCUMENTS
CERTIFICATE OF INCORPORATION
Under General Semiconductor's certificate of incorporation, General
Semiconductor has reserved the right to rescind, amend, alter, change or repeal
any provision of its certificate of incorporation in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders by the
certificate of incorporation are granted subject to this reservation.
The Vishay certificate of incorporation provides that any of its provisions
may be amended, altered or repealed and any other provisions authorized under
applicable law may be added or inserted as allowed by such law, and all rights
conferred upon stockholders by the certificate of incorporation are granted
subject to such provision.
BYLAWS
Under General Semiconductor's certificate of incorporation, the board of
directors of General Semiconductor is authorized to adopt, repeal, alter, amend
or rescind the bylaws of General Semiconductor. In addition, the bylaws may be
adopted, repealed, altered, amended or rescinded by the affirmative vote of a
majority of the outstanding stock of General Semiconductor that is entitled to
vote.
Vishay's certificate of incorporation and bylaws provide that the power to
amend, alter and repeal the bylaws and adopt new bylaws is vested in the board
of directors; provided, that the board of directors may delegate such power, in
whole or in part, to the stockholders; and provided further, that any bylaw,
other than an initial bylaw, which provides for staggered terms, shall be
adopted by the stockholders.
LIMITATION OF LIABILITY OF DIRECTORS
Both General Semiconductor's certificate of incorporation and Vishay's
certificate of incorporation provide that no director will be personally liable
for monetary damages for breach of fiduciary duties, except for liability
(1) for any breach of the director's duty of loyalty to the corporation or its
stockholders; (2) for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law; (3) under section 174 of
the Delaware General Corporation Law concerning unlawful dividends and stock
repurchases and redemptions; or (4) for any transaction from which the director
derived an improper personal benefit.
In addition, General Semiconductor's certificate of incorporation provides
that if the Delaware General Corporation Law is amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
General Semiconductor's directors will be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law as so amended. General
Semiconductor's certificate of incorporation also provides that repeal or
modification of the exculpation provisions described in the preceding paragraph
will not apply to or effect the liability of any director for or with respect to
any acts occurring prior to such amendment or repeal.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The certificate of incorporation of General Semiconductor provides that
General Semiconductor shall, to the fullest extent permitted by law, indemnify
any person who is or was involved in any manner in any threatened, pending or
completed investigation, claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative, because the person is or was a
director or officer
80
of General Semiconductor, or is or was serving another entity in such capacity
at the request of General Semiconductor, against all expenses and liabilities
actually and reasonably incurred by the person in connection with his or her
defense or settlement (including attorneys' fees).
Under General Semiconductor's bylaws, General Semiconductor must indemnify
and hold harmless, to the fullest extent permitted by law, each person who was
or is made a party or is threatened to be made a party to or is involved in any
threatened, pending or completed action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative brought by
reason of the fact that such person is or was a director or officer of General
Semiconductor or is or was serving at the request of General Semiconductor as a
director or officer of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan, whether the basis of the proceeding is alleged action in an official
capacity as a director or officer or in any other capacity while serving as such
director or officer. General Semiconductor is required to pay, in advance of a
final disposition, all expenses (including attorneys' fees) incurred (or
reasonably expected to be incurred within three months) in connection with any
proceeding within twenty days of receipt of a statement requesting such advance
reasonably evidencing the expenses incurred (or reasonably expected to be
incurred) and accompanied by a written undertaking to repay such expenses if it
is ultimately determined that the person is not entitled to indemnification
under General Semiconductor's bylaws.
In the case of a derivative action, General Semiconductor's organizational
documents provide that no indemnification shall be made for matters as to which
Delaware law expressly prohibits indemnification by reason of an adjudication of
liability on the indemnitee unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which that action or suit was
brought shall determine that, despite the adjudication of liability but in view
of all the circumstances of the case, the indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or other
court shall deem proper.
The certificate of incorporation of Vishay provides that every person (and
their heirs, executors and administrators) who is or was a director, officer,
employee or agent of Vishay or of any other company, including another
corporation, partnership, joint venture, trust or other enterprise in which that
person serves or served as such at the request of Vishay, shall be indemnified
by Vishay, in the circumstances described in the following sentence, against all
judgments, payments in settlement (whether or not approved by a court), fines,
penalties and other reasonable costs and expenses (including fees and
disbursements of counsel) imposed upon or incurred by the person in connection
with or resulting from any action, suit, proceeding, investigation or claim,
civil, criminal, administrative, legislative or other, or any appeal relating
thereto, which is brought or threatened either by or in the right of Vishay or
the other company or by any other person, governmental authority or
instrumentality and in which the person is made a party to or is otherwise
involved because of his or her being or having been such director, officer,
employee or agent or by reason of any action or omission by the person in such
capacity.
The person is entitled to indemnification if:
- he or she is wholly successful, on the merits or otherwise, in defending
the action; or
- in the judgment of a court of competent jurisdiction or, in the absence of
such a determination, in the judgment of a majority of a quorum of the
board of directors of the corporation (not
81
including any director who is a party to or is otherwise involved in the
action) or, in the absence of a disinterested quorum, in the opinion of
independent legal counsel:
- in the case of a derivative action, the person acted in good faith in
what he or she reasonably believed to be the best interest of Vishay and
was not adjudged liable to Vishay or such other company; or
- in the case of a third party action, the person acted in good faith in
what he or she reasonably believed to be in the best interest of Vishay
or such other company, and, in any criminal action, had no reasonable
cause to believe that his or her action was unlawful.
In the case of a derivative action, the Vishay's organizational documents
provide that indemnification shall not be made unless (1) a court of competent
jurisdiction has approved the settlement, if any, and the reimbursement of the
payment or (2) if the court in which the action has been instituted lacks
jurisdiction to grant the approval or the action is settled before the
institution of judicial proceedings, in the opinion of independent legal counsel
the applicable standard of conduct described above has been met, the action was
without substantial merit, the settlement was in the best interest of Vishay or
such other company and the reimbursement of the payment is permissible under
applicable law.
Vishay's certificate of incorporation provides that the directors may
authorize the advancement of amounts necessary to cover the reasonable costs and
expenses incurred prior to final disposition to the extent permitted under
Delaware law.
DELAWARE BUSINESS COMBINATION LAW
General Semiconductor and Vishay are each subject to the provisions of
section 203 of the Delaware General Corporation Law. Section 203 of the Delaware
General Corporation Law generally prohibits a Delaware corporation from engaging
in a "Business Combination", defined as a variety of transactions, including
mergers, assets sales, issuance of stock and other transactions resulting in a
financial benefit to the interested stockholder, with an "interested
stockholder", defined generally as a person that is the beneficial owner of 15%
or more of a corporation's outstanding voting stock, for a period of three years
following the date that such person became an interested stockholder unless
certain conditions are met. Under section 203, a corporation may waive the
protective provisions of section 203 in its certificate of incorporation or
bylaws. However, neither Vishay nor General Semiconductor has so waived the
provisions of section 203.
STOCKHOLDER RIGHTS PLAN
General Semiconductor has in place a stockholder rights plan. In general,
pursuant to the rights plan, upon the occurrence of specified triggering events,
such as the acquisition by any person of the beneficial ownership of securities
representing 15% or more of the outstanding General Semiconductor common stock
without the prior approval or recommendation of the General Semiconductor board,
each holder of a General Semiconductor right will have the right to receive,
upon exercise of the General Semiconductor right, that amount of General
Semiconductor common stock having a market value equal to two times the exercise
price of the General Semiconductor right. Under some circumstances, General
Semiconductor may redeem the General Semiconductor right for a redemption price
of $0.01 per General Semiconductor right. The General Semiconductor rights
expire after January 6, 2007.
On July 31, 2001, General Semiconductor's board of directors amended the
rights agreement to provide that the merger would not trigger the provisions of
the rights agreement by excluding Vishay or Vishay Acquisition Corp. from the
definition of "Acquiring Person" solely in connection with the execution of the
merger agreement and completion of the merger.
Vishay does not have in place a stockholder rights plan.
82
LEGAL MATTERS
The validity of the shares of Vishay common stock to be issued to General
Semiconductor stockholders in connection with the merger and certain United
States federal income tax matters in connection with the merger will be passed
upon by Kramer Levin Naftalis & Frankel LLP, New York, New York, special counsel
to Vishay. Certain United States federal income tax matters in connection with
the merger will be passed upon for General Semiconductor by Fried, Frank,
Harris, Shriver & Jacobson, a partnership including professional corporations,
New York, New York, special counsel to General Semiconductor.
EXPERTS
The consolidated financial statements of Vishay Intertechnology, Inc.
appearing in Vishay's Annual Report (Form 10-K) for the year ended December 31,
2000 have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of General Semiconductor, Inc.
incorporated in this joint proxy statement/prospectus by reference from the
Annual Report on Form 10-K of General Semiconductor for the year ended
December 31, 2000 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in its report which is incorporated herein by reference, and
have been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
SUBMISSION OF STOCKHOLDER PROPOSALS
VISHAY. Stockholder proposals that are intended to be presented at the
Vishay 2002 Annual Meeting of Stockholders should be sent to Vishay at 63
Lincoln Highway, Malvern, Pennsylvania 19355-2120 and must be received on or
prior to January 23, 2002 to be eligible for inclusion in Vishay's proxy
statement and form of proxy to be used in connection with the 2002 annual
meeting. These proposals must also meet the requirements set forth in the rules
and regulations of the SEC in order to be eligible for inclusion in Vishay's
proxy statement for its 2002 Annual Meeting of Stockholders.
GENERAL SEMICONDUCTOR. Due to the anticipated merger, General Semiconductor
does not currently expect to hold a 2002 annual meeting of stockholders, as
General Semiconductor will be owned by Vishay if the merger is completed. If the
merger is not completed and an annual meeting is later held, stockholder
proposals for inclusion in the proxy materials for that meeting must be
submitted 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 1, 2001. These proposals also must meet the other
requirements of the rules of the SEC relating to stockholder proposals.
83
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VISHAY INTERTECHNOLOGY, INC.
VISHAY ACQUISITION CORP.
AND
GENERAL SEMICONDUCTOR, INC.
Dated as of July 31, 2001
TABLE OF CONTENTS
PAGE
--------
ARTICLE I THE MERGER.................................................. A-5
SECTION 1.01. The Merger.................................................. A-5
SECTION 1.02. Effective Time.............................................. A-5
SECTION 1.03. Effect of the Merger........................................ A-5
SECTION 1.04. Certificate of Incorporation; Bylaws........................ A-5
SECTION 1.05. Directors and Officers...................................... A-6
SECTION 1.06. Effect on Securities, Etc................................... A-6
SECTION 1.07. Exchange of Shares.......................................... A-7
SECTION 1.08. Stock Transfer Books........................................ A-8
SECTION 1.09. No Further Ownership Rights in Company Common Stock......... A-8
SECTION 1.10. Lost, Stolen or Destroyed Certificates...................... A-9
SECTION 1.11. Tax Consequences............................................ A-9
SECTION 1.12. Taking of Necessary Action; Further Action.................. A-9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-9
SECTION 2.01. Organization and Qualification; Subsidiaries................ A-9
SECTION 2.02. Certificate of Incorporation and By-laws.................... A-10
SECTION 2.03. Capitalization.............................................. A-10
SECTION 2.04. Authority Relative to This Agreement........................ A-11
SECTION 2.05. Material Contracts; No Conflict; Required Filings and
Consents.................................................... A-11
SECTION 2.06. Compliance; Permits......................................... A-12
SECTION 2.07. SEC Filings; Financial Statements; Projections.............. A-13
SECTION 2.08. Absence of Certain Changes or Events........................ A-14
SECTION 2.09. No Undisclosed Liabilities.................................. A-14
SECTION 2.10. Absence of Litigation....................................... A-14
SECTION 2.11. Employee Benefit Plans; Employment Agreements............... A-14
SECTION 2.12. Employment and Labor Matters................................ A-18
SECTION 2.13. Registration Statement; Joint Proxy Statement/Prospectus.... A-19
SECTION 2.14. Restrictions on Business Activities......................... A-19
SECTION 2.15. Title to Property........................................... A-19
SECTION 2.16. Taxes....................................................... A-20
SECTION 2.17. Environmental Matters....................................... A-21
SECTION 2.18. Brokers..................................................... A-22
SECTION 2.19. Intellectual Property....................................... A-22
SECTION 2.20. Interested Party Transactions............................... A-23
SECTION 2.21. Insurance................................................... A-23
SECTION 2.22. Products; Product Liability and Recalls..................... A-24
SECTION 2.23. Opinion of Financial Advisor................................ A-24
SECTION 2.24. Tax Treatment............................................... A-24
SECTION 2.25. Supplements to the Company Disclosure Schedule.............. A-24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..... A-25
SECTION 3.01. Organization and Qualification; Subsidiaries................ A-25
SECTION 3.02. Certificate of Incorporation and By-laws.................... A-25
SECTION 3.03. Capitalization.............................................. A-25
SECTION 3.04. Authority Relative to this Agreement........................ A-26
SECTION 3.05. Material Contracts; No Conflicts; Required Filings and
Consents.................................................... A-27
A-i
SECTION 3.06. Compliance; Permits......................................... A-27
SECTION 3.07. SEC Filings; Financial Statements........................... A-28
SECTION 3.08. Absence of Certain Changes or Events........................ A-28
SECTION 3.09. No Undisclosed Liabilities.................................. A-29
SECTION 3.10. Absence of Litigation....................................... A-29
SECTION 3.11. Employee Benefit Plans; Employment Agreements............... A-29
SECTION 3.12. Employment and Labor Matters................................ A-30
SECTION 3.13. Registration Statement; Joint Proxy Statement/Prospectus.... A-31
SECTION 3.14. Restrictions on Business Activities......................... A-32
SECTION 3.15. Title to Property........................................... A-32
SECTION 3.16. Taxes....................................................... A-32
SECTION 3.17. Environmental Matters....................................... A-33
SECTION 3.18. Brokers..................................................... A-33
SECTION 3.19. Intellectual Property....................................... A-33
SECTION 3.20. Product Liability and Recalls............................... A-34
SECTION 3.21. Ownership of Parent and Merger Sub.......................... A-34
SECTION 3.22. No Prior Activities......................................... A-34
SECTION 3.23. Ownership Interest in the Company........................... A-35
SECTION 3.24. Tax Treatment............................................... A-35
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER...................... A-35
SECTION 4.01. Conduct of Business by the Company Pending the Merger....... A-35
SECTION 4.02. No Solicitation............................................. A-37
SECTION 4.03. Conduct of Business by Parent Pending the Merger............ A-39
ARTICLE V ADDITIONAL AGREEMENTS....................................... A-40
SECTION 5.01. Joint Proxy Statement/Prospectus; Registration Statement.... A-40
SECTION 5.02. Stockholders Meetings....................................... A-41
SECTION 5.03. Access to Information; Confidentiality...................... A-41
SECTION 5.04. Consents; Approvals......................................... A-42
SECTION 5.05. Agreements with Respect to Affiliates....................... A-42
SECTION 5.06. Indemnification and Insurance............................... A-42
SECTION 5.07. Notification of Certain Matters............................. A-43
SECTION 5.08. Further Action/Tax Treatment................................ A-44
SECTION 5.09. Public Announcements........................................ A-44
SECTION 5.10. Parent Common Stock......................................... A-44
SECTION 5.11. Stock Option Plans, etc..................................... A-44
SECTION 5.12. Certain Employee Benefits................................... A-45
SECTION 5.13. Rights Agreement............................................ A-46
SECTION 5.14. Conveyance Taxes............................................ A-46
SECTION 5.15. Accountant's Letters........................................ A-46
SECTION 5.16. Compliance with State Property Transfer Statutes............ A-46
SECTION 5.17. Parent Director............................................. A-46
ARTICLE VI CONDITIONS TO THE MERGER.................................... A-47
SECTION 6.01. Conditions to Obligation of Each Party to Effect the
Merger...................................................... A-47
SECTION 6.02. Additional Conditions to Obligations of Parent and Merger
Sub......................................................... A-47
SECTION 6.03. Additional Conditions to Obligation of the Company.......... A-48
ARTICLE VII TERMINATION................................................. A-49
SECTION 7.01. Termination................................................. A-49
SECTION 7.02. Effect of Termination....................................... A-51
SECTION 7.03. Fees and Expenses........................................... A-51
A-ii
ARTICLE VIII GENERAL PROVISIONS.......................................... A-52
SECTION 8.01. Effectiveness of Representations, Warranties and
Agreements.................................................. A-52
SECTION 8.02. Notices..................................................... A-53
SECTION 8.03. Certain Definitions......................................... A-53
SECTION 8.04. Amendment................................................... A-54
SECTION 8.05. Waiver...................................................... A-54
SECTION 8.06. Headings.................................................... A-54
SECTION 8.07. Severability................................................ A-54
SECTION 8.08. Entire Agreement............................................ A-55
SECTION 8.09. Assignment.................................................. A-55
SECTION 8.10. Parties in Interest......................................... A-55
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative....... A-55
SECTION 8.12. Governing Law; Jurisdiction................................. A-55
SECTION 8.13. Counterparts................................................ A-55
SECTION 8.14. Waiver of Jury Trial........................................ A-55
SECTION 8.15. Performance of Obligations.................................. A-56
SECTION 8.16. Enforcement................................................. A-56
A-iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 31, 2001 (this " Agreement"),
among Vishay Intertechnology, Inc., a Delaware corporation ("Parent"), Vishay
Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary
of Parent ("Merger Sub"), and General Semiconductor, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is advisable and in the best interests of their
respective stockholders, and consistent with and in furtherance of their
respective business strategies and goals, for Parent to acquire all of the
outstanding shares of the Company through the merger of Merger Sub with and into
the Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the merger (the "Merger")
of Merger Sub with and into the Company in accordance with the applicable
provisions of the Delaware General Corporation Law (the "DGCL"), and upon the
terms and subject to the conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (the "Code") and that the
transactions contemplated by this Agreement be undertaken pursuant to such plan;
WHEREAS, Parent, Merger Sub and the Company intend that the Merger qualify
as a reorganization within the meaning of Section 368(a) of the Code;
WHEREAS, pursuant to the Merger, each outstanding share (together with the
preferred stock purchase right associated therewith, a "Share") of the Company's
common stock, par value $.01 per share (the "Company Common Stock"), shall be
converted into the right to receive the Merger Consideration (as defined in
Section 1.07(b)), upon the terms and subject to the conditions set forth herein;
and
WHEREAS, as an inducement and a condition to the Company's willingness to
enter into this Agreement, contemporaneously with the execution hereof, certain
holders of Parent Common Stock are entering into Voting Agreements (the "Voting
Agreements") pursuant to which, among other things, such holders are agreeing to
vote, or execute written consents in respect of, all Shares beneficially owned
by them or over which such holders have voting control, in favor of the Parent
Stockholder Meeting Proposals, at any meeting of Parent stockholders or any
adjournment thereof or in connection with any solicitation of written consents,
in each case, at or in connection with which Parent stockholder action is sought
on such Parent Stockholder Meeting Proposals;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
DEFINITIONS:
"Acquisition Proposal" is defined in Section 4.02(a).
"Adjusted Option" is defined in Section 5.11(a).
"Affiliate Plan" is defined in Section 2.11(a).
"affiliates" is defined in Section 8.03(a).
A-1
"Agreement" is defined in the preamble.
"Alternative Transaction" is defined in Section 4.02(a).
"Alternative Transaction Condition" is defined in Section 7.03(b).
"Benefits Continuation Period" is defined in Section 5.12(a)
"business day" is defined in Section 8.03(b).
"CERCLA" is defined in Section 2.17(f)(ii).
"Certificate of Merger" is defined in Section 1.02.
"Certificates" is defined in Section 1.06(f).
"COBRA" is defined in Section 2.11(b).
"Code" is defined in the recitals.
"Company" is defined in the preamble.
"Company Affiliate Letter" is defined in Section 5.05.
"Company Charter Documents" is defined in Section 2.02.
"Company Common Stock" is defined in the recitals.
"Company Confidentiality Agreement" is defined in Section 5.03.
"Company Convertible Notes" is defined in Section 2.03(a).
"Company Disclosure Schedule" is defined in Section 2.01(b).
"Company Employee" is defined in Section 5.12(a).
"Company Employee Plans" is defined in Section 2.11(a).
"Company Financial Advisor" is defined in Section 2.18.
"Company Intellectual Property Assets" is defined in Section 2.19(a).
"Company Permits" is defined in Section 2.06(b).
"Company Preferred Stock" is defined in Section 2.03(a).
"Company SEC Documents" is defined in Section 2.03(b).
"Company Significant Subsidiaries" is defined in Section 2.01(a).
"Company Stockholders Meeting" is defined in Section 2.04(b).
"Company Stock Option" is defined in Section 1.06(c).
"Company Stock Option Plans" is defined in Section 1.06(c).
"Company 2000 Form 10-K" is defined in Section 2.01(b).
"control" is defined in Section 8.03(c).
"Covered Persons" is defined in Section 5.06(c).
"DGCL" is defined in the recitals.
"D&O Insurance" is defined in Section 5.06(d).
"Effective Time" is defined in Section 1.02.
A-2
"Employee Benefits Supplemental Disclosure Schedule" is defined in Section
2.11(a).
"Environmental Claim" is defined in Section 2.17(f)(i).
"Environmental, Health and Safety Transfer Laws" is defined in
Section 2.05(c).
"Environmental Laws" is defined in Section 2.17(f)(ii).
"ERISA" is defined in Section 2.11(a).
"Exchange Act" is defined in Section 2.05(c).
"Exchange Agent" is defined in Section 1.07(a).
"Exchange Ratio" is defined in Section 1.06(a).
"Expenses" is defined in Section 7.03(b).
"Fee" is defined in Section 7.03(b).
"GAAP" is defined in Section 2.07(b).
"Governmental Authority" is defined in Section 2.05(c).
"HSR Act" is defined in Section 2.05(c).
"Indemnified Parties" is defined in Section 5.06(b).
"Intellectual Property Assets" is defined in Section 2.19(a).
"IRS" is defined in Section 2.11(b).
"Joint Proxy Statement/Prospectus" is defined in Section 2.13(a)(ii).
"knowledge" is defined in Section 8.03(d).
"leased employee" is defined in Section 3.11(c).
"Material Adverse Effect" is defined in Section 8.03(e).
"Materials of Environmental Concern" is defined in Section 2.17(f)(iii).
"Merger" is defined in the preamble.
"Merger Consideration" is defined in Section 1.07(b).
"Merger Sub" is defined in the preamble.
"multiemployer plan" is defined in Section 3.11(b).
"Non-Competition Agreement" is defined in Section 2.11(h).
"Non-U.S. Monopoly Laws" is defined in Section 2.05(c).
"Non-U.S. Plan" is defined Section 2.11(a).
"NYSE" is defined in Section 1.06(f).
"OSHA" is defined in Section 2.17(f)(ii).
"Parent" is defined in the preamble.
"Parent Affiliate Plan" is defined in Section 3.11(a).
"Parent Charter Documents" is defined in Section 3.02.
"Parent Class B Stock" is defined in Section 3.03(a).
A-3
"Parent Common Stock" is defined in Section 1.06(a).
"Parent Confidentiality Agreement" is defined in Section 5.03.
"Parent Disclosure Schedule" is defined in Section 3.01(b).
"Parent Employee Plans" is defined in Section 3.11(a).
"Parent Intellectual Property Assets" is defined in Section 3.19(a).
"Parent Non-U.S. Plan" is defined in Section 3.11(a).
"Parent Permits" is defined in Section 3.06(b).
"Parent Preferred Stock" is defined in Section 3.03(a).
"Parent SEC Documents" is defined in Section 3.06(a).
"Parent Significant Subsidiaries" is defined in Section 3.01(b).
"Parent Stockholders Meeting" is defined in Section 3.13(a)(ii).
"Parent Stockholders Meeting Proposals" is defined in Section 3.13(a)(ii).
"Parent Subsidiary Documents" is defined in Section 3.02.
"Parent 2000 Form 10-K" is defined in Section 3.01(b).
"PBGC" is defined in Section 2.11(b).
"person" is defined in Section 8.03(f).
"Post-1998 Company SEC Documents" is defined in Section 2.07(a).
"Post-1998 Parent SEC Documents" is defined in Section 3.07(a).
"RCRA" is defined in Section 2.17(f)(ii).
"Registration Statement" is defined in Section 3.13(a)(i).
"Regulation S-K" is defined in Section 2.05(a).
"Regulation S-X" is defined in Section 2.01(a).
"reportable event" is defined in Section 3.11(b).
"Rights" is defined in Section 4.02(d).
"Rights Agreement" is defined in Section 4.02(d).
"Rule 145" is defined in Section 5.05.
"SEC" is defined in Section 2.03(b).
"Securities Act" is defined in Section 2.05(c).
"Share" is defined in the recitals.
"S Litigation" is defined in Section 8.03(e).
"Stockholders Meetings" is defined in Section 2.13(a)(ii).
"subsidiary" and "subsidiaries" are defined in Section 8.03(g).
"Subsidiary Documents" is defined in Section 2.02.
"Superior Proposal" is defined in Section 4.02(a).
A-4
"Surviving Corporation" is defined in Section 1.01.
"Tax" is defined in Section 2.16(b).
"Tax Return" is defined in Section 2.16(b).
"Terminating Breach" is defined in Section 7.01(h).
"Terminating Change" is defined in Section 7.01(g).
"Termination Misrepresentation" is defined in Section 7.01(f).
"Third Party" is defined in Section 4.02(a).
"Third Party Intellectual Property Assets" is defined in Section 2.19(c).
"TSCA" is defined in Section 2.17(f)(ii).
"Voting Agreements" is defined in the recitals.
"2001 Company Balance Sheet" is defined in Section 2.09.
"2001 Parent Balance Sheet" is defined in Section 3.09.
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. At the Effective Time, and subject to and upon
the terms and conditions of this Agreement and the DGCL, Merger Sub shall be
merged with and into the Company, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving corporation
(hereinafter sometimes referred to as the "Surviving Corporation").
SECTION 1.02. EFFECTIVE TIME. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.01, as promptly as practicable (and in any event within
two business days) after the satisfaction or waiver of the conditions set forth
in Article VI, the parties hereto shall cause the Merger to be consummated by
filing a properly executed agreement or certificate of merger as contemplated by
the DGCL (the "Certificate of Merger"), together with any required related
certificates, with the Secretary of State of Delaware, in such form as required
by, and executed in accordance with the relevant provisions of, the DGCL. The
Merger shall become effective at the time of such filing or at such later time,
which will be as soon as reasonably practicable, specified in the Certificate of
Merger (the "Effective Time"). Prior to such filing, a closing shall be held at
the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York,
NY, unless another time or place is agreed to in writing by the parties hereto,
for the purpose of confirming the satisfaction or waiver, as the case may be, of
the conditions set forth in Article VI.
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.04. CERTIFICATE OF INCORPORATION; BYLAWS. (a) CERTIFICATE OF
INCORPORATION. At the Effective Time, the Restated Certificate of Incorporation
of the Company, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by the DGCL and such Certificate of Incorporation; PROVIDED,
HOWEVER,
A-5
that Article Third of the Surviving Corporation's Certificate of Incorporation
shall be amended in the Merger to read in its entirety as follows: "ARTICLE
THIRD. The aggregate number of shares authorized is 1,000 shares of common
stock, par value $0.01 per share."
(b) BY-LAWS. Subject to Section 5.06, at the Effective Time, the By-laws of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
By-laws of the Surviving Corporation until thereafter amended as provided by the
DGCL.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.06. EFFECT ON SECURITIES, ETC. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Merger Sub, the
Company or the holders of any securities of the Company:
(a) CONVERSION OF SECURITIES. Each Share issued and outstanding immediately
prior to the Effective Time (excluding any Shares to be canceled pursuant to
Section 1.06(b)) shall be converted, subject to Sections 1.06 (e) and (f), into
0.563 (such ratio, the "Exchange Ratio") fully paid and nonassessable shares of
common stock of Parent, par value $0.10 per share ("Parent Common Stock").
(b) CANCELLATION. Each Share held in the treasury of the Company and each
Share owned by Parent immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder thereof, cease to
be outstanding, be canceled and retired without payment of any consideration
therefor, and cease to exist.
(c) STOCK OPTIONS. At the Effective Time, all options or rights to purchase
shares of Company Common Stock (a "Company Stock Option") then outstanding,
whether under (A) the Amended and Restated General Semiconductor, Inc. 1993
Long-Term Incentive Plan, (B) the General Semiconductor, Inc. Amended and
Restated 1998 Long-Term Incentive Plan, and/or (C) any other stock option or
stock plan or agreement of the Company (collectively, the "Company Stock Option
Plans"), shall be treated in accordance with Section 5.11 of this Agreement.
(d) CAPITAL STOCK OF MERGER SUB. Each share of common stock, $0.01 par value
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, $0.01 par value, of the
Surviving Corporation.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio, the Merger
Consideration and any other relevant amounts and terms in this Agreement shall
be appropriately adjusted to reflect fully the effect of: any stock split,
reverse split, or stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common Stock); any
distribution, exercise or exchange of Rights or such Rights becoming
exercisable; or any reorganization, recapitalization, reclassification,
readjustment, split up, combination or exchange of shares, or other like event
with respect to Parent Common Stock or Company Common Stock, in any case
occurring after the date hereof and prior to the Effective Time.
(f) FRACTIONAL SHARES. No certificates or scrip representing less than one
share of Parent Common Stock shall be issued in exchange for Shares upon the
surrender for exchange of a certificate which immediately prior to the Effective
Time represented outstanding Shares (the "Certificates"). In lieu of any such
fractional share, each holder of Shares who would otherwise have been entitled
to a fraction of a Share of Parent Common Stock upon surrender of Certificates
for exchange shall be paid upon
A-6
such surrender (and after taking into account all Certificates surrendered by
such holder) cash (without interest) in an amount equal to such fraction
multiplied by the closing price of Parent Common Stock on the New York Stock
Exchange (the "NYSE") trading day immediately prior to the Effective Time of the
Merger. The fractional shares of Parent Common Stock will be aggregated and no
stockholder of the Company will be entitled to receive cash in an amount equal
to or greater than the value of one full share of Parent Common Stock.
SECTION 1.07. EXCHANGE OF SHARES. (a) EXCHANGE AGENT. Parent shall cause
to be supplied to or for such bank or trust company as shall be designated by
Parent and shall be reasonably acceptable to the Company (the "Exchange Agent"),
in trust for the benefit of the holders of Company Common Stock, as needed for
exchange and payment in accordance with this Section 1.07 through the Exchange
Agent, the Parent Common Stock deliverable pursuant to Section 1.06(a), the cash
to be paid in lieu of fractional shares in exchange for outstanding Shares
pursuant to Section 1.06(f) and the cash or other property in respect of any
dividends or other distributions payable pursuant to Section 1.07(c).
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent will cause the Exchange Agent to mail to each holder of
record of Certificates (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify and as are consistent with the terms of this Agreement), and
(ii) instructions to effect the surrender of the Certificates in exchange for
the Parent Common Stock and cash in lieu of fractional shares. Upon surrender of
a Certificate for cancellation to the Exchange Agent together with such letter
of transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) that number of whole shares of
Parent Common Stock which such holder has the right to receive in accordance
with Section 1.06(a) in respect of the Shares formerly evidenced by such
Certificate and (B) cash in respect of fractional shares as provided in
Section 1.06(f) (the Parent Common Stock and cash in respect of fractional
shares being referred to, collectively, as the "Merger Consideration").
The holder of such Certificate, upon its exchange for shares of Parent
Common Stock, shall also receive any dividends or other distributions to which
such holder is entitled pursuant to Section 1.07(c). Certificates surrendered
shall forthwith be canceled following the Effective Time. In the event of a
transfer of ownership of Shares which is not registered in the transfer records
of the Company as of the Effective Time, the Merger Consideration, dividends and
distributions may be issued and paid in accordance with this Article I to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer pursuant to this Section 1.07(b) and by evidence that any
applicable stock transfer taxes have been paid. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented Shares
will be deemed from and after the Effective Time, for all corporate purposes
other than the payment of dividends or other distributions, to evidence the
ownership of the number of whole shares of Parent Common Stock, and cash in
respect of fractional shares, into which such Shares shall have been so
converted.
Shares held at the Effective Time in book-entry form shall be exchanged for
Merger Consideration in accordance with the customary procedures of The
Depository Trust Company.
A-7
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the Parent Common
Stock that such holder is entitled to receive, until the holder of such
Certificate shall surrender such Certificate in accordance with the provisions
of Section 1.07(b). Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock, and (ii) on the applicable payment date, the
amount of dividends or other distributions with a record date after the
Effective Time not yet paid on the date of surrender of such Certificate to be
paid with respect to such whole shares of Parent Common Stock.
(d) TRANSFERS OF OWNERSHIP. If any shares of Parent Common Stock are to be
delivered in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition of the delivery thereof
that the Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange shall have
paid to Parent or any agent designated by it any transfer or other taxes
required by reason of the delivery of Parent Common Stock in any name other than
that of the registered holder of the Certificate surrendered, or establish to
the satisfaction of Parent or any agent designated by it that such tax has been
paid or is not payable.
(e) ESCHEAT. Neither Parent, Merger Sub nor the Company nor any of their
respective affiliates shall be liable to any holder of Company Common Stock for
any Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) WITHHOLDING RIGHTS. The Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock, and from any cash dividends or
other distributions that such holder is entitled to receive under
Section 1.07(c), such amounts as the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or non-U.S. tax law. To the extent that amounts are so
withheld by the Exchange Agent, such portion of the Merger Consideration and
other such amounts payable under Section 1.07(c) that are withheld shall be
treated for all purposes of this Agreement as having been received by the holder
of the Shares in respect of which such deduction and withholding was made by the
Exchange Agent.
(g) UNDISTRIBUTED MERGER CONSIDERATION. Any portion of the Parent Common
Stock, the cash to be paid in lieu of fractional shares and the cash or other
property in respect of dividends or other distributions that the holder is
entitled to receive under Section 1.07(c) supplied to the Exchange Agent which
remains undistributed to the holders of the Certificates for one year after the
Effective Time shall be delivered to Parent, upon demand, and any holders of
Certificates who have not theretofore complied with this Section 1.07 shall
thereafter look only to Parent for payment of their claim for Merger
Consideration and any dividends or distributions with respect to Parent Common
Stock.
SECTION 1.08. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
SECTION 1.09. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration and distributions, if any, pursuant to Section 1.07(c)
delivered upon the surrender for exchange of Shares in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Shares, and there shall be no further registration of
transfers on the records of the Surviving Corporation of Shares which were
outstanding immediately prior to the
A-8
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
SECTION 1.10. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such Merger
Consideration and any dividends or other distributions as may be required
pursuant to this Article I; PROVIDED, HOWEVER, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
SECTION 1.11. TAX CONSEQUENCES. The parties hereto intend that the Merger
shall constitute a reorganization within the meaning of Section 368(a) of the
Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
SECTION 1.12. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent,
Merger Sub and the Company will take, and cause their affiliates to take, all
such reasonable and lawful actions as may be necessary or appropriate in order
to effectuate the Merger and the other transactions contemplated by this
Agreement in accordance with this Agreement as promptly as possible. If, at any
time after the Effective Time, any such further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub, the
officers and directors of the Company and Merger Sub immediately prior to the
Effective Time are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
SECTION 2.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) Each of
the Company and its "significant subsidiaries," as defined in Regulation S-X of
the federal securities laws ("Regulation S-X") (substituting for this purpose a
5% threshold for the 10% threshold appearing therein; the "Company Significant
Subsidiaries") is an entity duly organized, validly existing and (to the extent
the concept of good standing exists in the applicable jurisdiction) in good
standing under the laws of the jurisdiction of its organization and has the
requisite corporate or other power and authority necessary to own, lease or
operate the properties it owns, leases or operates and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power or authority would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) Each of the Company and each Company Significant Subsidiary is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business activities makes such
qualification or licensing necessary, except where such failures to be so duly
qualified or licensed and in good standing would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. A true and
complete list of all of the Company's "significant" subsidiaries, as defined in
Regulation S-X, is included as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 2000 (the "Company 2000 Form 10-K"). A
list of all subsidiaries of the Company together with the jurisdiction of
organization of each such subsidiary and the percentage of
A-9
each such subsidiary's outstanding capital stock owned by the Company or another
subsidiary of the Company is contained in Section 2.01 of the written disclosure
schedule previously delivered by the Company to Parent (the "Company Disclosure
Schedule").
(c) Except as set forth in Section 2.01 of the Company Disclosure Schedule
or the Company SEC Documents, neither the Company nor any of its subsidiaries
directly or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity (other than its wholly owned subsidiaries) (i) with
respect to which interest the Company or a subsidiary has invested (and
currently owns) or is required to invest $1,000,000 or more, or (ii) which is a
publicly-traded entity unless such interest is held for investment by the
Company or its subsidiary and, to the knowledge of the Company, comprises less
than five percent of the outstanding stock of such entity.
SECTION 2.02. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company has
heretofore made available to Parent a complete and correct copy of its Restated
Certificate of Incorporation and By-laws as amended to date (the "Company
Charter Documents"), and will make available to Parent, as promptly as
practicable, the Certificate of Incorporation and By-laws (or equivalent
organizational documents) of each of the Company Significant Subsidiaries (the
"Subsidiary Documents") reasonably requested by Parent. All such Company Charter
Documents and Subsidiary Documents are in full force and effect, except in the
case of Subsidiary Documents where the failure to be in full force and effect
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect. Except as set forth in Section 2.02 of the Company
Disclosure Schedule or as would not reasonably be expected materially to
interfere with its operations, neither the Company nor any of the Company
Significant Subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or By-laws or equivalent organizational documents.
SECTION 2.03. CAPITALIZATION. (a) The authorized capital stock of the
Company consists of 400,000,000 shares of Company Common Stock and 20,000,000
shares of preferred stock, par value $.01 per share (the "Company Preferred
Stock"). As of July 23, 2001, (i) 37,925,131 shares of Company Common Stock were
issued and outstanding, all of which are validly issued, fully paid and
nonassessable (excluding treasury shares which are issued but not outstanding,
all of which are not entitled to vote), and none of which has been issued in
violation of preemptive or similar rights, (ii) no shares of Company Common
Stock were held by subsidiaries of the Company, (iii) 7,549,833 shares of
Company Common Stock were reserved for existing grants and 22,230 shares of
Company Common Stock were reserved for future grants pursuant to the Company
Stock Option Plans, and (iv) 11,093,248 shares of Company Common Stock were
reserved for issuance upon conversion of the Company's 5.75% convertible
subordinated notes due 2006 (the "Company Convertible Notes"). There are no
outstanding shares of Company Preferred Stock. Except as set forth in
Section 2.03 of the Company Disclosure Schedule, no change in such
capitalization has occurred since July 23, 2001 except for changes resulting
from the exercise or termination of Company Stock Options which were outstanding
and exercisable as of July 23, 2001 (or were outstanding as of July 23, 2001 and
became exercisable in accordance with their terms thereafter) or from the
conversion of Company Convertible Notes that were outstanding as of July 23,
2001.
Except as set forth in Section 2.01, this Section 2.03 or Section 2.11 or in
Section 2.03 or Section 2.11 of the Company Disclosure Schedule or the Company
SEC Documents and except for the Rights and this Agreement, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character, including any stock purchase plan, binding on the Company or any
of its subsidiaries relating to the issued or unissued capital stock of the
Company or any of its subsidiaries or obligating the Company or any of its
subsidiaries to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any of its subsidiaries. All shares of Company
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments
A-10
pursuant to which they are issuable, shall be duly authorized, validly issued,
fully-paid and nonassessable and will not be issued in violation of preemptive
or similar rights.
(b) Except as set forth in Section 2.03 of the Company Disclosure Schedule
or the reports, schedules, forms, statements, registration statements, proxy
statements and other documents filed by the Company with the Securities and
Exchange Commission ("SEC") since December 31, 2000 and prior to the date of
this Agreement, including those incorporated by reference and not superseded by
other Company SEC Documents (the "Company SEC Documents"), there are no
obligations, contingent or otherwise, of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any shares of the Company Common
Stock or the capital stock of any subsidiary. Except as set forth in
Section 2.03 of the Company Disclosure Schedule or the Company SEC Documents,
there are no obligations, contingent or otherwise, of the Company or any of its
subsidiaries to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such subsidiary or any other entity
other than guarantees of bank obligations of subsidiaries and intercompany book
entry transactions, in either case entered into in the ordinary course of
business. Except as set forth in Section 2.01 or 2.03 of the Company Disclosure
Schedule, (i) all of the outstanding shares of capital stock (other than
directors' qualifying shares) of each of the Company's subsidiaries are duly
authorized, validly issued, fully-paid and nonassessable, and (ii) all such
shares (other than directors' qualifying shares and a DE MINIMIS number of
shares owned by employees of such subsidiaries) are owned by the Company or
another subsidiary, free and clear of all security interests, liens, claims,
pledges, agreements, limitations in the Company's voting rights, charges or
other encumbrances of any nature whatsoever.
SECTION 2.04. AUTHORITY RELATIVE TO THIS AGREEMENT. (a) The Company has
all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby subject to the requisite approval of the
Company's stockholders in accordance with the DGCL. The execution and delivery
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than the requisite approval by the Company's
stockholders in accordance with the DGCL and the Company Charter Documents and
the filings and recording of appropriate merger documents as required by the
DGCL).
(b) As of the date hereof, the Board of Directors of the Company has
unanimously (i) determined that it is advisable and in the best interest of the
Company's stockholders for the Company to enter into this Agreement and to
consummate the Merger upon the terms and subject to the conditions of this
Agreement, (ii) approved this Agreement in accordance with the applicable
provisions of the DGCL, and (iii) recommended the approval of this Agreement by
holders of the Company Common Stock and directed that this Agreement be
submitted for consideration by the Company's stockholders at a meeting of the
stockholders of the Company to consider the Merger Agreement (the "Company
Stockholders Meeting"). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Parent and Merger Sub of this Agreement, constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally or to general principles of equity.
SECTION 2.05. MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND
CONSENTS. (a) Except as set forth in Section 2.05(a) of the Company Disclosure
Schedule, the Company has filed or incorporated by reference as an exhibit to
the Company SEC Documents all agreements, contracts, instruments, indentures,
mortgages, security agreements, guaranties and other documents required to be
filed as
A-11
exhibits pursuant to Items 601(b)(4) and 601(b)(10) of Regulation S-K of the
federal securities laws ("Regulation S-K") (without regard to the exclusion set
forth in Item 601(b)(4)(iii)(A)).
(b) Except as set forth in Section 2.05(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company will not, (i) conflict with
or violate the Company Charter Documents, (ii) assuming compliance with the
matters referred to in Section 2.05(c), conflict with or violate the Subsidiary
Documents or any law, rule, regulation, order, judgment or decree applicable to
the Company or any of its subsidiaries or by which its or any of their
respective properties is bound, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or impair the Company's or any of its subsidiaries' rights or
alter the rights or obligations of any third party under, or give to others any
rights of, or cause any, termination, amendment, redemption, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on
(including a right to purchase) any of the properties or assets of the Company
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
credit facility, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound, except, in the case of clause (ii) or (iii), for
any such conflicts, violations, breaches, defaults or other occurrences that
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
(c) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, require the Company
or any of its subsidiaries to make or seek any consent, approval, authorization
or permit of, or filing with or notification to, any governmental,
administrative or regulatory authority, domestic or foreign (each, a
"Governmental Authority"), except (i) for applicable requirements, if any, of
the Securities Act of 1933, as amended, and the rules and regulations of the SEC
thereunder (the "Securities Act"), the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder (the "Exchange
Act"), state securities laws, the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), and the NYSE; filings and consents
under any applicable non-U.S. laws intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade
("Non-U.S. Monopoly Laws"); filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement ("Environmental, Health and Safety
Transfer Laws"); and the filing and recordation of appropriate merger or other
documents as required by the DGCL; (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or materially delay consummation of the Merger,
or otherwise prevent or materially delay the Company from performing its
material obligations under this Agreement, or would not otherwise reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
or (iii) as to which any necessary consents, approvals, authorizations, permits,
filings or notifications have heretofore been obtained or filed, as the case may
be, by the Company.
SECTION 2.06. COMPLIANCE; PERMITS. (a) Except as set forth in
Section 2.06(a) of the Company Disclosure Schedule or the Company SEC Documents,
neither the Company nor any of its subsidiaries is in default or violation of,
(i) any law, rule, regulation, order, judgment or decree applicable to the
Company or any of its subsidiaries or by which its or any of their respective
properties is bound or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
is bound, except for any such conflicts, defaults or violations which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
A-12
No investigation by any Governmental Authority with respect to the Company
or any of its subsidiaries is pending or, to the Company's knowledge,
threatened, except as disclosed in the Company SEC Documents, except for
investigations which, if they resulted in action being taken against the Company
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) Except as set forth in Section 2.06(b) of the Company Disclosure
Schedule or the Company SEC Documents, the Company and its subsidiaries hold all
permits, licenses, easements, variances, exemptions, consents, certificates,
orders and approvals from governmental authorities which are material to the
operation of the business of the Company and its subsidiaries, taken as a whole,
as it is now being conducted (collectively, the "Company Permits"), except where
the failure to hold such Company Permits would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. The Company
and its subsidiaries are in compliance with the terms of the Company Permits,
except as described in the Company SEC Documents or where the failure to so
comply would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
SECTION 2.07. SEC FILINGS; FINANCIAL STATEMENTS; PROJECTIONS. (a) The
Company has filed all reports, schedules, forms, statements and other documents
(including all exhibits thereto) required to be filed by it with the SEC since
December 31, 1998 (the "Post-1998 Company SEC Documents"). Except as set forth
in Section 2.07 of the Company Disclosure Schedule or the Company SEC Documents,
the Post-1998 SEC Documents (i) were prepared in all material respects in
accordance with the applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of the Company's subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Post-1998 Company SEC Documents was
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or in the Post-1998
Company SEC Documents), and fairly presents in all material respects the
consolidated financial position of the Company and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements (i) should be read in conjunction with the Company's consolidated
financial statements contained in the Company 2000 Form 10-K, and (ii) were or
are subject to normal and recurring year-end adjustments which were not or are
not expected to be material in amount. The fact that the Company amends any of
the Post-1998 Company SEC Documents in response to comments received from the
staff of the SEC upon its review of the Joint Proxy Statement/Prospectus shall
not, in and of itself and without regard to the substance of any such amendment,
be deemed prima facie or conclusive evidence that the representation and
warranty contained in this Section 2.07(b) is not true and correct.
A-13
(c) The projections of the Company's revenues and net income for the
calendar quarters ended September 30, 2001 and December 31, 2001 previously
delivered to Parent were prepared in good faith and, to the Company's knowledge,
are reasonable as of the date hereof except as they may be affected by
conditions in the semiconductor industry generally or the discrete electronics
component industry generally, the effects of the announcement of the
transactions contemplated by this Agreement (including, without limitation,
personnel changes, and any disruption of customer, supplier or employee
relationships), or changes in economic, regulatory or political conditions
generally or in any region in the world.
SECTION 2.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 2.08 or Section 4.01 of the Company Disclosure Schedule or the Company
SEC Documents or as contemplated by this Agreement, since December 31, 2000, the
Company has conducted its business in the ordinary course and there has not
occurred: (i) any changes, effects or circumstances constituting, or which would
reasonably be expected to constitute, individually or in the aggregate, a
Material Adverse Effect; (ii) any amendments or changes in the Company Charter
Documents; (iii) any material changes to any Company Employee Plans or other
employee benefit arrangements or agreements, including the establishment of any
new such plans, arrangements or agreements or the extension of coverage under
any such plans, arrangements or agreements to new groups of employees or other
individuals, except that with respect to Non-U.S. Plans (as defined in
Section 2.11(a)), any such material changes that the Company in good faith is
not able to list on the Company Disclosure Schedule by the date of this
Agreement may be included on the Employee Benefits Supplemental Disclosure
Schedule (as defined in Section 2.11(a)); (iv) any damage to, destruction or
loss of any asset of the Company (not covered by insurance) that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; (v) any material change by the Company in its accounting
methods, principles or practices (other than as required by changes in GAAP
subsequent to the date hereof); or (vi) other than in the ordinary course of
business, any sale of a material amount of assets of the Company.
SECTION 2.09. NO UNDISCLOSED LIABILITIES. Except as set forth in
Section 2.09 or 4.01 of the Company Disclosure Schedule or the Company SEC
Documents, neither the Company nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise), except liabilities (a) in the
aggregate adequately provided for in the Company's unaudited balance sheet
(including any related notes thereto) as of June 30, 2001 included in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 (the
"2001 Company Balance Sheet"), (b) incurred in the ordinary course of business
and not required under GAAP to be reflected on the 2001 Company Balance Sheet,
(c) incurred since June 30, 2001 in the ordinary course of business,
(d) incurred in connection with this Agreement or the Merger or the other
transactions contemplated hereby, or (e) which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 2.10. ABSENCE OF LITIGATION. Except as set forth in Section 2.10
and Section 2.19(c) of the Company Disclosure Schedule or the Company SEC
Documents or arising out of the transactions contemplated by this Agreement,
there are no claims, actions, suits, proceedings or investigations pending or,
to the knowledge of the Company, threatened against the Company or any of its
subsidiaries, or any properties or assets of the Company or any of its
subsidiaries, before any court, arbitrator or Governmental Authority, that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 2.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) "Company
Employee Plans" shall mean all "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), all "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA), all similar plans maintained outside the United States and not required
by applicable law (any non-U.S., Company Employee Plan not required by
applicable law, a "Non-U.S. Plan") and all other bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, programs or
A-14
arrangements (including those which contain change of control provisions or
pending change of control provisions), and any employment, executive
compensation or severance agreements (including those which contain change of
control provisions or pending change of control provisions), whether maintained
in the U.S. or a Non-U.S. Plan, written or otherwise, as amended, modified or
supplemented, maintained or contributed to by the Company or a subsidiary of the
Company for the benefit of, or relating to, any former or current employee,
officer or director (or any of their beneficiaries) of the Company or a
subsidiary of the Company. The term "Affiliate Plan" shall mean any other such
plan, program or arrangement with respect to which the Company or any subsidiary
of the Company has or would reasonably be expected to have any material
liability, either as a member of a controlled group of corporations or trades or
businesses, as defined under section 414 of the Code and comparable provisions
of ERISA, or by contractual arrangement. Section 2.11(a) of the Company
Disclosure Schedule lists each material Company Employee Plan and each material
Affiliate Plan; PROVIDED, HOWEVER, that the Company may omit from the Company
Disclosure Schedule and instead include in an employee benefits supplement to
the Company Disclosure Schedule (the "Employee Benefits Supplemental Disclosure
Schedule") any material Non-U.S. Plan that the Company in good faith is not able
to list on Section 2.11 of the Company Disclosure Schedule by the date of this
Agreement. The Employee Benefits Supplemental Disclosure Schedule shall be
delivered to Parent as promptly as practicable but in no event later than
30 days after the date hereof. With respect to each Company Employee Plan or
Affiliate Plan listed in Section 2.11(a) of the Company Disclosure Schedule, the
Company has provided or made available to Parent, and, with respect to each
Company Employee Plan or Affiliate Plan listed in the Employee Benefits
Supplemental Disclosure Schedule, the Company will provide or make available at
such time as the Employee Benefits Supplemental Disclosure Schedule is provided
to Parent: (i) each such written Company Employee Plan (and, with respect to
Company Employee Plans that provide equity-based benefits or that cover 50 or
more participants, a written description in English of any Company Employee Plan
which is not written, provided however, that such written descriptions may be
included on the Employee Benefits Supplemental Disclosure Schedule to the extent
that the Company in good faith is not able to provide such descriptions by the
date hereof) and any related trust agreement, material insurance or other
contract (including a policy), if any, the most recently prepared summary plan
description, if any, summary of material modifications the substance of which is
not already incorporated in the corresponding summary plan description or
Company Employee Plan document, if any, and communications distributed to one or
more plan participants that would reasonably be expected to materially modify
the terms of any Company Employee Plan or summary plan description, whether
through information actually conveyed in the communication or through a failure
to convey information; (ii) the most recent annual report on Form 5500 series
(or equivalent filing with respect to Non-U.S. Plans), with accompanying
schedules and attachments, filed with respect to each Company Employee Plan;
(iii) the most recent actuarial valuation, if any, for each Company Employee
Plan and each material Affiliate Plan subject to Title IV of ERISA and each
material Non-U.S. Plan, to the extent applicable; and (iv) the most recent
favorable determination letters issued for each Company Employee Plan and
related trust which is intended to be qualified under Section 401(a) of the Code
(and, if an application for such determination is pending, a copy of the
application for such determination).
(b) Except as set forth in Section 2.11(b) of the Company Disclosure
Schedule or, with respect to Non-U.S. Plans, the Employee Benefits Supplemental
Disclosure Schedule, or as disclosed in the Post-1998 Company SEC Documents
(i) none of the Company Employee Plans or Affiliate Plans promises or provides
medical or other welfare benefits to any director, officer, employee or
consultant (or any of their beneficiaries) after their service with the Company
or its subsidiary or affiliate terminates, other than as required by
Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA
(hereinafter, "COBRA"), or any similar state laws; (ii) none of the Company
Employee Plans or Affiliate Plans is a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA and no
A-15
Non-U.S. Plan is a multiemployer plan and no Company Employee Plan or Affiliate
Plan has incurred any withdrawal liability that remains unsatisfied that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; (iii) neither the Company nor any of its subsidiaries, any of
their respective executives nor, to the knowledge of the Company, any other
party in interest or disqualified person (as defined in Section 3(14) of ERISA
and Section 4975 of the Code) has engaged in a transaction with respect to any
Company Employee Plan or Affiliate Plan which would reasonably be expected to
subject the Company or any subsidiary, directly or indirectly, to a tax, penalty
or other liability for prohibited transactions under ERISA or Section 4975 of
the Code that would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect; (iv) neither the Company or any of its
subsidiaries, nor any executive of the Company or one of its subsidiaries as
fiduciary of the Company Employee Plans or to the knowledge of the Company any
other fiduciary of any Company Employee Plan has breached any of the
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
and that would reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect; (v) all Company Employee Plans, and to the knowledge
of the Company, all Affiliate Plans have been established and maintained in
accordance with their terms and have been operated in compliance in all respects
with the requirements of applicable law, including all filing requirements with
the Department of Labor except for such failure as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
(vi) each Company Employee Plan which is intended to be qualified under
Section 401(a) of the Code is the subject of a favorable determination letter
from the Internal Revenue Service (the "IRS"); (vii) all contributions required
to be made with respect to any Company Employee Plan (whether pursuant to the
terms of such plan, Section 412 of the Code, any collective bargaining
agreement, or otherwise) have been made on or before their due dates (including
any extensions thereof) except to the extent any failure to have made such a
contribution on or before its due date would not reasonably be expected to
result in a current or future liability that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect;
(viii) with respect to each Company Employee Plan and each Affiliate Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the 30-day notice requirement has been waived under the
regulations to Section 4043 of ERISA) has occurred with respect to which the
Company or one of its subsidiaries has any outstanding liability that would
reasonably be expected to have a Material Adverse Effect, and no Company action
has occurred that resulted or is reasonably likely to result in any adverse
liability for any Non-U.S. Plan that, in any case, reasonably would be expected,
individually or in the aggregate, to have a Material Adverse Effect; (ix) none
among the Company or any subsidiary thereof has incurred (or would reasonably be
expected to incur) any liability that remains unsatisfied, or reasonably expects
to incur any liability, under Title IV of ERISA with respect to either a Company
Employee Plan or an Affiliate Plan including, without limitation, with respect
to an event described in Section 4062, 4063 or 4041 of ERISA (other than
liability for premium payments to the Pension Benefit Guaranty Corporation (the
"PBGC") arising in the ordinary course) that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect; and
(x) other than routine claims for benefits made in the ordinary course of the
operation of the Company Employee Plans, there are no pending, nor to the
Company's knowledge, any threatened, claims, investigations or causes of action
with respect to any Company Employee Plan or Affiliate Plan, whether maintained
in the U.S. or a Non-U.S. Plan, whether made by a participant or beneficiary of
such a plan, a governmental agency or otherwise, against the Company or any
subsidiary of the Company, any Company director, officer or employee, any
Company Employee Plan, or Affiliate Plan or any fiduciary of a Company Employee
Plan or, to the knowledge of the Company, Affiliate Plan that, in any case,
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
(c) The Company has set forth in Section 2.11(c) of the Company Disclosure
Schedule the aggregate number of options to purchase Company Common Stock
outstanding as of the date hereof, and will provide to Parent, as soon as
practicable after the date hereof but no later than upon delivery
A-16
of the Employee Benefits Supplemental Disclosure Schedule, a true and complete
list of each current or former employee, consultant, officer or director of the
Company or any of its subsidiaries who, as of two days prior to the date such
list is delivered, which date shall be subsequent to the date of this Agreement,
holds (i) any option to purchase the Company Common Stock, together with the
number of shares of the Company Common Stock subject to such option, the
exercise price of such option (to the extent determined as of the date hereof),
whether such option is intended to qualify as an incentive stock option within
the meaning of Section 422(b) of the Code and the expiration date of such
option; (ii) any shares of Company Common Stock that, as of two days prior to
the date such list is delivered, which date shall be subsequent to the date of
this Agreement, were unvested or subject to a repurchase option, risk of
forfeiture or other condition providing that such shares may be forfeited or
repurchased by the Company upon any termination of the stockholder's employment,
directorship or other relationship with the Company or any of its subsidiaries
or which shares are subject to performance-based vesting; and (iii) any other
award or right (including share units), directly or indirectly, to receive
Company Common Stock (or any other unit of Company equity) or any amount payable
by reference to Company Common Stock (or any other unit of Company equity),
together with the number of shares of Company Common Stock (or any other unit of
Company equity) subject to such right.
(d) To the extent not already included and so labeled in Section 2.11(a) or
such other section of the Company Disclosure Schedule as is specifically
referenced in Section 2.11(d) of the Company Disclosure Schedule,
Section 2.11(d) of the Company Disclosure Schedule sets forth a true and
complete (i) list of all material outstanding agreements with any consultants
who provide services to the Company or any of its subsidiaries; (ii) list of all
material agreements with respect to the services of independent contractors or
leased employees who provide services to the Company or any of its subsidiaries,
whether or not they participate in any of the Company Employee Plans;
(iii) description of any situation in which a material portion of the workforce
of a component of the Company or its subsidiaries, whether such component is a
subsidiary, unit, work location, line of business or otherwise, is composed of
non common law employees, whether consultants, independent contractors or
otherwise, which description shall include, if applicable, representative
samples of agreements with such non common law employees; and (iv) list of all
material worker council agreements of the Company or any of its subsidiaries
with or relating to its employees.
(e) Except as set forth in Section 2.11(e) of the Company Disclosure
Schedule, with respect to each Company Employee Plan or material Affiliate Plan
that is subject to Title IV of ERISA, since the date of the most recent
actuarial report prepared by each such plan's actuary with respect to that
plan's most recently completed fiscal year, nothing has occurred that would
materially adversely affect the funding status of such Company Employee Plan
that is not attributable to a decline in the market value of the plan's assets
or an increase in the plan's liabilities in the ordinary course.
(f) Except as set forth in Section 2.11(f) of the Company Disclosure
Schedule or, with respect to Non-U.S. Plans, the Employee Benefits Supplemental
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement, either alone or in combination with another event, will not
(i) result in any payment (including, without limitation, severance, golden
parachute or bonus payments or otherwise) becoming due pursuant to any Company
Employee Plan to any current or former director, officer, employee or consultant
of the Company which either alone or in the aggregate are material, (ii) result
in any material increase in the amount of compensation or benefits payable
pursuant to any Company Employee Plan in respect of any director, officer,
employee or consultant of the Company, or (iii) accelerate the vesting or timing
of payment of any benefits or compensation payable pursuant to any Company
Employee Plan in respect of any director, officer, employee or consultant of the
Company.
(g) There are no complaints, charges or claims against the Company or any of
its subsidiaries pending or, to the knowledge of the Company, threatened to be
brought by or filed with any governmental authority based on, arising out of, in
connection with or otherwise relating to the
A-17
classification of any individual by the Company as an independent contractor or
"leased employee" (within the meaning of section 414(n) of the Code) rather than
as an employee, and the Company neither knows nor should the Company know of any
conditions under which the Company or any of its subsidiaries is reasonably
likely to incur any such liability that in each case would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
(h) The Company shall indicate on Section 2.11(h) of the Company Disclosure
Schedule (i) with respect to each participant in any executive severance plan or
arrangement, whether such employee has entered into an agreement or a provision
of an agreement prohibiting or restricting such employee from accepting
employment or otherwise engaging in activity that is in competition with the
business of the Company or its subsidiaries (other than with respect to the use
of confidential information or trade secrets) after the termination of such
individual's employment with the Company (a "Non-Competition Agreement"); and
(ii) a description of those classes of employees that are required to execute a
Non-Competition Agreement.
(i) Section 2.11(i) of the Company Disclosure Schedule sets forth the
maximum amount of payments (including any gross-up benefits referred to in the
following sentence), for which the Company is reasonably expected to be liable,
as a result of the transactions contemplated by this Agreement, under (i) any
employment, severance or other agreements with consultants to or employees or
executives of the Company, (ii) any severance plans or agreements (or sections
of other plans or agreements that provide for severance payments) with respect
to executives of the Company, (iii) any other Company Employee Plan, including,
without limitation, cash out of stock options and other equity-based
compensation, accelerated or enhanced payments for deferred compensation or
retirement plans and payment of performance bonuses, assuming, for purposes of
this sentence, the termination following the Merger of such consultant, employee
or executive; it being understood that the amounts set forth on
Section 2.11(i) of the Company Disclosure Schedule only include amounts that are
payable, increased or otherwise enhanced as a result of the transactions
contemplated by this Agreement. Other than as set forth on Section 2.11(i) of
the Company Disclosure Schedule, no employee is entitled to any benefits that
include a gross-up with respect to excise taxes pursuant to Section 280G of the
Code.
SECTION 2.12. EMPLOYMENT AND LABOR MATTERS. Except as set forth in
Section 2.11(b) or Section 2.12 of the Company Disclosure Schedule or the
Company SEC Documents:
(a) Each of the Company and its subsidiaries is in compliance, and has not
failed to be in compliance as a result of which it would reasonably be expected
now or in the future to have liability, with all applicable U.S. and non-U.S.
laws, agreements and contracts relating to employment practices, terms and
conditions of employment, and the employment of former, current, and prospective
employees, independent contractors and "leased employees" (within the meaning of
Section 414(n) of the Code) of the Company or any of its subsidiaries, including
all such U.S. and non-U.S. laws, agreements and contracts relating to wages,
hours, collective bargaining, employment discrimination, immigration,
disability, civil rights, human rights, fair labor standards, occupational
safety and health, workers' compensation, pay equity, wrongful discharge and
violation of the potential rights of such former, current, and prospective
employees, independent contractors and leased employees, and has timely prepared
and filed all appropriate forms (including Immigration and Naturalization
Service Form I-9) required by any relevant Governmental Authority, except where
the failure to be or have been in compliance would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any of its subsidiaries is a party to any
material U.S. or non-U.S. collective bargaining agreement or other labor union
contract applicable to persons employed by the Company or its subsidiaries, nor,
to the knowledge of the Company, are there any activities or proceedings of any
labor union to organize any employees of the Company or any of its subsidiaries.
A-18
(c) Neither the Company nor any of its subsidiaries is in breach of any U.S.
or non-U.S. collective bargaining agreement or labor union contract, or has any
knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of the Company or any of its
subsidiaries which breach, strike, slowdown, work stoppage, lockout or threat
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 2.13. REGISTRATION STATEMENT; JOINT PROXY
STATEMENT/PROSPECTUS. (a) Subject to the accuracy of the representations of
Parent and Merger Sub in Section 3.13:
(i) the information supplied by the Company for inclusion in the
Registration Statement shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and
(ii) the information supplied by the Company for inclusion or incorporation
by reference in the joint proxy statement/prospectus to be sent to the
stockholders of the Company in connection with the Company Stockholders Meeting
and to the stockholders of Parent in connection with the Parent Stockholders
Meeting (the Company Stockholders Meeting and the Parent Stockholders Meeting
together being referred to as the "Stockholders Meetings"; and such joint proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Joint Proxy Statement/Prospectus") will not, on the date the Joint Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is mailed
to stockholders or at the respective times of the Stockholders Meetings, contain
any statement which, at such time and in light of the circumstances under which
it shall be made, is false or misleading with respect to any material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein not false or misleading or necessary
to correct any statement in any earlier written communication to stockholders
with respect to the solicitation of proxies for the Stockholders Meetings which
has become false or misleading.
(b) If at any time prior to the respective vote of stockholders at the
Stockholders Meetings, any event relating to the Company or any of its
respective affiliates, officers or directors is discovered by the Company which
is required to be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, the Company shall promptly
inform Parent and Merger Sub.
(c) The Joint Proxy Statement/Prospectus (to the extent it relates to
information supplied by the Company for inclusion or incorporation by reference)
shall comply in all material respects with the requirements of all applicable
laws, including the Securities Act and the Exchange Act.
(d) Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any information supplied by Parent or Merger Sub or any
third party that is contained or incorporated by reference in, or furnished in
connection with the preparation of, the Joint Proxy Statement/Prospectus.
SECTION 2.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement or as set forth in Section 2.14 of the Company Disclosure Schedule or
the Company SEC Documents, there is no agreement, judgment, injunction, order or
decree binding upon the Company or any of its subsidiaries which has or would
reasonably be expected to have the effect of prohibiting or restricting the
conduct of business by the Company or any of its subsidiaries as currently
conducted by the Company or such subsidiary, or restricting any transactions
(including payment of dividends and distributions) between the Company and its
subsidiaries, except for any prohibition or restriction as would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
SECTION 2.15. TITLE TO PROPERTY. Except as set forth in Sections 2.15 and
2.19(b) of the Company Disclosure Schedule or the Company SEC Documents, each of
the Company and its subsidiaries has marketable title to all of its owned real
properties and other owned assets, free and
A-19
clear of all liens, charges and encumbrances, except for (i) statutory liens for
taxes that are not yet due and payable or are being contested in good faith,
(ii) statutory or common law liens in favor of carriers, warehousemen, mechanics
and materialmen, to secure claims for labor, materials or supplies and other
like liens and (iii) such liens or other imperfections of title, if any, as do
not materially interfere with the present use of the assets affected thereby or
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, and except for liens which secure indebtedness
reflected in the 2001 Company Balance Sheet; and, to the knowledge of the
Company, all leases pursuant to which the Company or any of its subsidiaries
lease from others material amounts of real or personal property are in good
standing, valid and effective in accordance with their respective terms, and
there is not, to the knowledge of the Company, under any of such leases, any
existing material default or event of default (or event which with notice or
lapse of time, or both, would constitute a material default or event of
default), except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 2.16. TAXES. Except as set forth in Section 2.16 of the Company
Disclosure Schedule or as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect:
(a) The Company and each of its subsidiaries has timely and accurately
filed, or caused to be timely and accurately filed, all Tax Returns required to
be filed by it, and has paid, collected or withheld, or caused to be paid,
collected or withheld, all amounts of Taxes required to be paid, collected or
withheld, other than such Taxes for which adequate reserves in the 2001 Company
Balance Sheet have been established or which are being contested in good faith.
There are no claims or assessments pending against the Company or any of its
subsidiaries for any alleged deficiency in any Tax, there are no pending or, to
the knowledge of the Company, threatened audits or investigations for or
relating to any liability in respect of any Taxes, and the Company has not been
notified in writing of any proposed Tax claims or assessments against the
Company or any of its subsidiaries (other than in each case, claims or
assessments for which adequate reserves in the 2001 Company Balance Sheet have
been established or which are being contested in good faith). Neither the
Company nor any of its subsidiaries has executed any waivers or extensions of
any applicable statute of limitations to assess any amount of Taxes. There are
no outstanding requests by the Company or any of its subsidiaries for any
extension of time within which to file any Tax Return or within which to pay any
amounts of Taxes shown to be due on any Tax Return. To the best knowledge of the
Company, there are no liens for amounts of Taxes on the assets of the Company or
any of its subsidiaries except for statutory liens for current Taxes not yet due
and payable. There are no outstanding powers of attorney enabling any party to
represent the Company or any of its subsidiaries with respect to Taxes.
Other than with respect to the Company and its subsidiaries, neither the
Company nor any of its subsidiaries is liable for Taxes of any other person, or
is currently under any contractual obligation to indemnify any person with
respect to any amounts of Taxes (except for customary agreements to indemnify
lenders or security holders in respect of Taxes and except for provisions in
agreements for the divestiture of subsidiaries, assets or business lines of the
Company or its subsidiaries that require the Company or its subsidiaries (as
applicable) to indemnify a purchaser or purchaser group for amounts of Taxes of
the Company or its subsidiaries (as applicable) in the nature of sales or
similar Taxes incurred as a consequence of any such divestiture transactions),
or is a party to any tax sharing agreement or any other agreement providing for
payments by the Company or any of its subsidiaries with respect to any amounts
of Taxes.
(b) For purposes of this Agreement, the term "Tax" shall mean any United
States federal, foreign, national, state, provincial, local or other
jurisdictional income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, estimated, alternative, or add-on minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or
A-20
charge imposed by any Governmental Authority, together with any interest or
penalty imposed thereon. The term "Tax Return" shall mean a report, return or
other information (including any attached schedules or any amendments to such
report, return or other information) required to be supplied to or filed with a
Governmental Authority with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
SECTION 2.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in
Section 2.17(a) to the Company Disclosure Schedule or in the Company SEC
Documents or as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, the operations and properties of
the Company and its subsidiaries are in compliance with the Environmental Laws,
which compliance includes the possession by the Company and its subsidiaries of
all permits and governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof.
(b) Except as set forth in Section 2.17(b) of the Company Disclosure
Schedule or the Company SEC Documents or as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, there are
no Environmental Claims, including claims based on "arranger liability," pending
or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries or, to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed.
(c) Except as set forth on Section 2.17(c) of the Company Disclosure
Schedule or in the Company SEC Documents, to the knowledge of the Company, there
are no past or present actions, circumstances, conditions, events or incidents,
including the release, emission, discharge, presence or disposal of any
Materials of Environmental Concern, that are reasonably likely to form the basis
of any Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim the
Company or any of its subsidiaries have retained or assumed, except for such
Environmental Claims that would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
(d) Except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect or as set forth in Section 2.17(d)
of the Company Disclosure Schedule or the Company SEC Documents, (i) to the
knowledge of the Company, there are no off-site locations where the Company or
any of its subsidiaries has stored, disposed or arranged for the disposal of
Materials of Environmental Concern which have been listed on the National
Priority List, CERCLIS, or state Superfund site list, and the Company and its
subsidiaries have not been notified that any of them is a potentially
responsible party at any such location; and (ii) there is no friable asbestos
containing material contained in or forming part of any building, building
component, structure or office space owned, leased or operated by the Company or
any of its subsidiaries.
(e) Except as would not reasonably be expected to have a Material Adverse
Effect, the Company is not reasonably expected to have liability for
Environmental Claims beyond the reserve recorded on the 2001 Company Balance
Sheet for environmental matters.
(f) For purposes of this Agreement:
(i) "Environmental Claim" means any claim, action, cause of action,
investigation or notice (in each case in writing or, if not in writing, to the
knowledge of the Company) by any person or entity alleging potential liability
(including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from the
presence, or release or threat of release into the environment, of any Material
of Environmental Concern at any location, whether or not owned or operated by
Parent or the Company or any of their respective subsidiaries.
A-21
(ii) "Environmental Laws" means, as they exist on the date hereof, all
applicable United States federal, state, local and non-U.S. laws, regulations,
codes and ordinances, relating to pollution or protection of human health (as
relating to the environment or the workplace) and the environment (including
ambient air, surface water, ground water, land surface or sub-surface strata),
including laws and regulations relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise relating
to the use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern, including, but not limited to Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et
seq., Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et
seq., Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.,
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. Section 651 et seq., the
Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act, 33 U.S.C.
Section 1251 et seq., each as may have been amended or supplemented, and any
applicable environmental transfer statutes or laws.
(iii) "Materials of Environmental Concern" means chemicals, pollutants,
contaminants, hazardous materials, hazardous substances and hazardous wastes,
medical waste, toxic substances, petroleum and petroleum products and
by-products, asbestos-containing materials, PCBs, and any other chemicals,
pollutants, substances or wastes, in each case regulated under any Environmental
Law.
SECTION 2.18. BROKERS. There is no investment banker, broker, finder or
other intermediary, other than Credit Suisse First Boston (the "Company
Financial Advisor"), the fees and expenses of which will be paid by the Company,
that has been retained by or is authorized to act on behalf of the Company or
any of its affiliates who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement. The Company has
heretofore furnished to Parent a complete and correct copy of all agreements or
other arrangements, whether written or oral, between the Company and the Company
Financial Advisor pursuant to which the Company would have any obligation to
such firm arising out of the transactions contemplated by this Agreement.
SECTION 2.19. INTELLECTUAL PROPERTY. (a) As used herein, the term
"Intellectual Property Assets" shall mean all worldwide intellectual property
rights, including, without limitation, patents, trademarks, service marks,
copyrights, and registrations and applications therefor, licenses, trade names,
Internet domain names, know-how, trade secrets, computer software programs and
development tools and proprietary information, technologies and processes, and
all documentation and media describing or relating to the above, in any format,
whether hard copy or machine-readable only. As used herein, "Company
Intellectual Property Assets" shall mean the Intellectual Property Assets used
or owned by the Company or any of its subsidiaries.
(b) Except as set forth in Section 2.19(b) of the Company Disclosure
Schedule or as would not reasonably be expected, individually or in the
aggregate to have a Material Adverse Effect, the Company and/or each of its
subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all of the Company Intellectual Property Assets that are used in
and are material to the business of the Company and its subsidiaries as
currently conducted, without infringing or violating the rights of others.
(c) Except as set forth in Section 2.19(c) of the Company Disclosure
Schedule or as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, no claims (i) are currently
pending or, to the knowledge of the Company, are threatened by any person with
respect to the Company Intellectual Property Assets, or (ii) are, to the
knowledge of the Company, currently pending or threatened by any person with
respect to the Intellectual Property Assets of a third party (the "Third Party
Intellectual Property Assets") to the extent arising out of any use,
reproduction or distribution of, or of products or methods covered by, such
Third Party Intellectual Property Assets by or through the Company or any of its
subsidiaries.
A-22
(d) Except as set forth in Section 2.19(d) of the Company Disclosure
Schedule, to the Company's knowledge, there are no valid grounds for any bona
fide claim to the effect that the manufacture, offer for sale, sale, licensing
or use of any product, system or method either (i) now used, offered for sale,
sold or licensed or, (ii) to the Company's knowledge as of the date hereof,
scheduled for commercialization prior to the first anniversary of the date
hereof, in each case by or for the Company or any of its subsidiaries, infringes
on any Third Party Intellectual Property Assets.
(e) Section 2.19(e) of the Company Disclosure Schedule sets forth a list of
(i) to the Company's knowledge, all patents and patent applications owned by the
Company and/or each of its subsidiaries worldwide; (ii) to the Company's
knowledge, all trademark and service mark registrations and all trademark and
service mark applications; (iii) all material common law trademarks, material
trade dress and material slogans; (iv) to the Company's knowledge, all material
trade names owned by the Company and/or each of its subsidiaries worldwide;
(v) to the Company's knowledge, all copyright registrations and copyright
applications owned by the Company and/or each of its subsidiaries worldwide;
(vi) to the Company's knowledge, all Internet domain name registrations owned by
the Company and/or its subsidiaries worldwide; and (vii) to the Company's
knowledge, all material licenses owned by the Company and/or each of its
subsidiaries in which the Company and/or each of its subsidiaries is (A) a
licensor with respect to any of the patents, trademarks, service marks, trade
names, Internet domain names, or copyrights listed in Section 2.19(e) of the
Company Disclosure Schedule which are material to the Company or (B) a licensee
of any other person's patents, trade names, trademarks, service marks or
copyrights material to the Company except for any licenses of software programs
that are commercially available "off the shelf." Except as set forth in
Section 2.19(e)(viii) of the Company Disclosure Schedule, the Company and/or
each of its subsidiaries has made all necessary filings and recordations to
protect and maintain its interest in the patents, patent applications, trademark
and service mark registrations, trademark and service mark applications,
Internet domain names, copyright registrations and copyright applications and
licenses set forth in Section 2.19(e) of the Company Disclosure Schedule, except
where the failure to so protect or maintain would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. The Company
may supplement Section 2.19(e) of the Company Disclosure Schedule during the
30 days following the date of this Agreement, PROVIDED that there shall not be
omitted from Section 2.19(e) of the Company Disclosure Schedule any Company
Intellectual Property Assets, where the failure of the Company to own any such
assets would, individually or in the aggregate, have a Material Adverse Effect.
(f) To the knowledge of the Company, except as set forth in
Section 2.19(e)(viii) or 2.19(f) of the Company Disclosure Schedule or the
Company SEC Documents: (i) each patent, trademark or service mark registration
and copyright registration of the Company and/or each of its subsidiaries is
valid and subsisting and (ii) each material license of the Company Intellectual
Property Assets listed on Section 2.19(e) of the Company Disclosure Schedule is
valid, subsisting and enforceable.
(g) Except as set forth in Section 2.19(g) of the Company Disclosure
Schedule, to the Company's knowledge, there is no unauthorized use, infringement
or misappropriation of any of the Company's Intellectual Property Assets by any
third party, including any employee, former employee, independent contractor or
consultant of the Company or any of its subsidiaries.
SECTION 2.20. INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 2.20 of the Company Disclosure Schedule or the Company SEC Documents or
for events as to which the amounts involved do not, in the aggregate, exceed
$200,000, since the Company's proxy statement dated March 30, 2001, no event has
occurred that would be required to be reported as a Certain Relationship and
Related Transaction pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
SECTION 2.21. INSURANCE. Except as set forth in Section 2.21 of the
Company Disclosure Schedule or the Company SEC Documents, all material fire and
casualty, general liability, business interruption, product liability and
sprinkler and water damage insurance policies maintained by the
A-23
Company or any of its subsidiaries are with reputable insurance carriers and, in
character and amount, insure against such risks as are customarily insured
against by companies in the same or similar businesses and having a similar size
and scope of operations as the Company, except as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect. A
list of all such policies will be provided to Parent as a supplement to the
Company Disclosure Schedule as soon as practicable, but in no event later than
thirty (30) days after the date hereof.
SECTION 2.22. PRODUCTS; PRODUCT LIABILITY AND RECALLS. (a) As of the date
of this Agreement, the Company has a proven process of wafer fab for a
200 million cell trench power MOSFET and has delivered the same to customers for
sampling.
(b) Except as set forth in Section 2.22(b) of the Company Disclosure
Schedule or the Company SEC Documents, to the Company's knowledge, there is no
claim, pending or threatened, against the Company or any of its subsidiaries for
injury to person or property of employees or any third parties suffered as a
result of the sale of any product or performance of any service by the Company
or any of its subsidiaries, including claims arising out of the defective or
unsafe nature of its products or services, which would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(c) Except as set forth in Section 2.22(c) of the Company Disclosure
Schedule or the Company SEC Documents, there is no pending or, to the knowledge
of the Company, threatened recall or investigation of any product sold by the
Company, which recall or investigation would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(d) All of the test results or other information submitted in the past five
years by the Company to any Governmental Authority or independent testing agency
for the rating or certification of any product or facility were, to the
knowledge of the Company at the time of such submission, true and correct in all
material respects.
SECTION 2.23. OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has been advised by the Company Financial Advisor to the effect that in
its opinion, as of the date of such opinion, which date shall be within 2
business days of the date of this Agreement, the Exchange Ratio is fair to the
holders of Shares from a financial point of view.
SECTION 2.24. TAX TREATMENT. The Company has not taken or agreed to take
any action or failed to take any action, nor is the Company aware of any facts
or circumstances, that would prevent the Merger from qualifying as a
reorganization within the meaning of section 368(a) of the Code.
SECTION 2.25. SUPPLEMENTS TO THE COMPANY DISCLOSURE SCHEDULE. No
disclosure which will be made on any supplements to the Company Disclosure
Schedule will be of a matter which would be reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect.
A-24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) Each of
Parent and Merger Sub is an entity duly organized, validly existing and (to the
extent the concept of good standing exists in the applicable jurisdiction) in
good standing under the laws of the jurisdiction of its organization and has the
requisite corporate or other power and authority necessary to own, lease or
operate the properties it owns, leases or operates and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power or authority would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Each of Parent and Merger Sub is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) Each "significant subsidiary," as defined in Regulation S-X, of Parent
(substituting for this purpose a 5% threshold for the 10% threshold appearing
therein; the "Parent Significant Subsidiaries") is an entity duly organized,
validly existing and (to the extent the concept of good standing exists in the
applicable jurisdiction) in good standing under the laws of the jurisdiction of
its organization, and has the requisite corporate or other power and authority
necessary to own, lease or operate the properties it owns, leases or operates
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
or authority would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect. Each Parent Significant Subsidiary is an
entity duly qualified or licensed as a foreign corporation to do business and is
in good standing in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business activities makes
such qualification or licensing necessary, except where such failure to be so
duly qualified or licensed and in good standing would not reasonably be expected
to have a Material Adverse Effect. Except as set forth in Section 3.01 of the
written disclosure schedule previously delivered by Parent to the Company (the
"Parent Disclosure Schedule"), all of Parent's significant subsidiaries and
their respective jurisdictions of organization are included in the subsidiary
list contained in Parent's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 (the "Parent 2000 Form 10-K").
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BY-LAWS. Parent and Merger
Sub have heretofore made available to the Company a complete and correct copy of
each of its Restated Certificate of Incorporation and By-laws as amended to date
(the "Parent Charter Documents"), and will make available to the Company, as
promptly as practicable, the Certificate of Incorporation and By-laws (or
equivalent organizational documents) of each Parent Significant Subsidiary (the
"Parent Subsidiary Documents") reasonably requested by the Company. All such
Parent Charter Documents and Parent Subsidiary Documents are in full force and
effect, except in the case of Parent Subsidiary Documents where the failure to
be in full force and effect would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. Except as would not reasonably
be expected materially to interfere with its operations, neither Parent, Merger
Sub nor any Parent Significant Subsidiary is in violation of any of the
provisions of its Certificate of Incorporation or By-laws or equivalent
organizational documents.
SECTION 3.03. CAPITALIZATION. (a) The authorized capital stock of Parent
consists of 150,000,000 shares of Parent Common Stock, 20,000,000 shares of
Parent's Class B convertible common stock, par value $0.10 per share (the
"Parent Class B Stock") and 1,000,000 shares of preferred stock, par value $1.00
per share ("Parent Preferred Stock"). As of July 27, 2001 (i) 122,432,672 shares
of Parent Common Stock were issued and outstanding, all of which are duly
authorized, validly issued,
A-25
fully paid and non-assessable, and none of which have been issued in violation
of preemptive or similar rights, (ii) 15,506,634 shares of Parent Class B Stock
were issued and outstanding, all of which are duly authorized, validly issued,
fully paid and non-assessable, and none of which have been issued in violation
of preemptive or similar rights, (iii) no shares of Parent Preferred Stock were
issued and outstanding; (iv) 5,139,543 shares of Parent Common Stock were
issuable upon conversion of the outstanding shares of Parent Class B Common
Stock; (v) 9,717,724 shares of Parent Common Stock were issuable upon conversion
of Parent's Liquid Yield Option Notes (LYONs); and (v) shares of Parent Common
Stock were issuable upon exercise of stock options issued under Parent's stock
option plans.
(b) Except (i) as set forth in Section 3.03(a), (ii) for changes since
July 27, 2001 resulting from the exercise of stock options, (iii) for securities
of Parent or its subsidiaries convertible into or exchangeable for shares of
capital stock or voting securities of Parent set forth in the Parent SEC
Documents and the conversion or exchange thereof, (iv) for other rights to
acquire immaterial (individually or in the aggregate) amounts of Parent Common
Stock and changes resulting from the exercise thereof, (v) for changes resulting
from the grant of stock based compensation to directors or employees or
(vi) for changes resulting from the issuance of stock or other securities in
connection with a merger or other acquisition or business combination, an
underwritten public offering or an offering pursuant to Rule 144A under the
Securities Act approved by Parent's Board of Directors and undertaken in
compliance with Section 4.03(b), as applicable, there are no outstanding
(x) shares of capital stock or voting securities of Parent, (y) securities of
Parent convertible into or exchangeable for shares of capital stock or voting
securities of Parent or (z) options, warrants or other rights agreements,
arrangements or commitments of any character, including any stock purchase plan,
binding on Parent, to acquire from Parent or other obligations of Parent to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent. Except as set
forth in the Parent SEC Documents (as defined in Section 3.06(a)), there are no
outstanding obligations, contingent or otherwise, of Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of the Parent Common
Stock or the capital stock of any subsidiary.
(c) The Parent Common Stock to be delivered as Merger Consideration has been
duly authorized and, when issued and delivered in accordance with the terms of
this Agreement, will have been validly issued and will be fully paid and
nonassessable, and the issuance thereof is not subject to any preemptive or
other similar right.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. (a) Parent and Merger
Sub have all necessary corporate power and authority to execute and deliver this
Agreement and to perform their obligations hereunder and to consummate the
transactions contemplated hereby, subject to the approval of the Parent
Stockholders Meeting Proposals. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate the transactions so contemplated (other than the approval of the
Parent Stockholders Meeting Proposals by a majority of the outstanding voting
power of Parent in accordance with the DGCL, the Parent Charter Documents and
the rules of the NYSE). This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company of this Agreement, constitutes a legal,
valid and binding obligation of each of Parent and Merger Sub enforceable
against each of them in accordance with its terms, subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally or to general
principles of equity.
(b) At a meeting duly called and held, or by written consent in lieu of
meeting, the respective Boards of Directors of Parent and Merger Sub have
(i) determined that this Agreement, the Merger and the other transactions
contemplated hereby are fair to and in the best interests of Parent, Merger Sub
and Parent's stockholders, (ii) approved this Agreement and the transactions
contemplated hereby,
A-26
(iii) approved the Parent Stockholder Meeting Proposals and (iv) recommended
approval of the Parent Stockholder Meeting Proposals by the stockholders of
Parent at the Parent Stockholders Meeting.
SECTION 3.05. MATERIAL CONTRACTS; NO CONFLICTS; REQUIRED FILINGS AND
CONSENTS. (a) Except as set forth in Section 3.05(a) of the Parent Disclosure
Schedule, the Parent has filed or incorporated by reference as an exhibit to the
Parent SEC Documents all agreements, contracts, instruments, indentures,
mortgages, security agreements, guaranties and other documents required to be
filed as exhibits pursuant to Items 601(b)(4) and 601(b)(10) of Regulation S-K
(without regard to the exclusion set forth in Item 601(b)(4)(iii)(A)).
(b) The execution and delivery of this Agreement by Parent and Merger Sub do
not, and the performance of this Agreement by Parent and Merger Sub will not
(i) conflict with or violate the Parent Charter Documents, (ii) assuming
compliance with the matters referred to in Section 3.05(c), conflict with or
violate the Parent Subsidiary Documents or any law, rule, regulation, order,
judgment or decree applicable to Parent or any of its subsidiaries or by which
its or any of their respective properties is bound, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or impair Parent's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of, or cause any, termination, amendment,
redemption, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on (including a right to purchase) any of the properties or
assets of Parent or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, credit facility, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or any of
its subsidiaries is a party or by which Parent or any of its subsidiaries or its
or any of their respective properties is bound, except, in the case of
clause (ii) or (iii), for any such conflicts, violations, breaches, defaults or
other occurrences that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by Parent and Merger Sub do
not, and the performance of this Agreement by Parent and Merger Sub will not,
require Parent, Merger Sub or any their subsidiaries to make or seek any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (i) the filing of a Certificate of Merger
with respect to the Merger with the Secretary of State of Delaware; (ii) for
applicable requirements, if any of the Securities Act, the Exchange Act, state
securities laws, the HSR Act, and the NYSE; Non-U.S. Monopoly Laws;
Environmental, Health and Safety Transfer Laws; and the filing and recordation
of appropriate merger or other documents as required by the DGCL; (iii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the Merger, or otherwise prevent or materially delay Parent and
Merger Sub from performing their respective material obligations under this
Agreement, or would not otherwise reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; or (iii) as to which any necessary
consents, approvals, authorizations, permits, filings or notifications have
heretofore been obtained or filed, as the case may be, by Parent and Merger Sub.
SECTION 3.06. COMPLIANCE; PERMITS. (a) Except as set forth in the reports,
schedules, forms, statements, registration statements, proxy statements and
other documents (the "Parent SEC Documents") filed by the Parent with the SEC
since December 31, 2000 and prior to the date of this Agreement, including those
incorporated therein by reference and not superseded by other Parent SEC
Documents, neither Parent nor any of its subsidiaries is in default or violation
of, (i) any law, rule, regulation, order, judgment or decree applicable to
Parent or any of its subsidiaries or by which its or any of their respective
properties is bound or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or any of its subsidiaries is a party or by which Parent or any
of its subsidiaries or its or any of their respective properties is bound,
except for any such conflicts, defaults or violations which would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
A-27
No investigation by any Governmental Authority with respect to Parent or any
of its subsidiaries is pending or, to Parent's knowledge, threatened, except for
investigations which, if they resulted in action being taken against Parent,
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) Except as set forth in the Parent SEC Documents, Parent and its
subsidiaries hold all permits, licenses, easements, variances, exemptions,
consents, certificates, orders and approvals from governmental authorities which
are material to the operation of the businesses of Parent and its subsidiaries,
taken as a whole, as it is now being conducted (collectively, the "Parent
Permits"), except where the failure to hold such Parent Permits would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Parent and its subsidiaries are in compliance with the terms of
the Parent Permits, except as described in the Parent SEC Documents or where the
failure to so comply would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) Parent has filed all
reports, schedules, forms, statements and other documents (including all
exhibits thereto) required to be filed by it with the SEC since December 31,
1998 (the "Post-1998 Parent SEC Documents"). Except as set forth in the Parent
SEC Documents, the Post-1998 Parent SEC Documents (i) were prepared in all
material respects in accordance with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. Except as set
forth in Section 3.07 of the Parent Disclosure Schedule, none of the Parent's
subsidiaries is required to file with the SEC periodic reports pursuant to the
Exchange Act.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Post-1998 Parent SEC Documents was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or in the
Post-1998 Parent SEC Documents), and fairly presents in all material respects,
the consolidated financial position of Parent and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements (i) should be read in conjunction with the Parent's consolidated
financial statements contained in the Parent 2000 Form 10-K, and (ii) were or
are subject to normal and recurring year end adjustments which were not or are
not expected to be material in amount. The fact that Parent amends any of the
Post-1998 Parent SEC Documents in response to comments received from the staff
of the SEC upon its review of the Joint Proxy Statement/Prospectus shall not, in
and of itself and without regard to the substance of any such amendment, be
deemed prima facie or conclusive evidence that the representation and warranty
contained in this Section 3.07(b) is not true and correct.
(c) The projections of the Parent revenues and net income for the calendar
quarters ended September 30, 2001 and December 31, 2001, previously delivered to
the Company, were prepared in good faith and, to the Parent's knowledge, are
reasonable as of the date hereof, except as they may be affected by conditions
in the semiconductor industry generally or the discrete electronics component
industry generally, the effects of the announcement of the transactions
contemplated by this Agreement (including, without limitation, personnel changes
and any disruption of customer, supplier or employee relationships), or changes
in economic, regulatory or political conditions generally or in any region in
the world.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
the Parent SEC Documents or as contemplated by this Agreement, since
December 31, 2000, Parent has conducted its business in the ordinary course and
there has not occurred: (i) any changes, effects or circumstances constituting,
or which would reasonably be expected to constitute, individually or in the
aggregate, a Material Adverse Effect; (ii) any amendments or changes in the
Parent Charter Documents, except to
A-28
increase the authorized capital of Parent; (iii) any damage to, destruction or
loss of any asset of Parent (not covered by insurance) that would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
(iv) any material change by Parent in its accounting methods, principles or
practices (other than as required by GAAP subsequent to the date hereof); or
(v) other than in the ordinary course of business, any sale of a material amount
of assets of Parent.
SECTION 3.09. NO UNDISCLOSED LIABILITIES. Except as set forth in the
Parent SEC Documents, neither Parent nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise), except liabilities
(a) in the aggregate adequately provided for in Parent's unaudited balance sheet
(including any related notes thereto) as of March 31, 2001 included in Parent's
Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2001 (the
"2001 Parent Balance Sheet"), (b) incurred in the ordinary course of business
and not required under GAAP to be reflected on the 2001 Parent Balance Sheet,
(c) incurred since March 31, 2001 in the ordinary course of business,
(d) incurred in connection with this Agreement or the Merger or the other
transactions contemplated hereby, or (e) which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 3.10. ABSENCE OF LITIGATION. Except as set forth in the Parent SEC
Documents or arising out of the transactions contemplated by this Agreement,
there are no claims, actions, suits, proceedings or investigations pending or,
to the knowledge of Parent, threatened against Parent or any of its
subsidiaries, or any properties or assets of Parent or any of its subsidiaries,
before any court, arbitrator or Governmental Authority, that would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
SECTION 3.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) "Parent
Employee Plans" shall mean all "employee pension benefit plans" (as defined in
Section 3(2) of ERISA), all "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA), all similar plans maintained outside the United States
and not required by applicable law (any non-U.S. Parent Employee Plan not
required by applicable law, a "Parent Non-U.S. Plan") and all other bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements (including those which contain change of control
provisions or pending change of control provisions), and any employment,
executive compensation or severance agreements (including those which contain
change of control provisions or pending change of control provisions), whether
maintained in the U.S. or a Parent Non-U.S. Plan, written or otherwise, as
amended, modified or supplemented, maintained or contributed to by Parent or a
subsidiary of Parent for the benefit of, or relating to, any former or current
employee, officer or director (or any of their beneficiaries) of Parent or a
subsidiary of the Parent. The term "Parent Affiliate Plan" shall mean any other
such plan, program or arrangement with respect to which Parent or any subsidiary
of Parent has or would reasonably be expected to have any material liability,
either as a member of a controlled group of corporations or trades or
businesses, as defined under section 414 of the Code and comparable provisions
of ERISA, or by contractual arrangement.
(b) Except as set forth in Section 3.11(b) of the Parent Disclosure Schedule
or as disclosed in the Post-1998 Parent SEC Documents (i) none of the Parent
Employee Plans or Parent Affiliate Plans is a "multiemployer plan" as such term
is defined in Section 3(37) of ERISA and no Parent Non-U.S. Plan is a
multiemployer plan and no Parent Employee Plan or Parent Affiliate Plan has
incurred any withdrawal liability that remains unsatisfied that would reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect; (ii) neither Parent nor any of its subsidiaries, any of their respective
executives nor, to the knowledge of Parent, any other party in interest or
disqualified person (as defined in Section 3(14) of ERISA and Section 4975 of
the Code) has engaged in a transaction with respect to any Parent Employee Plan
or Parent Affiliate Plan which would reasonably be expected to subject Parent or
any subsidiary, directly or indirectly, to a tax, penalty or other liability for
prohibited transactions under ERISA or Section 4975 of the Code that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; (iii) neither Parent or any of its subsidiaries, nor any
executive of Parent or one of its subsidiaries as fiduciary of the Parent
Employee
A-29
Plans or to the knowledge of Parent any other fiduciary of any Parent Employee
Plan has breached any of the responsibilities or obligations imposed upon
fiduciaries under Title I of ERISA and that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect; (iv) all
Parent Employee Plans, and to the knowledge of Parent, all Parent Affiliate
Plans have been established and maintained in accordance with their terms and
have been operated in compliance in all respects with the requirements of
applicable law, including all filing requirements with the Department of Labor
except for such failure as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect; (v) each Parent Employee Plan
which is intended to be qualified under Section 401(a) of the Code is the
subject of a favorable determination letter from the IRS; (vi) all contributions
required to be made with respect to any Parent Employee Plan (whether pursuant
to the terms of such plan, Section 412 of the Code, any collective bargaining
agreement, or otherwise) have been made on or before their due dates (including
any extensions thereof) except to the extent any failure to have made such a
contribution on or before its due date could not reasonably be expected to
result in a current or future liability that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect; (vii) with
respect to each Parent Employee Plan and each Parent Affiliate Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the 30-day notice requirement has been waived under the
regulations to Section 4043 of ERISA) has occurred with respect to which Parent
or one of its subsidiaries has any material outstanding liability that would
reasonably be expected to have a Material Adverse Effect, and no Parent action
has occurred that resulted or is reasonably likely to result in any adverse
liability for any Parent Non-U.S. Plan that, in any case, reasonably would be
expected, individually or in the aggregate, to have a Material Adverse Effect;
(viii) none among Parent or any subsidiary thereof has incurred (or would
reasonably be expected to incur) any liability that remains unsatisfied, or
reasonably expects to incur any liability, under Title IV of ERISA with respect
to either a Parent Employee Plan or a Parent Affiliate Plan including, without
limitation, with respect to an event described in Section 4062, 4063 or 4041 of
ERISA (other than liability for premium payments to the PBGC arising in the
ordinary course) that would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; and (ix) other than routine claims
for benefits made in the ordinary course of the operation of the Parent Employee
Plans, there are no pending, nor to Parent's knowledge, any threatened, claims,
investigations or causes of action with respect to any Parent Employee Plan or
Parent Affiliate Plan, whether maintained in the U.S. or a Parent Non-U.S. Plan,
whether made by a participant or beneficiary of such a plan, a governmental
agency or otherwise, against Parent or any subsidiary of Parent, any Parent
director, officer or employee, any Parent Employee Plan, or Parent Affiliate
Plan or any fiduciary of a Parent Employee Plan or, to the knowledge of Parent,
Parent Affiliate Plan that, in any case, would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(c) There are no complaints, charges or claims against Parent or any of its
subsidiaries pending or, to the knowledge of Parent, threatened to be brought by
or filed with any governmental authority based on, arising out of, in connection
with or otherwise relating to the classification of any individual by Parent as
an independent contractor or "leased employee" (within the meaning of
section 414(n) of the Code) rather than as an employee, and Parent neither knows
nor should Parent know of any conditions under which Parent or any of its
subsidiaries is reasonably likely to incur any such liability that in each case
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 3.12. EMPLOYMENT AND LABOR MATTERS. Except as set forth in
Section 3.11(b) or Section 3.12 of the Parent Disclosure Schedule or the Parent
SEC Documents:
(a) Each of Parent and its subsidiaries is in compliance, and has not failed
to be in compliance as a result of which it would reasonably be expected now or
in the future to have liability, with all applicable U.S. and non-U.S. laws,
agreements and contracts relating to employment practices, terms and conditions
of employment, and the employment of former, current, and prospective employees,
independent contractors and "leased employees" (within the meaning of
Section 414(n) of the Code) of
A-30
Parent or any of its subsidiaries including all such U.S. and non-U.S. laws,
agreements and contracts relating to wages, hours, collective bargaining,
employment discrimination, immigration, disability, civil rights, human rights,
fair labor standards, occupational safety and health, workers' compensation, pay
equity, wrongful discharge and violation of the potential rights of such former,
current, and prospective employees, independent contractors and leased
employees, and has timely prepared and filed all appropriate forms (including
Immigration and Naturalization Service Form I-9) required by any relevant
Governmental Authority, except where the failure to be or have been in
compliance would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(b) Neither Parent nor any of its subsidiaries is in breach of any U.S. or
non-U.S. collective bargaining agreement or labor union contract, or has any
knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of Parent or any of its
subsidiaries which breach, strike, slowdown, work stoppage, lockout or threat
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 3.13. REGISTRATION STATEMENT; JOINT PROXY
STATEMENT/PROSPECTUS. (a) Subject to the accuracy of the representations of the
Company in Section 2.13:
(i) the registration statement on Form S-4 (or on such other form as shall
be appropriate) (as it may be amended, the "Registration Statement"),
pursuant to which the Parent Common Stock to be delivered to the
stockholders of the Company by Parent in connection with the Merger will
be registered with the SEC, shall not, at the respective times the
Registration Statement (including any amendments or supplements thereto)
is filed with the SEC or declared effective by the SEC, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; and
(ii) the information supplied by Parent or Merger Sub for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus will
not, on the date the Joint Proxy Statement/ Prospectus (or any
amendment thereof or supplement thereto) is mailed to stockholders or,
at the time of the Company Stockholder Meeting or at the time of the
meeting of the stockholders of Parent (the "Parent Stockholders
Meeting") to consider proposals for (1) an increase in the authorized
capital of Parent in an amount at least sufficient for (x) the issuance
of Parent Common Stock in the Merger as provided in this Agreement,
(y) the issuance of Parent Common Stock upon conversion of the
outstanding Company Convertible Notes (in accordance with the
conversion ratio as in effect on the date hereof) and (z) the issuance
of Parent Common Stock upon exercise of all outstanding Company Stock
Options as provided in this Agreement and (2) the authorization of the
issuance of Parent Common Stock as provided in the preceding
clause (1) (such proposals, the "Parent Stockholders Meeting
Proposals"), contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading
with respect to any material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the
statements made therein not false or misleading, or necessary to
correct any statement in any earlier written communication to
stockholders with respect to the solicitation of proxies for the
respective Stockholders Meeting which has become false or misleading.
(b) If at any time prior to the respective vote of stockholders at the
Stockholders Meetings, any event relating to Parent, Merger Sub or any of their
respective affiliates, officers or directors is discovered by Parent or Merger
Sub which should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, Parent or Merger Sub shall
promptly inform the Company.
(c) The Registration Statement and the Joint Proxy Statement/Prospectus
shall comply in all material respects with the requirements of all applicable
laws, including the Securities Act and the Exchange Act.
A-31
(d) Notwithstanding the foregoing, Parent and Merger Sub make no
representation or warranty with respect to any information supplied by the
Company or any third party that is contained or incorporated by reference in, or
furnished in connection with the preparation of, the Registration Statement or
the Joint Proxy Statement/Prospectus.
SECTION 3.14. RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement or as set forth in the Parent SEC Documents, there is no agreement,
judgment, injunction, order or decree binding upon Parent or any of its
subsidiaries which has or would reasonably be expected to have the effect of
prohibiting or restricting the conduct of business by Parent or any of its
subsidiaries as currently conducted by Parent or such subsidiary, or restricting
any transactions (including payment of dividends and distributions) between
Parent and its subsidiaries, except for any prohibition or restriction as would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 3.15. TITLE TO PROPERTY. Except as set forth in the Parent SEC
Documents, each of Parent and its subsidiaries has marketable title to all of
its owned real properties and other owned assets, free and clear of all liens,
charges and encumbrances, except for (i) statutory liens for taxes that are not
yet due and payable or are being contested in good faith, (ii) statutory or
common law liens in favor of carriers, warehousemen, mechanics and materialmen,
to secure claims for labor, materials or supplies and other like liens and
(iii) such liens or other imperfections of title, if any, as do not materially
interfere with the present use of the assets affected thereby or which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, and except for liens which secure indebtedness reflected in the
2001 Parent Balance Sheet; and, to the knowledge of Parent, all leases pursuant
to which Parent or any of its subsidiaries lease from others material amounts of
real or personal property are in good standing, valid and effective in
accordance with their respective terms, and there is not, to the knowledge of
Parent, under any of such leases, any existing material default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default or event of default), except where the lack of such good
standing, validity and effectiveness or the existence of such default or event
of default would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect.
SECTION 3.16. TAXES. Except as set forth in Section 3.16 of the Parent
Disclosure Schedule or as would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect:
Parent and each of its subsidiaries has timely and accurately filed, or
caused to be timely and accurately filed, all Tax Returns required to be filed
by it, and has paid, collected or withheld, or caused to be paid, collected or
withheld, all amounts of Taxes required to be paid, collected or withheld, other
than such Taxes for which adequate reserves in the 2001 Parent Balance Sheet
have been established or which are being contested in good faith. There are no
claims or assessments pending against Parent or any of its subsidiaries for any
alleged deficiency in any Tax, there are no pending or, to the knowledge of
Parent, threatened audits or investigations for or relating to any liability in
respect of any Taxes, and Parent has not been notified in writing of any
proposed Tax claims or assessments against Parent or any of its subsidiaries
(other than in each case, claims or assessments for which adequate reserves in
the 2001 Parent Balance Sheet have been established or which are being contested
in good faith). Neither Parent nor any of its subsidiaries has executed any
waivers or extensions of any applicable statute of limitations to assess any
amount of Taxes. There are no outstanding requests by Parent or any of its
subsidiaries for any extension of time within which to file any Tax Return or
within which to pay any amounts of Taxes shown to be due on any Tax Return. To
the best knowledge of Parent, there are no liens for amounts of Taxes on the
assets of Parent or any of its subsidiaries except for statutory liens for
current Taxes not yet due and payable.
A-32
Other than with respect to Parent and its subsidiaries, neither Parent nor
any of its subsidiaries is liable for Taxes of any other person, or is currently
under any contractual obligation to indemnify any person with respect to any
amounts of Taxes (except for customary agreements to indemnify lenders or
security holders in respect of Taxes and except for provisions in agreements for
the divestiture of subsidiaries, assets or business lines of Parent or its
subsidiaries, that require Parent or its subsidiaries (as applicable) to
indemnify a purchaser or purchaser group for amounts of Taxes of Parent or its
subsidiaries (as applicable) in the nature of sales or similar Taxes incurred as
a consequence of any such divestiture transactions), or is a party to any tax
sharing agreement or any other agreement providing for payments by Parent or any
of its subsidiaries with respect to any amounts of Taxes.
SECTION 3.17. ENVIRONMENTAL MATTERS. (a) Except as set forth in
Section 3.17(a) to the Parent Disclosure Schedule or in the Parent SEC Documents
or as would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, the operations and properties of Parent and its
subsidiaries are in compliance with the Environmental Laws, which compliance
includes the possession by Parent and its subsidiaries of all permits and
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof.
(b) Except as set forth in Section 3.17(b) of the Parent Disclosure Schedule
or the Parent SEC Documents or as would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect, there are no
Environmental Claims, including claims based on "arranger liability," pending
or, to the knowledge of Parent, threatened against Parent or any of its
subsidiaries or, to the knowledge of Parent, against any person or entity whose
liability for any Environmental Claim has been retained or assumed by Parent or
any of its subsidiaries.
(c) Except as set forth on Section 3.17(c) of the Parent Disclosure Schedule
or in the Parent SEC Documents, to the knowledge of Parent, there are no past or
present actions, circumstances, conditions, events or incidents, including the
release, emission, discharge, presence or disposal of any Materials of
Environmental Concern, that are reasonably likely to form the basis of any
Environmental Claim against Parent or any of its subsidiaries or against any
person or entity whose liability for any Environmental Claim Parent or any of
its subsidiaries have retained or assumed, except for such Environmental Claims
that would not reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect.
(d) Except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect or as set forth in Section 3.17(d)
of the Parent Disclosure Schedule or the Parent SEC Documents, (i) to the
knowledge of Parent, there are no off-site locations where the Company or any of
its subsidiaries has stored, disposed or arranged for the disposal of Materials
of Environmental Concern which have been listed on the National Priority List,
CERCLIS, or state Superfund site list, and Parent and its subsidiaries have not
been notified that any of them is a potentially responsible party at any such
location; and (ii) there is no friable asbestos containing material contained in
or forming part of any building, building component, structure or office space
owned, leased or operated by Parent or any of its subsidiaries.
SECTION 3.18. BROKERS. There is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Parent or any of its affiliates who might be entitled to any fee or
commission from Parent or any of its affiliates in connection with the
transactions contemplated by this Agreement.
SECTION 3.19. INTELLECTUAL PROPERTY. (a) As used herein, "Parent
Intellectual Property Assets" shall mean the Intellectual Property Assets used
or owned by Parent or any of its subsidiaries.
(b) Except as would not reasonably be expected, individually or in the
aggregate to have a Material Adverse Effect, Parent and/or each of its
subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all of the Parent Intellectual Property Assets that are used in
and are material to the business of Parent and its subsidiaries as currently
conducted, without infringing or violating the rights of others.
A-33
(c) Except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, no claims (i) are currently
pending or, to the knowledge of Parent are threatened by any person with respect
to the Parent Intellectual Property Assets, or (ii) are, to the knowledge of
Parent, currently pending or threatened by any person with respect to Third
Party Intellectual Property Assets to the extent arising out of any use,
reproduction or distribution of, or of products or methods covered by, such
Third Party Intellectual Property Assets by or through Parent or any of its
subsidiaries.
(d) Except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, to the knowledge of Parent, there
are no valid grounds for any BONA FIDE claim to the effect that the manufacture,
offer for sale, sale, licensing or use of any product, system or method either
(i) now used, offered for sale, sold or licensed or, (ii) to Parent's knowledge
as of the date hereof, scheduled for commercialization prior to the first
anniversary of the date hereof, in each case by or for Parent or any of its
subsidiaries, infringes on any Third Party Intellectual Property Assets.
(e) Parent and/or each of its subsidiaries has made all necessary filings
and recordations to protect and maintain its interest in the Parent Intellectual
Property Assets, except where the failure to so protect or maintain would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(f) To the knowledge of Parent, except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect: (i) each
patent, trademark or service mark registration and copyright registration of
Parent and/or each of its subsidiaries is valid and subsisting and (ii) each
material license of the Parent Intellectual Property Assets to a third party and
each material license of Third Party Intellectual Property Assets to Parent is
valid, subsisting and enforceable.
(g) To the knowledge of Parent, except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, there is no
unauthorized use, infringement or misappropriation of any of Parent's
Intellectual Property Assets by any third party, including any employee, former
employee, independent contractor or consultant of Parent or any of its
subsidiaries.
SECTION 3.20. PRODUCT LIABILITY AND RECALLS. (a) Except as set forth in
the Parent SEC Documents, to Parent's knowledge, there is no claim, pending or
threatened, against Parent or any of its subsidiaries for injury to person or
property of employees or any third parties suffered as a result of the sale of
any product or performance of any service by Parent or any of its subsidiaries,
including claims arising out of the defective or unsafe nature of its products
or services, which would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(b) Except as set forth in the Parent SEC Documents, there is no pending or,
to the knowledge of Parent, threatened recall or investigation of any product
sold by Parent, which recall or investigation would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(c) All of the test results or other information submitted in the past five
years by Parent to any Governmental Authority or independent testing agency for
the rating or certification of any product or facility were, to the knowledge of
Parent at the time of such submission, true and correct in all material
respects.
SECTION 3.21. OWNERSHIP OF PARENT AND MERGER SUB. Merger Sub is a direct,
wholly-owned subsidiary of Parent.
SECTION 3.22. NO PRIOR ACTIVITIES. (a) Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement.
(b) Except for obligations or liabilities incurred by Merger Sub in
connection with its incorporation or organization and the transactions
contemplated by this Agreement and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Merger Sub has not
incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities or
A-34
engaged in any business activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person.
SECTION 3.23. OWNERSHIP INTEREST IN THE COMPANY. Other than by reason of
this Agreement or the transactions contemplated hereby, neither Parent nor any
of its affiliates is an "interested stockholder" of the Company, as that term is
defined in Section 203 of the DGCL.
SECTION 3.24. TAX TREATMENT. Neither Parent nor Merger Sub has taken or
agreed to take any action or failed to take any action, nor is Parent or Merger
Sub aware of any facts or circumstances, that would prevent the Merger from
qualifying as a reorganization within the meaning of section 368(a) of the Code.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, unless Parent shall otherwise agree in writing, and
except as set forth in Section 4.01 of the Company Disclosure Schedule, or as
required by law with prompt notification to Parent, the Company shall conduct
its business and shall cause the businesses of its subsidiaries to be conducted
only in, and the Company and its subsidiaries shall not take any action except
in, the ordinary course of business and in a manner consistent with past
practice; and the Company shall use reasonable commercial efforts to preserve
substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, as set forth in Section 4.01 of the Company
Disclosure Schedule or as required by law with advance written notification to
Parent, neither the Company nor any of its subsidiaries shall, during the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, directly or indirectly do,
or publicly propose to do, any of the following without the prior written
consent of Parent, which, in the case of clauses (c), (d)(i) (but only in
respect of cross-border dividends by a subsidiary), (d)(iv), (e)(iv), (f),
(h) or (i), will not be unreasonably withheld or delayed:
(a) amend or otherwise change the Company Charter Documents;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of capital stock of any
class, or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock, or any other ownership interest
(including, without limitation, any phantom interest) in the Company, any of its
subsidiaries or affiliates (except for the issuance of shares of Company Common
Stock issuable pursuant to Company Stock Options or Company Convertible Notes
outstanding on the date hereof, or the issuance by a wholly owned subsidiary of
shares of capital stock to its parent or for the issuance by a subsidiary of
directors qualifying shares as required by applicable law);
(c) sell, pledge, dispose of or encumber any assets of the Company or any of
its subsidiaries (except for (i) sales of assets in the ordinary course of
business and in a manner consistent with past practice, (ii) dispositions of
obsolete or worthless assets, and (iii) sales of immaterial assets not in excess
of $500,000 in the aggregate);
(d) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned subsidiary of the Company
may declare and pay a dividend to its parent that is not a cross-border
dividend, (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock,
A-35
(iii) except (A) as required by the terms of any security as in effect on the
date hereof and set forth in Section 4.01 of the Company Disclosure Schedule,
(B) for the redemption of the Rights to permit or facilitate the Merger and
(C) to the extent necessary to effect withholding to meet minimum tax
withholding obligations in connection with the exercise of any Company Stock
Option, amend the terms or change the period of exercisability of, purchase,
repurchase, redeem or otherwise acquire, or permit any subsidiary to amend the
terms or change the period of exercisability of, purchase, repurchase, redeem or
otherwise acquire, any of its securities or any securities of its subsidiaries,
including, without limitation, shares of Company Common Stock, or any option,
warrant or right, directly or indirectly, to acquire any such securities, or
propose to do any of the foregoing, or (iv) settle, pay or discharge any claim,
suit or other action brought or threatened against the Company with respect to
or arising out of a stockholder equity interest in the Company;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof other than those listed on Section 4.01 of the Company Disclosure
Schedule; (ii) incur any indebtedness for borrowed money, except for
(A) borrowings and reborrowings under the Company's or any of its subsidiaries'
existing committed or uncommitted credit facilities listed on Section 4.01 of
the Company Disclosure Schedule, as in effect on the date of this Agreement, in
the ordinary course of business and (B) other borrowings not in excess of
$1,000,000 in the aggregate; (iii) issue any debt securities or assume,
guarantee (other than guarantees of the Company's subsidiaries entered into in
the ordinary course of business and except as required by any agreement in
effect on the date hereof and identified in Section 4.01 of the Company
Disclosure Schedule) or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or advances,
except in the ordinary course of business consistent with past practice (but not
loans or advances to employees of the Company to fund the exercise price of
Company Stock Options or otherwise to purchase shares of the Company Common
Stock); (iv) authorize any capital expenditures or purchases of fixed assets
which are, in the aggregate, in excess of $40 million over the next 12-month
period; or (v) enter into or materially amend any contract, agreement,
commitment or arrangement to effect any of the matters prohibited by this
Section 4.01(e);
(f) except as set forth in Section 4.01 of the Company Disclosure Schedule,
as required by law or as provided in an existing obligation of the Company,
(i) increase the compensation or severance payable or to become payable to its
directors, officers, employees or consultants, except for increases in salary or
wages of employees of the Company or its subsidiaries, including in connection
with promotions, in accordance with past practices; (ii) grant any severance or
termination pay (except to make payments required to be made under obligations
existing on the date hereof in accordance with the terms of such obligations)
to, or enter into or amend any employment or severance agreement, with any
current or prospective employee of the Company or any of its subsidiaries,
except for new hire employees in the ordinary course of business whose annual
salary does not exceed $150,000 and whose severance benefits do not exceed one
times annual salary; or (iii) establish, adopt, enter into or amend any
collective bargaining agreement, Company Employee Plan, including, without
limitation, any plan that provides for the payment of bonuses or incentive
compensation, trust, fund, policy or arrangement for the benefit of any current
or former directors, officers, employees or consultants or any of their
beneficiaries, except, in each case, as may be required by law or as would not
result in a material increase in the cost of maintaining such collective
bargaining agreement, Company Employee Plan, trust, fund, policy or arrangement.
(g) take any action to change accounting policies or procedures (including,
without limitation, procedures with respect to revenue recognition, payments of
accounts payable and collection of accounts receivable) except as required by a
change in GAAP occurring after the date hereof;
(h) make any material tax election or settle or compromise any material
United States federal, state, local or non-U.S. tax liability;
A-36
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in excess
of $1,000,000 in the aggregate, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Documents or incurred in the ordinary
course of business and consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.01(a) through (i) above, or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect such that the conditions in Section 6.02(a) would
not be satisfied or prevent the Company from performing or cause the Company not
to perform its covenants hereunder such that the condition in Section 6.02(b)
would not be satisfied.
SECTION 4.02. NO SOLICITATION. (a) The Company shall not, directly or
indirectly, through any officer, director, employee, representative or agent of
the Company or any of its subsidiaries, solicit or encourage the initiation of
(including by way of furnishing information) any inquiries or proposals
regarding any merger, sale of assets, sale of shares of capital stock
(including, without limitation, by way of a tender offer) or similar
transactions involving the Company or any subsidiaries of the Company that if
consummated would constitute an Alternative Transaction (as defined below) (any
of the foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal"). Nothing contained in this Agreement shall prevent the
Board of Directors of the Company from (i) furnishing information to a third
party which has made a BONA FIDE Acquisition Proposal that the Board of
Directors of the Company concludes in good faith after consulting with a
nationally recognized investment banking firm would, if consummated, constitute
a Superior Proposal (as defined below) not solicited in violation of this
Agreement, provided that such third party has executed an agreement with
confidentiality provisions substantially similar to those of the Company
Confidentiality Agreement or (ii) subject to compliance with the other terms of
this Section 4.02, including Sections 4.02(c) and (d), considering and
negotiating a BONA FIDE Acquisition Proposal that the Board of Directors of the
Company concludes in good faith after consulting with a nationally recognized
investment banking firm would, if consummated, constitute a Superior Proposal
not solicited in violation of this Agreement; PROVIDED, HOWEVER, that, as to
each of clauses (i) and (ii), (x) such actions occur at a time prior to approval
of the Merger and this Agreement at the Company Stockholders Meeting and
(y) the Board of Directors of the Company reasonably determines in good faith
(after due consultation with independent counsel, which may be Fried, Frank,
Harris, Shriver & Jacobson) that it is or is reasonably likely to be required to
do so in order to discharge properly its fiduciary duties.
For purposes of this Agreement, "Alternative Transaction" means any of
(i) a transaction pursuant to which any person (or group of persons) other than
Parent or its affiliates (a "Third Party") acquires or would acquire more than
25% of the outstanding shares of any class of equity securities of the Company,
whether from the Company or pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or other business combination involving the Company
pursuant to which any Third Party acquires or would acquire more than 25% of the
outstanding equity securities of the Company or the entity surviving such merger
or business combination, (iii) any transaction pursuant to which any Third Party
acquires or would acquire control of assets (including for this purpose the
outstanding equity securities of subsidiaries of the Company and securities of
the entity surviving any merger or business combination including any of the
Company's subsidiaries) of the Company, or any of its subsidiaries having a fair
market value (as determined by the Board of Directors of the Company in good
faith) equal to more than 25% of the fair market value of all the assets of the
Company and its subsidiaries, taken as a whole, immediately prior to such
transaction, or (iv) any other consolidation, business combination,
recapitalization or similar transaction involving the Company or any
"significant subsidiary" (as defined in Rule 1-02 under Regulation S-X) of the
Company, other than the transactions contemplated by this Agreement; PROVIDED,
HOWEVER, that the term Alternative Transaction shall not include any acquisition
of securities by a broker dealer in connection with a BONA FIDE public offering
of such securities.
A-37
For purposes of this Agreement, a "Superior Proposal" means any proposal
made by a Third Party to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, 90% or more of the Company Common Stock
entitled to vote generally in the election of directors or all or substantially
all of the assets of the Company, on terms which the Board of Directors of the
Company reasonably believes (after consultation with a financial advisor of
nationally recognized reputation) to be more favorable from a financial point of
view to its shareholders than the Merger and the transactions contemplated by
this Agreement, taking into account at the time of determination any changes to
the financial terms of this Agreement proposed by Parent; PROVIDED, HOWEVER,
that a Superior Proposal may be subject to a due diligence review of
confidential information and to other customary conditions.
(b) The Company shall notify Parent promptly (but in no event later than
5:00 p.m. New York Time on the next business day) after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any of its subsidiaries in connection with an Acquisition Proposal or for access
to the properties, books or records of the Company or any subsidiary by any
person or entity that informs the Board of Directors of the Company or such
subsidiary that it is considering making, or has made, an Acquisition Proposal.
Such notice to Parent shall be made orally and in writing, and shall indicate
the identity of the person making the Acquisition Proposal or intending to make
an Acquisition Proposal or requesting non-public information or access to the
books and records of the Company, the terms of any such Acquisition Proposal or
modification or amendment to an Acquisition Proposal, and whether the Company is
providing or intends to provide the person making the Acquisition Proposal with
access to information concerning the Company as provided in Section 4.02(a). The
Company shall keep Parent fully informed, on a current basis, of any material
changes in the status and any material changes or modifications in the material
terms of any such Acquisition Proposal, indication or request. The Company shall
also promptly notify Parent, orally and in writing, if it enters into
negotiations concerning any Acquisition Proposal. Notwithstanding any other
provision of this Section 4.02(b), the Company shall not be under any obligation
to make any disclosure to Parent in respect of an Acquisition Proposal if such
disclosure would violate any confidentiality agreement to which the Company is a
party as of the date hereof; PROVIDED, HOWEVER, that the Company shall not take
any action permitted by clauses (i) or (ii) of Section 4.02(a) in respect of any
Acquisition Proposal unless the Company complies with the provisions of this
Section 4.02(b) in respect thereof.
(c) Except to the extent the Board of Directors of the Company reasonably
determines in good faith (after due consultation with independent counsel, which
may be Fried, Frank, Harris, Shriver & Jacobson) that it is or is reasonably
likely to be required to act to the contrary in order to discharge properly its
fiduciary duties, neither the Company nor the Board of Directors of the Company
shall withdraw or modify, or propose to withdraw or modify, in a manner adverse
to Parent or Merger Sub, the approval by such Board of Directors of this
Agreement or the Merger (and, with respect to the approval, recommendation or
entering into of any Acquisition Proposal, it may take such contrary action only
after the second full business day (disregarding any partial business days)
following Parent's and Merger Sub's receipt of written notice of the Board of
Directors' intention to do so).
(d) The Company and the Board of Directors of the Company shall not
(i) redeem the rights (the "Rights") issued under the Rights Agreement, dated as
of January 6, 1997, as amended, between the Company and Mellon Investor Services
LLC (formerly known as ChaseMellon Shareholder Services, L.L.C.), as Rights
Agent (the "Rights Agreement"), or waive or amend any provision of the Rights
Agreement, in any such case to permit or facilitate the consummation of any
Acquisition Proposal or Alternative Transaction, or (ii) enter into any
agreement (other than a confidentiality agreement entered into not in violation
of Section 4.02(a)) with respect to, or otherwise approve or recommend, or
propose to approve or recommend, any Acquisition Proposal or Alternative
Transaction, unless this Agreement has been terminated in accordance with its
terms. It is understood and agreed that a deferral of the distribution of Rights
following the commencement of a tender offer or exchange offer shall not be
prohibited hereunder.
A-38
(e) Nothing contained in this Section 4.02 shall prohibit the Company from
taking and disclosing to its stockholders a position required by Rules 14e-2(a)
and 14d-9 promulgated under the Exchange Act or from making any disclosure to
its stockholders required by applicable law, rule or regulation or by the NYSE.
(f) Subject to the other provisions of this Section 4.02, the Company shall
immediately cease and cause to be terminated any existing discussions or
negotiations with any persons (other than Parent and Merger Sub) conducted
heretofore with respect to any of the foregoing. The Company agrees not to
release any third party (i) from the confidentiality provisions of, or
(ii) except with respect to a party to whom the Board of Directors is permitted
to furnish information or with whom the Board of Directors is permitted to
negotiate pursuant to Section 4.02(a), from the standstill provisions of, any
agreement to which the Company is a party.
(g) The Company shall ensure that the officers and directors of the Company
and the Company's subsidiaries and any investment banker or other advisor or
representative retained by the Company are aware of the restrictions described
in this Section 4.02. It is understood that any violation of the restrictions
set forth in this Section 4.02 by any officer or director of the Company or the
Company subsidiaries, any investment banker, attorney or other advisor or
representative of the Company engaged in respect of the transactions
contemplated by this Agreement or any other advisor or representative of the
Company acting at the Company's direction or with the Company's consent, shall
be deemed to be a breach of this Section 4.02 by the Company.
(h) No action taken in respect of an Acquisition Proposal which is expressly
permitted by the provisions of this Section 4.02 shall constitute a breach of
any other provision of this Agreement.
SECTION 4.03. CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Parent covenants and agrees
that, except as set forth in Section 4.03 of the Parent Disclosure Schedule or
unless the Company shall otherwise agree in writing, Parent shall take all
action necessary so that (i) Parent shall conduct its business, and cause the
businesses of its subsidiaries to be conducted, in the ordinary course of
business and consistent with past practice, including actions taken by Parent or
its subsidiaries in contemplation of consummation of the Merger or other
business acquisitions otherwise in compliance with this Agreement, and
(ii) Parent shall not directly or indirectly do, or propose to do, any of the
following without the prior written consent of the Company:
(a) amend or otherwise change the Parent Charter Documents, except as
contemplated by this Agreement;
(b) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other person, or dispose of any assets, which, in any
such case, would materially delay or prevent the consummation of the Merger and
the other transactions contemplated by this Agreement or materially alter the
nature or character of the business of Parent as it is presently conducted;
(c) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned subsidiary of Parent may
declare and pay a dividend to its parent;
(d) take any action to change its accounting policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable and collection of accounts receivable), except as
required by a change in GAAP occurring after the date hereof; or
(e) take or agree in writing or otherwise to take any of the actions
described in Sections 4.03(a) through (d) above, or any actions that would make
any of the representations or warranties of Parent contained in this Agreement
untrue or incorrect such that the conditions in Section 6.03(a) would not be
satisfied or prevent Parent from performing or cause Parent not to perform its
covenants hereunder such that the condition in Section 6.03(b) would not be
satisfied.
A-39
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION
STATEMENT. (a) As promptly as practicable after the execution of this
Agreement, the Company and Parent shall prepare and Parent shall file with the
SEC, preliminary proxy materials which shall constitute the Joint Proxy
Statement/ Prospectus and, if the parties so agree at the time, the Registration
Statement. Parent shall furnish all information concerning Parent required to be
contained in the Joint Proxy Statement/Prospectus, and the Company shall furnish
all information concerning the Company required to be contained in the Joint
Proxy Statement/Prospectus.
As promptly as practicable after comments are received from the SEC thereon
and after the furnishing by the Company and Parent of all information required
to be contained therein, Parent shall file (and the Company shall cooperate with
Parent in connection with the filing) with the SEC the definitive Joint Proxy
Statement/Prospectus and the Registration Statement (or, if the Registration
Statement has been previously filed, an amendment thereto) relating to approval
of this Agreement by the Company's stockholders as set forth in
Section 2.04(b), to the approval of the Parent Stockholders Meeting Proposals by
the Parent's stockholders as provided in Section 3.13(a) and to the payment of
the Merger Consideration in the form of Parent Common Stock pursuant to this
Agreement, and shall use all reasonable efforts to cause the Registration
Statement to become effective.
Parent shall take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a general consent to
service of process) required to be taken under the applicable state securities
laws in connection with the issuance of Parent Common Stock in connection with
the Merger. The Company shall furnish to Parent all information concerning the
holders of capital stock of the Company as may be reasonably requested in
connection with any such action and the preparation, filing and distribution of
the Joint Proxy Statement/Prospectus.
The Company and Parent shall notify the other promptly upon the receipt of
any comments from the SEC or its staff or any other government officials in
connection with any filing made pursuant hereto and of any request by the SEC or
its staff or any other government officials for amendments or supplements to the
Registration Statement, the Joint Proxy Statement/Prospectus or any other
filings or for additional information and will supply the other with copies of
all correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Joint Proxy Statement/
Prospectus, the Merger or any other filing. Neither Parent nor the Company will
file any amendment or supplement to, or any correspondence to the SEC or its
staff with respect to, the Joint Proxy Statement/Prospectus, without providing
the other party a reasonable opportunity to review and comment thereon.
Parent will advise the Company, promptly after Parent receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
If at any time prior to the respective vote of stockholders at the
Stockholders Meeting any information relating to the Company or Parent, or any
of their respective affiliates, officers or directors, should be discovered by
the Company or Parent which should be set forth in an amendment or supplement to
either of the Registration Statement or the Joint Proxy Statement/Prospectus so
that any of such documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other parties
A-40
hereto and an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of the Company. Whenever any event occurs which
is required to be set forth in an amendment or supplement to the Registration
Statement, the Joint Proxy Statement/Prospectus or any other filing, the Company
or Parent will promptly inform the other of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials and/or
mailing to stockholders of Company, such amendment or supplement.
(b) Parent shall include as an exhibit to the Registration Statement tax
opinions of Kramer Levin Naftalis & Frankel LLP and Fried, Frank, Harris,
Shriver & Jacobson, in form and substance reasonably satisfactory to Parent and
Merger Sub and to the Company, on the basis of customary representations,
warranties and covenants of Parent and the Company and assumptions set forth in
such opinions, in compliance with the provisions of Item 601(b)(8) of
Regulation S-K.
SECTION 5.02. STOCKHOLDERS MEETINGS. (a) The Company shall establish a
record date for, duly call, give notice of, convene and hold the Company
Stockholders Meeting as promptly as practicable for the purpose of voting upon
the approval of this Agreement, and the Company shall use all reasonable efforts
to cause the Joint Proxy Statement/Prospectus to be mailed to the Company's
stockholders and to hold the Company Stockholders Meeting as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act. The Company shall solicit from its stockholders proxies in favor
of approval of this Agreement and shall take all other reasonable action
necessary or advisable to secure the vote or consent of stockholders in favor of
such approval. The Joint Proxy Statement/Prospectus shall include the
recommendation of the Board of Directors of the Company in favor of adoption of
this Agreement. Notwithstanding anything to the contrary set forth in
Section 5.01 or this Section 5.02, the Company shall not be obligated to take
the action set forth in this Section 5.02(a) to the extent that the Board of
Directors of the Company reasonably determines (after due consultation with
independent counsel, which may be Fried, Frank, Harris, Shriver & Jacobson) that
such action is, or is reasonably likely to be, inconsistent with the proper
discharge of its fiduciary duties.
(b) Parent shall establish a record date for, duly call, give notice of,
convene and hold the Parent Stockholders Meeting as promptly as practicable for
the purpose of voting upon the Parent Stockholder Meeting Proposals, and Parent
shall use all reasonable efforts to cause the Joint Proxy Statement/ Prospectus
to be mailed to the Parent's stockholders and to hold the Parent Stockholders
Meeting as promptly as practicable after the Registration Statement is declared
effective under the Securities Act. Parent shall solicit from its stockholders
proxies in favor of approval of this Agreement and shall take all other
reasonable action necessary or advisable to secure the vote or consent of
stockholders in favor of such approval. The Joint Proxy Statement/Prospectus
shall include the recommendation of the Board of Directors of Parent in favor of
the Parent Stockholders Meeting Proposals. Notwithstanding anything to the
contrary set forth in Section 5.01 or this Section 5.02, Parent shall not be
obligated to take the action set forth in the preceding sentences of this
Section 5.02(b) to the extent that the Board of Directors of Parent determines
(after due consultation with independent counsel, which may be Kramer Levin
Naftalis & Frankel LLP) that such action is, or is reasonably likely to be,
inconsistent with the proper discharge of its fiduciary duties.
SECTION 5.03. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Upon reasonable
notice and subject to restrictions contained in confidentiality agreements (from
which such party shall use reasonable efforts to be released), the Company shall
(and shall cause its subsidiaries to) and Parent shall (and shall cause its
subsidiaries to) (i) afford to the officers, employees, accountants, counsel and
other representatives of the other, reasonable access, during the period after
the execution and delivery of this Agreement and prior to the Effective Time, to
the properties, books, contracts, commitments and records of the Company or the
Parent, as applicable, and, (ii) during such period, furnish promptly to the
other all information concerning the business, properties and personnel of the
Company or the Parent, as applicable, as such other party may reasonably
request, and each shall make available to the
A-41
other the appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the Company's or Parent's, as applicable,
business, properties and personnel as either Parent or the Company may
reasonably request. All such information shall be kept confidential in
accordance with the terms of the confidentiality letter, dated July 27, 2001
(the "Parent Confidentiality Agreement"), from Parent to the Company and the
confidentiality letter, dated July 30, 2001 (the "Company Confidentiality
Agreement") from the Company to Parent, and such information shall not be used
by a party for any purpose other than completing this Agreement or subsequently
acting in accordance with its terms. Notwithstanding the provisions of this
Section 5.03, a party will not be required to provide access or to disclose
information where such access or disclosure would violate any law or any
confidentiality agreement in effect on the date hereof between such party and a
third party or, in the opinion of counsel to such party, would result in the
waiver of any attorney-client privilege or work-product protection.
SECTION 5.04. CONSENTS; APPROVALS. (a) The Company and Parent shall each
use its reasonable best efforts to obtain and to cooperate with each other in
order to obtain all consents, waivers, approvals, authorizations or orders
(including, without limitation, all United States and non-U.S. governmental and
regulatory rulings and approvals), and the Company and Parent shall make all
filings (including, without limitation, all filings with United States and
non-United States governmental or regulatory agencies) required in connection
with the authorization, execution and delivery of this Agreement by the Company
and Parent and the consummation by them of the transactions contemplated hereby.
Each of the Company and Parent shall furnish all information in its possession
required for any application or other filing to be made pursuant to the rules
and regulations of any United States or non-U.S. governmental body in connection
with the transactions contemplated by this Agreement.
(b) Each of the Company and Parent shall cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under
Section 5.01 and this Section 5.04 to comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder.
SECTION 5.05. AGREEMENTS WITH RESPECT TO AFFILIATES. The Company shall
deliver to Parent, prior to the date the Registration Statement becomes
effective under the Securities Act, a letter (the "Company Affiliate Letter")
identifying all persons who are, at the time of the Company Stockholders
Meeting, anticipated to be "affiliates" of the Company for purposes of Rule 145
under the Securities Act ("Rule 145"). The Company shall use its commercially
reasonable efforts to cause each person who is identified as an "affiliate" in
the Affiliate Letter to deliver to Parent prior to the Effective Time a written
agreement in connection with restrictions on affiliates under Rule 145, in a
form mutually agreeable to the Company and Parent.
SECTION 5.06. INDEMNIFICATION AND INSURANCE. (a) The Certificate of
Incorporation and By-laws of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the Company Charter
Documents, which provisions shall not be amended, modified or otherwise repealed
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder as of the Effective Time of individuals
who at the Effective Time were directors, officers, employees or agents of the
Company, unless such modification is required after the Effective Time by law
and then only to the minimum extent required by such law.
(b) The Surviving Corporation shall, to the fullest extent permitted under
applicable law or under the Surviving Corporation's Certificate of Incorporation
or By-laws, indemnify and hold harmless each present and former director,
officer or employee of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
(x) arising out of or pertaining to the transactions contemplated by this
Agreement or (y) otherwise with respect to
A-42
any acts or omissions occurring at or prior to the Effective Time, to the same
extent as provided in the Company Charter Documents or any applicable contract
or agreement as in effect on the date hereof, in each case for a period of six
years after the Effective Time. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) any counsel retained by the Indemnified Parties for any period after
the Effective Time shall be reasonably satisfactory to the Surviving
Corporation, (ii) after the Effective Time, the Surviving Corporation shall pay
the reasonable fees and expenses of such counsel, promptly after statements
therefor are received; PROVIDED that the Indemnified Parties shall be required
to reimburse the Surviving Corporation for such payments in the circumstances
and to the extent required by the Company Charter Documents, any applicable
contract or agreement or applicable law and (iii) the Surviving Corporation
shall cooperate in the defense of any such matter; PROVIDED, HOWEVER, that the
Surviving Corporation shall not be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld); and
PROVIDED, FURTHER, that, in the event that any claim or claims for
indemnification are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until the
final disposition of any and all such claims. The Indemnified Parties as a group
may retain only one law firm to represent them in each applicable jurisdiction
(other than local counsel) with respect to any single action unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties,
in which case each Indemnified Person with respect to whom such a conflict
exists (or group of such Indemnified Persons who among them have no such
conflict) may retain one separate law firm in each applicable jurisdiction
(other than local counsel).
(c) The Surviving Corporation shall assume, honor and fulfill in all
respects the obligations of the Company pursuant to indemnification agreements,
employment agreements, severance agreements, retention bonuses and similar
agreements (the parties under such agreements being referred to as the "Covered
Persons") with the Company's directors and officers existing at or before the
Effective Time, provided such agreements (x) do not violate Section 4.01(f) or
(y) are entered into pursuant to this Section 5.06.
(d) In addition, Parent will provide, or cause the Surviving Corporation to
provide, for a period of not less than six years after the Effective Time, the
Company's current directors and officers (and former directors and officers, to
the extent covered under the Company's current insurance and indemnification
policy for directors and officers) with an insurance and indemnification policy
that provides coverage for events occurring at or prior to the Effective Time
(the "D&O Insurance") that is no less favorable than the existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage; PROVIDED, HOWEVER, that Parent and the Surviving Corporation shall not
be required to pay an annual premium for the D&O Insurance in excess of 250% of
the annual premium currently paid by the Company for such insurance, but in such
case shall purchase as much such coverage as possible for such amount.
(e) From and after the Effective Time, Parent shall unconditionally
guarantee the timely payment of all funds owing by, and the timely performance
of all other obligations of, the Surviving Corporation under this Section 5.06.
(f) This Section 5.06 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation,
the Indemnified Parties and the Covered Persons, shall be binding on all
successors and assigns of the Surviving Corporation and shall be enforceable by
the Indemnified Parties and the Covered Persons.
(g) Parent and Merger Sub agree that Ronald A. Ostertag, on behalf of the
Company, may grant the retention bonuses to be paid to employees of the Company
as described in Section 5.06 of the Company Disclosure Schedule.
SECTION 5.07. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of
A-43
any event the occurrence or nonoccurrence of which would reasonably be expected
to cause any representation or warranty contained in this Agreement to be
materially untrue or inaccurate, or (ii) any failure of the Company, Parent or
Merger Sub, as the case may be, materially to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice; and PROVIDED FURTHER that failure to give such
notice shall not be treated as a breach of a covenant for the purposes of
Sections 6.02(b), 6.03(b) or 7.01(h), unless the failure to give such notice
results in material prejudice to the other party.
SECTION 5.08. FURTHER ACTION/TAX TREATMENT. (a) Upon the terms and subject
to the conditions hereof, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement. The foregoing covenant shall not include the obligation by
the Company or Parent to agree to divest, abandon, license, hold separate or
take similar action with respect to any assets (tangible or intangible) which
are, in the aggregate material to Parent or the Company, as applicable.
(b) Notwithstanding anything herein to the contrary, each of Parent, Merger
Sub and the Company shall use its reasonable best efforts to cause the Merger to
qualify, and will not (both before and after the Effective Time) take any
actions, or fail to take any action, which could reasonably be expected to
prevent the Merger from qualifying as a reorganization under the provisions of
Section 368(a) of the Code. Parent shall, and shall cause the Surviving
Corporation to, report, to the extent required by the Code or the regulations
thereunder, the Merger for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. Each of Parent and the Company
shall make, and shall cause their affiliates to make, such representations,
warranties and covenants as shall be requested reasonably in the circumstances
by Kramer Levin Naftalis & Frankel LLP and Fried, Frank, Harris, Shriver &
Jacobson in order for such firms to render their opinions referred to in
Sections 5.01(b), 6.02(e) and 6.03(e).
SECTION 5.09. PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing any press release or making any written public
statement with respect to the Merger or this Agreement and shall not issue any
such press release or make any such public statement without the prior consent
of the other party, which shall not be unreasonably withheld; PROVIDED, HOWEVER,
that either party may, without the prior consent of the other, issue such press
release or make such public statement as may upon the advice of counsel be
required by law (including, without limitation, Rules 165 and 425 under the
Securities Act and Rule 14a-12 under the Exchange Act) or the rules and
regulations of the NYSE, if it has used all reasonable efforts to consult with
the other party.
SECTION 5.10. PARENT COMMON STOCK. Parent shall use its best efforts to
cause the Parent Common Stock to be issued to the holders of Company Common
Stock in the Merger to be listed, upon official notice of issuance, on the NYSE
prior to the Effective Time.
SECTION 5.11. STOCK OPTION PLANS, ETC. (a) At the Effective Time, Parent
shall, and shall cause its affiliates to, take all necessary action to provide
that each outstanding Company Stock Option shall continue to have, and be
subject to, the same terms and conditions set forth in the relevant Company
Stock Option Plan (and any related agreements not entered into in contravention
of this Agreement) immediately prior to the Effective Time; except that
(i) each Company Stock Option will be exercisable for that number of whole
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company Stock
Option, immediately prior to the Effective Time multiplied by the Exchange
Ratio, rounded to the nearest
A-44
whole number of shares of Parent Common Stock, and (ii) the per share exercise
price for the Parent Common Stock issuable upon exercise of such Company Stock
Option will be equal to the quotient determined by dividing the exercise price
per share of the Company Common Stock at which such Company Stock Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded to the nearest whole cent (each such Company Stock Option, as modified,
an "Adjusted Option"); PROVIDED, HOWEVER, that to the extent that any Company
Stock Option is intended to qualify as an incentive stock option pursuant to
section 422 of the Code immediately prior to the Effective Time, the provisions
of this Section 5.11 shall be applied in good faith to comply with sections 422
and 424(a) of the Code.
(b) Parent will take all corporate action necessary to reserve for issuance,
as of the Effective Time a sufficient number of shares of Parent Common Stock
for delivery upon exercise of the Adjusted Options and to deliver to holders of
Adjusted Options, upon the exercise of such options, Parent Common Stock listed
on the NYSE.
(c) Not later than 15 days following the Effective Time, Parent (i) shall
file with the SEC a registration statement on Form S-8 of the SEC (or any
successor or other appropriate form) with respect to the shares of Parent Common
Stock issuable upon the exercise of the Adjusted Options and shall use
reasonable best efforts thereafter to maintain the effectiveness of such
registration statement and (ii) shall deliver to holders of the Adjusted Options
a prospectus or prospectuses relating to such registration statement and
thereafter maintain the current status of such prospectus or prospectuses, until
all of the Adjusted Options have been exercised, expired or forfeited.
(d) Prior to the Effective Time, Parent and the Company shall take all such
reasonable steps as may be required to cause any dispositions of Company Common
Stock (including derivative securities with respect to Company Common Stock) or
acquisitions of Parent Common Stock (including derivative securities with
respect to Parent Common Stock) resulting from the transactions contemplated by
this Agreement by each officer and director of the Company to be exempt under
Rule 16b-3 promulgated under the Exchange Act.
SECTION 5.12. CERTAIN EMPLOYEE BENEFITS. (a) For the period from the
Effective Time through December 31, 2001 (the "Benefits Continuation Period"),
Parent shall cause the Surviving Corporation to provide each person who, as of
the Effective Time, is an employee of the Company or any subsidiary of the
Company (a "Company Employee") with salary and employee benefits that are
comparable in the aggregate to those provided to such Company Employee
immediately prior to the Effective Time, PROVIDED, HOWEVER, that,
(i) consistent with the foregoing, the Surviving Corporation shall have the
right to amend any Company Employee Plan in accordance with the terms of such
Company Employee Plan. Notwithstanding the foregoing, for a period of six months
following the Effective Time, the Surviving Corporation shall not terminate or
amend in a manner adverse to any Company Employee the General
Semiconductor, Inc. Severance Plan, as in effect on the date hereof. After the
Benefits Continuation Period, Parent shall cause the Surviving Corporation to
provide each Company Employee with salary and employee benefits that are
comparable in the aggregate to those provided to similarly situated employees of
Parent or its subsidiaries.
(b) With respect to the benefits provided pursuant to this Section 5.12,
service accrued by Company Employees during employment with the Company and its
subsidiaries (including any predecessor entity) prior to the Effective Time
shall be recognized for all purposes except for benefit accruals under defined
benefit pension plans.
(c) From and after the Effective Time, Parent shall cause the Surviving
Corporation to honor in accordance with their terms all benefits and obligations
under the Company Employee Plans, including without limitation each employment,
severance or change in control agreement, plan or arrangement, each as in effect
on the date of this Agreement (or as amended as contemplated hereby or with the
prior written consent of Parent), PROVIDED, HOWEVER, that except as precluded by
law or the terms of a Company Employee Plan and, subject to Section 5.12(a)
hereof, nothing herein shall prevent the
A-45
Surviving Corporation or any other subsidiary of Parent from amending or
modifying any employee benefit plan, program or arrangement in any respect or
terminating or modifying the terms and conditions of employment or other service
of any particular employee or any other person.
(d) It is expressly agreed that the provisions of Section 5.12 are not
intended to be for the benefit of or otherwise enforceable by any third party,
including, without limitation, any Company Employees.
(e) The Company shall amend its 401(k) savings plan and any other Company
Employee Plan which permits participants to elect to invest in stock of the
Company, as necessary, to preclude any additional purchases of stock of the
Company, as of the date two (2) days prior to the Effective Time, and the
Company shall communicate this amendment to the participants in such plans.
SECTION 5.13. RIGHTS AGREEMENT. As promptly as practicable on or after the
date of this Agreement, the Board of Directors of the Company shall take all
action necessary in order to render the Rights inapplicable to the Merger and
the other transactions contemplated by this Agreement.
SECTION 5.14. CONVEYANCE TAXES. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time, and the
Company shall be responsible for the payment of all such taxes and fees. If the
Merger is consummated, in no event shall Parent or any affiliate thereof (other
than a subsidiary of the Company) reimburse the Company for the payment of such
taxes and fees.
SECTION 5.15. ACCOUNTANT'S LETTERS. Upon reasonable notice from the other,
the Company shall use its reasonable efforts to cause Deloitte & Touche LLP to
deliver to Parent, and Parent shall use its reasonable efforts to cause Ernst &
Young LLP to deliver to the Company, a letter covering such matters as are
reasonably requested by Parent or the Company, as the case may be, and as are
customarily addressed in accountants' "comfort letters."
SECTION 5.16. COMPLIANCE WITH STATE PROPERTY TRANSFER STATUTES. The
Company agrees that it shall use its reasonable commercial efforts to comply
promptly with all requirements of applicable state property transfer laws as may
be required by the relevant state agency and shall take all action reasonably
necessary to cause the transactions contemplated hereby to be effected in
compliance with applicable state property transfer laws. The Company, after
consultation with Parent, shall determine which actions must be taken prior to
or after the Effective Time to comply with applicable state property transfer
laws, except where the failure to so comply will not materially affect the right
to use or enjoy any applicable property after the Effective Time. The Company
agrees to provide Parent with any documents required to be submitted to the
relevant state agency prior to submission. Parent shall provide to the Company
any assistance reasonably requested by the Company with respect to such
compliance.
SECTION 5.17. PARENT DIRECTOR. Subject to applicable fiduciary obligations
of Parent's Board of Directors, Parent shall take all such actions as are
required to cause its Board of Directors to be expanded by one member and to
elect or appoint Ronald Ostertag as a director of Parent at or as soon as
practicable following the Effective Time. Thereafter, Parent shall take all
action necessary to cause Ronald Ostertag to continue to serve as a director of
Parent until at least the date of the third annual meeting of stockholders
following the Effective Time. Mr. Ostertag shall be entitled as a director of
Parent after the Effective Time to exculpation, indemnification and
reimbursement of expenses pursuant to terms and conditions identical to the
terms and conditions applicable to all other directors of Parent included in the
Parent Charter Documents and will be entitled to coverage under the directors'
and officers' liability and fiduciary liability insurance policies and any
indemnification agreements maintained or entered into by Parent on the same
terms as applicable to the other directors of Parent.
A-46
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The SEC shall have
declared the Registration Statement effective under the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose and no similar proceeding
in respect of the Joint Proxy Statement/Prospectus shall have been initiated or
threatened by the SEC;
(b) STOCKHOLDER APPROVAL. This Agreement shall have been approved by the
requisite vote of the stockholders of the Company, and the Parent Stockholders
Meeting Proposals shall have been approved by the stockholders of Parent;
(c) ANTITRUST. All waiting periods applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and all
clearances and approvals required to be obtained in respect of the Merger prior
to the Effective Time under any Non-U.S. Monopoly Laws shall have been obtained,
except where the failure to have obtained any such clearances or approvals with
respect to any Non-U.S. Monopoly Laws would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
Company or Parent;
(d) GOVERNMENTAL ACTIONS. There shall not have been instituted and pending
any action by any Governmental Authority that is reasonably to be expected to
result in an order, nor shall there be in effect any judgment, decree or order
of any Governmental Authority (i) preventing the consummation of the Merger or
(ii) compelling Parent or any of its subsidiaries (including the Surviving
Corporation and its subsidiaries) to dispose of or hold separate assets which
are material, in the aggregate, to Parent or its subsidiaries taken as a whole,
or to the Surviving Corporation and its subsidiaries taken as a whole; and
(e) ILLEGALITY. No statute, rule, regulation, executive or other order,
ruling or injunction shall have been enacted, promulgated, entered, enforced or
deemed applicable to the Merger which makes the consummation of the Merger
illegal or that prohibits, restrains or enjoins consummation of the Merger.
SECTION 6.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. (I) The representations and
warranties, (other than those contained in Sections 2.03, 2.04, 2.13, 2.18 and
2.23) of the Company contained in this Agreement (which for purposes of this
Section 6.02(a), shall be interpreted without giving effect to the words
"materially" or "material," individually or as it appears in the defined term
"Material Adverse Effect" or qualifications or exceptions based on such terms)
shall be true and correct in all respects on and as of the Effective Time, with
the same force and effect as if made on and as of the Effective Time, except for
(i) changes contemplated by this Agreement, (ii) those representations and
warranties which address matters only as of a particular date (which shall have
been true and correct as of such date), or (iii) where the failure to be so true
and correct would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect on the Company, and (II) the representations
and warranties of the Company contained in Sections 2.03, 2.04, 2.13, 2.18 and
2.23 shall be true and correct in all material respects on and as of the
Effective Time with the same force and effect as if made on and as of the
Effective Time, except for any representations and warranties contained therein
which address matters only as of a particular date (which shall have been true
and correct in all
A-47
material respects as of such date); and Parent and Merger Sub shall have
received a certificate of the Company to such effect signed by the Chief
Executive Officer or Chief Financial Officer of the Company;
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and Parent and Merger Sub shall have received a certificate to such effect
signed by the Chief Executive Officer or Chief Financial Officer of the Company;
PROVIDED, HOWEVER, that unless the Company knowingly breaches Section 4.01(j),
the Company shall be deemed to have complied with Section 4.01(j) unless the
failure to comply with such section also results in the failure of the condition
set forth in Section 6.02(a);
(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by the Company for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by the Company, except where the failure to
receive such consents, waivers, approvals, authorizations or orders or to make
such filings would not reasonably be expected, individually or in the aggregate
with all other such failures, to have a Material Adverse Effect on the Company
or Parent;
(d) RIGHTS AGREEMENT. A Distribution Date shall not have occurred under
the Rights Agreement, and the Rights shall be inapplicable to the Merger and to
the other transactions contemplated by this Agreement; and
(e) TAX OPINION. Parent shall have received a written opinion of Kramer
Levin Naftalis & Frankel LLP, in form and substance reasonably satisfactory to
Parent, delivered and dated as of the date of the Effective Time and on the
basis of customary representations, warranties and covenants of Parent and the
Company and assumptions set forth in such opinion, to the effect that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code.
SECTION 6.03. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. (I) The representations and warranties
(other than those contained in Sections 3.03, 3.04, 3.13 and 3.18) of Parent
contained in this Agreement (which for purposes of this Section 6.03(a), shall
be interpreted without giving effect to the words "materially" or "material,"
individually or as it appears in the defined term "Material Adverse Effect" or
qualifications or exceptions based on such terms) shall be true and correct in
all respects on and as of the Effective Time, with the same force and effect as
if made on and as of the Effective Time, except for (i) changes contemplated by
this Agreement, (ii) those representations and warranties which address matters
only as of a particular date (which shall have been true and correct as of such
date), or (iii) where the failure to be so true and correct would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on the Company, and (II) the representations and warranties of Parent contained
in Sections 3.03, 3.04, 3.13, and 3.18 shall be true and correct in all material
respects on and as of the Effective Time, with the same force and effect as if
made on and as of the Effective Time, except for any representations and
warranties contained therein which address matters only as of a particular date
(which shall have been true and correct in all material respects as of such
date); and the Company shall have received a certificate of Parent to such
effect signed by the Chief Executive Officer or Chief Financial Officer of
Parent;
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a certificate of Parent to
such effect signed by the President or Chief Financial Officer of Parent;
A-48
PROVIDED, HOWEVER, that unless Parent knowingly breaches Section 4.03(e), Parent
shall be deemed to have complied with Section 4.03(e) unless the failure to
comply with such section also results in the failure of the condition set forth
in Section 6.03(a);
(c) CONSENTS OBTAINED. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by Parent or Merger Sub for the authorization, execution and delivery of
this Agreement, and the consummation by them of the transactions contemplated
hereby and thereby shall have been obtained and made by Parent or Merger Sub,
except where the failure to receive such consents, waivers, approvals,
authorizations or orders or to make such filings would not reasonably be
expected, individually or in the aggregate with all other such failures, to have
a Material Adverse Effect on the Company or Parent;
(d) LISTING. The Parent Common Stock to be issued by Parent in connection
with the Merger shall have been authorized for listing on the NYSE upon official
notice of issuance; and
(e) TAX OPINION. The Company shall have received a written opinion of
Fried, Frank, Harris, Shriver & Jacobson, in form and substance reasonably
satisfactory to the Company, delivered and dated as of the date of the Effective
Time and on the basis of customary representations, warranties and covenants of
Parent and the Company and assumptions set forth in such opinion, to the effect
that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code.
ARTICLE VII
TERMINATION
SECTION 7.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company:
(a) by mutual written consent duly authorized by the Boards of Directors of
Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by January 31, 2002 (other than for the reasons set forth in
clause (d) below); PROVIDED, HOWEVER, that the right to terminate this Agreement
under this Section 7.01(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Merger to be consummated on or prior to such date; or
(c) by either Parent or the Company if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a nonappealable final order, decree or ruling or taken any other
nonappealable final action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger; or
(d) by either Parent or the Company, if (i) the stockholders of the Company
shall not have approved this Agreement at the Company Stockholders Meeting;
PROVIDED, HOWEVER, that the Company may not terminate pursuant to this clause if
the Company has not complied with its obligations under Section 5.02; or if
(ii) the stockholders of the Parent shall not have approved the Parent
Stockholders Meeting Proposals at the Parent Stockholders Meeting; PROVIDED,
HOWEVER, that Parent may not terminate pursuant to this clause if Parent has not
complied with its obligations under Section 5.02; or
(e) by Parent, if, whether or not permitted to do so by this Agreement, the
Board of Directors of the Company or the Company shall (i) withdraw, modify or
change its approval, adoption or recommendation of this Agreement or the Merger
in a manner adverse to Parent or shall have resolved to do so; (ii) approve or
recommend to the stockholders of the Company an Alternative Transaction;
(iii) approve or recommend that the stockholders of the Company tender their
shares in any tender or exchange offer that is an Alternative Transaction; or
(iv) fail to include the recommendation of the
A-49
Board of Directors of the Company in favor of approval of this Agreement
pursuant to Section 5.02(a) or fail to take the action required by the second
sentence of Section 5.02(a) (it being understood and agreed that a communication
by the Board of Directors of the Company to the Company's stockholders pursuant
to Rule 14d-9(f)(3) or 14(e)(2)of the Exchange Act, or any similar type of
communication to the Company's stockholders in connection with the making or
amendment of a tender offer or exchange offer, shall not be deemed to constitute
a basis for termination under this Section 7.01(e)); or
(f) by Parent or the Company, if any representation or warranty of the
Company, or Parent and Merger Sub, respectively, set forth in this Agreement
shall be untrue when made, such that the conditions set forth in Sections
6.02(a) or 6.03(a), as the case may be, would not be satisfied (in either case a
"Terminating Misrepresentation"); PROVIDED that if such Terminating
Misrepresentation is curable prior to January 31, 2002 by the Company or Parent,
as the case may be, through the exercise of its reasonable best efforts and for
so long as the Company or Parent, as the case may be, continues to exercise such
reasonable best efforts, neither Parent nor the Company, respectively, may
terminate this Agreement under this Section 7.01(f); or
(g) by Parent or the Company, if any representation or warranty of the
Company, or Parent and Merger Sub, respectively, set forth in this Agreement
shall have become untrue, such that the conditions set forth in Sections 6.02(a)
or 6.03(a), as the case may be, would not be satisfied (in either case, a
"Terminating Change"), in either case other than by reason of a Terminating
Breach (as hereinafter defined); PROVIDED that if any such Terminating Change is
curable prior to January 31, 2002 by the Company or Parent, as the case may be,
through the exercise of its reasonable best efforts, and for so long as the
Company or Parent, as the case may be, continues to exercise such reasonable
best efforts, neither Parent nor the Company, respectively, may terminate this
Agreement under this Section 7.01(g); or
(h) by Parent or the Company, upon a breach of any covenant or agreement on
the part of the Company or Parent, respectively, set forth in this Agreement
such that the conditions set forth in Sections 6.02(b) or 6.03(b), as the case
may be, would not be satisfied (a "Terminating Breach"); if such Terminating
Breach is curable prior to January 31, 2002 by the Company or Parent, as the
case may be, through the exercise of its reasonable best efforts and for so long
as the Company or Parent, as the case may be, continues to exercise such
reasonable best efforts, neither Parent nor the Company, respectively, may
terminate this Agreement under this Section 7.01(h); or
(i) by the Company, if (w) the Board of Directors of the Company shall have
authorized the Company, subject to complying with the terms of this Agreement,
including Section 4.02, to enter into a definitive agreement with respect to a
Superior Proposal and the Company shall have notified Parent in writing that it
intends to enter into such an agreement, attaching a summary of the material
terms thereof, (x) Parent shall not have made, within two full business days
(disregarding any partial business days) of receipt of the Company's written
notification of its intention to enter into a definitive agreement with respect
to a Superior Proposal, an offer that the Board of Directors of the Company
determines, in good faith after consultation with its financial advisors, is at
least as favorable, from a financial point of view, to the stockholders of the
Company as the Superior Proposal, (y) the Company prior to such termination
pursuant to this clause (i) shall have paid to Parent in immediately available
funds the Fee and the Expenses required to be paid pursuant to Section 7.03(b),
and (z) this Agreement shall not theretofore have been approved at the Company
Stockholders Meeting; or
(j) by the Company, if, whether or not permitted to do so by this
Agreement, the Board of Directors of Parent or Parent shall (i) withdraw, modify
or change its approval, adoption or recommendation of the Parent Stockholders
Meeting Proposals in a manner adverse to the Company or (ii) fail to include the
recommendation of the Board of Directors of Parent in favor of approval of the
Parent Stockholders Meeting Proposals pursuant to Section 5.02(b) or fail to
take the action required by the second sentence of Section 5.02(b); or
A-50
(k) by the Company, if any party to a Voting Agreement shall repudiate such
agreement or such agreement shall otherwise be unenforceable, PROVIDED that the
Company shall not be entitled to terminate this Agreement under this
Section 7.01(k) as a result of the death or incapacity of either of the
stockholders that are parties to the Voting Agreements or any circumstances
arising from such death or incapacity.
SECTION 7.02. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 7.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or stockholders except that (i) the Company,
Parent or Merger Sub may have liabilities or obligations as set forth in
Section 7.03 and as set forth in or contemplated by Section 8.01 hereof.
Notwithstanding the foregoing, nothing herein shall relieve the Company, Parent
or Merger Sub from liability for any willful breach hereof or willful
misrepresentation herein (it being understood that (x) the provisions of
Section 7.03 do not constitute a sole or exclusive remedy for such willful
breach or misrepresentation and (y) the mere existence of a Material Adverse
Effect, by itself, shall not constitute such a willful breach).
SECTION 7.03. FEES AND EXPENSES. (a) Except as set forth in this
Section 7.03, all fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, whether or not the Merger is consummated; PROVIDED, HOWEVER, that
if the Merger is not consummated, Parent and the Company shall share equally
(i) all SEC filing fees and printing expenses incurred in connection with the
printing and filing of the Joint Proxy Statement/Prospectus (including any
preliminary materials related thereto) and the Registration Statement (including
financial statements and exhibits) and any amendments or supplements thereto and
(ii) conveyance and similar taxes required to be paid by the Company prior to
the Effective Time pursuant to Section 5.14.
(b) The Company shall pay Parent a fee of $22.5 million (the "Fee"), and
shall pay Parent's actual, documented and reasonable out-of-pocket expenses,
relating to the transactions contemplated by this Agreement (including, but not
limited to, fees and expenses of counsel and accountants and out-of-pocket
expenses (but not fees) of financial advisors) ("Expenses," as applicable to
Parent or the Company), in a combined amount not to exceed $1.0 million, upon
the first to occur of any of the following events:
(i) the termination of this Agreement by Parent or the Company pursuant to
Section 7.01(d) following the Company Stockholder Meeting at which the
stockholders of the Company failed to approve this Agreement, PROVIDED
that the Alternative Transaction Condition (as defined below) is
satisfied; or
(ii) the termination of this Agreement by Parent pursuant to
Section 7.01(e); or
(iii) the termination of this Agreement by the Company pursuant to
Section 7.01(i).
The "Alternative Transaction Condition" shall be satisfied in respect of a
termination of this Agreement if (A) an Alternative Transaction shall be
publicly announced by the Company or any third party during the period beginning
on the date of this Agreement and ending 6 months following the date of
termination of this Agreement and (B) such transaction shall at any time
thereafter be consummated on terms substantially equivalent to or more favorable
to the Company or its stockholders than the terms theretofore announced;
PROVIDED that for purposes of this definition, the definition of Alternative
Transaction set forth in Section 4.02(a) shall be modified to replace "25%," as
it appears in such definition, with "40%".
(c) Upon a termination of this Agreement by Parent pursuant to
Section 7.01(h), the Company shall pay to Parent its Expenses relating to the
transactions contemplated by this Agreement in a combined amount not to exceed
$1.0 million; and, in addition, the Company shall pay Parent the Fee
A-51
provided that (i) such Terminating Breach is willful and (ii) the Alternative
Transaction Condition is satisfied.
(d) Upon a termination of this Agreement by Parent pursuant to
Section 7.01(f), the Company shall pay to Parent its Expenses relating to the
transactions contemplated by this Agreement in a combined amount not to exceed
$1.0 million. Upon termination of this Agreement by the Company pursuant to
Sections 7.01(f), 7.01(h) or 7.01(j), Parent shall pay to the Company the
Expenses of the Company relating to the transactions contemplated by this
Agreement, in an amount not to exceed $1.0 million.
(e) The Fee and/or Expenses payable pursuant to this Section 7.03 shall be
paid within one business day after a demand for payment following the first to
occur of any of the events described in the aforesaid Sections, as applicable;
PROVIDED that in no event shall the Company be required to pay the Fee or any
Expenses to Parent, nor shall Parent be required to pay any Expenses to the
Company if, immediately prior to the termination of this Agreement, the entity
otherwise entitled to receive such fee and/or expenses was in material breach of
its obligations under this Agreement or, in the case of Parent, Merger Sub was
in material breach of its obligations under this Agreement.
(f) Each of the Company, Parent and Merger Sub agrees that the payments
provided for in this Section 7.03 shall be the sole and exclusive remedy of
Parent and Merger Sub upon a termination of this Agreement by Parent pursuant to
Section 7.01(d), (e), (f), (h) or (i), and the payments provided for in this
Section 7.03 shall be the sole and exclusive remedy of the Company upon a
termination of this Agreement by the Company pursuant to Section 7.01(f),
(h) or (j), regardless of the circumstances giving rise to such termination;
PROVIDED, HOWEVER, that the foregoing shall not apply to any willful breach of
this Agreement or any willful misrepresentation hereunder giving rise to such
termination. Subject to Section 7.03(e), if a party is entitled to terminate
this Agreement pursuant to more than one clause of Section 7.01, such party
shall be entitled to receive the Fees and Expenses to which it is entitled as a
result of any such termination, provided that in no event shall there be any
duplication of payment.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. (a) Except as otherwise provided in this Section 8.01, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01, except that the agreements set forth in Article I and
Sections 5.06, 5.08(b), 5.11, 5.12 and 5.17 and any other agreement in this
Agreement which contemplates performance after the Effective Time shall survive
the Effective Time indefinitely and those set forth in Sections 7.02 and 7.03
and this Article VIII shall survive termination indefinitely. The Parent
Confidentiality Agreement and the Company Confidentiality Agreement shall
survive termination of this Agreement in accordance with their respective terms.
(b) Any disclosure made with reference to one or more Sections of the
Company Disclosure Schedule or the Parent Disclosure Schedule shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant provided that such relevance is reasonably apparent on the face of
such disclosure. Disclosure of any matter in the Company Disclosure Schedule or
the Parent Disclosure Schedule shall not be deemed an admission that such matter
is material.
A-52
SECTION 8.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
Vishay Intertechnology, Inc.
63 Lincoln Highway
Malvern, Pennsylvania 19355-2120
Attn: Avi D. Eden
Telecopy: (610) 889-2161
With a copy (which shall not constitute notice) to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attn: Abbe L. Dienstag, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
(b) If to the Company:
General Semiconductor, Inc.
10 Melville Park Road
Melville, New York 11747
Attn: Stephen B. Paige, Esq.
Telecopy: (631) 847-3033
With a copy (which shall not constitute notice) to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attn: Lois Herzeca, Esq.
Telecopy: (212) 859-4000
Confirm: (212) 859-8000
SECTION 8.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "affiliates", with respect to any person, means a person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "business day" means any day other than a day on which banks in New
York City are required or authorized to be closed;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "knowledge" means, with respect to any matter in question, that the
executive officers or any employee having primary or substantial oversight
responsibility for the matter of the Company or Parent, as the case may be, have
or at any time had actual knowledge of such matter;
A-53
(e) "Material Adverse Effect," when used in connection with the Company or
any of its subsidiaries or Parent or any of its Subsidiaries, as the case may
be, means any change, effect or circumstance that is materially adverse to the
business, assets (including intangible assets), financial condition or results
of operations of the Company and its subsidiaries, taken as whole, or Parent and
its subsidiaries, taken as a whole, as the case may be; PROVIDED, HOWEVER, that
each of the following shall be excluded from the definition of Material Adverse
Effect and from any determination as to whether a Material Adverse Effect has
occurred or may occur: changes, effects or circumstances, that are applicable to
(A) the semiconductor industry or the discrete electronics components industry
generally, (B) the United States securities markets generally, (C) personnel and
other changes customarily attendant to transactions of the type contemplated by
this Agreement, including, without limitation, any disruption of customer,
supplier or employee relationships, (D) changes in economic, regulatory or
political conditions generally, (E) the litigation brought against the Company
by Siliconix Incorporated in the United States District Court for the Northern
District of California and any related claims between the current parties to
such litigation or between the Company and Parent (the "S Litigation") and
(F) the restructuring described in Section 2.08 of the Company Disclosure
Schedule.
(f) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
more than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
When reference is made in this Agreement to the Company or Parent, such
reference shall include their respective subsidiaries, as and to the extent the
context so requires, whether or not explicitly stated in this Agreement.
SECTION 8.04. AMENDMENT. This Agreement may be amended by the parties
hereto at any time prior to the Effective Time; provided, however, that, after
approval of this Agreement by the stockholders of the Company, no amendment may
be made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 8.05. WAIVER. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 8.06. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.07. SEVERABILITY. (a) If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
material manner adverse to any party. Upon a determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
A-54
(b) The Company and Parent agree that the Fee provided in Section 7.03(b)
is fair and reasonable in the circumstances. If a court of competent
jurisdiction shall nonetheless, by a final, non-appealable judgment, determine
that the amount of the Fee exceeds the maximum amount permitted by law, then the
amount of the Fee shall be reduced to the maximum amount permitted by law in the
circumstances, as determined by such court of competent jurisdiction.
SECTION 8.08. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matters
hereof and thereof, except as otherwise expressly provided herein or therein,
other than the Parent Confidentiality Agreement and the Company Confidentiality
Agreement.
SECTION 8.09. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise, except that all or any of the rights of Parent
and/or Merger Sub hereunder may be assigned to any direct or indirect wholly
owned subsidiary of Parent, PROVIDED that no such assignment shall relieve the
assigning party of its obligations hereunder.
SECTION 8.10. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than Section 5.06 (which is intended to be for the benefit of the Indemnified
Parties and Covered Persons and may be enforced by such Indemnified Parties and
Covered Persons) and other than the right of the stockholders of the Company to
receive the Merger Consideration if, but only if, the Merger is consummated and
not otherwise.
SECTION 8.11. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 8.12. GOVERNING LAW; JURISDICTION. (a) All questions concerning
the construction, validity and interpretation of this agreement and the
schedules hereto will be governed by the internal law, and not the law of
conflicts, of the State of Delaware.
(b) Each of the parties to this Agreement submits to the jurisdiction of
any state or federal court sitting in Wilmington, Delaware, in any action or
proceeding arising out of or relating to this Agreement, agrees that all claims
in respect of the action or proceeding may be heard and determined in any such
court, and agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the parties to this
Agreement waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety or other security
that might be required of any other party with respect thereto.
SECTION 8.13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.14. WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
A-55
SECTION 8.15 PERFORMANCE OF OBLIGATIONS. Unless otherwise previously
performed, Parent shall cause each of Merger Sub and the Surviving Corporation
to perform all of its obligations set forth in this Agreement.
SECTION 8.16 ENFORCEMENT. (a) The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
(b) The parties agree and acknowledge that (i) each of Parent and the
Company shall not, and shall cause their respective subsidiaries and affiliates
not to, utilize any statement herein or the failure to make a statement herein,
as evidence in support of any position of the parties or their respective
subsidiaries and affiliates in the S Litigation, and (ii) the S Litigation, and
the Intellectual Property Assets in issue, or which in the future become an
issue in the S Litigation shall be deemed expressly excluded from the respective
representations and warranties of the parties in Section 2.19 and Section 3.19.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
VISHAY INTERTECHNOLOGY, INC.
By: /s/ AVI D. EDEN
-----------------------------------------
Name: Avi D. Eden
Title: Executive Vice President and
General Counsel
VISHAY ACQUISITION CORP.
By: /s/ AVI D. EDEN
-----------------------------------------
Name: Avi D. Eden
Title: Vice President
GENERAL SEMICONDUCTOR, INC.
By: /s/ RONALD A. OSTERTAG
-----------------------------------------
Name: Ronald A. Ostertag
Title: COB, CEO
A-56
July 31, 2001
Board of Directors
General Semiconductor, Inc.
10 Melville Park Road
Melville, NY 11747-3113
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders
of Company Common Stock (as defined below) from a financial point of view of the
proposed Exchange Ratio (as defined below) set forth in the Agreement and Plan
of Merger, dated as of July 31, 2001 (the "Merger Agreement"), by and among
Vishay Intertechnology, Inc. ("Parent"), Vishay Acquisition Corp., a wholly
owned subsidiary of Parent ("Merger Sub"), and General Semiconductor, Inc. (the
"Company"). The Merger Agreement provides for, among other things, the merger of
Merger Sub with and into the Company (the "Merger") pursuant to which the
Company will become a wholly owned subsidiary of Parent and each outstanding
share of common stock, par value $.01 per share (together with the preferred
stock purchase rights associated therewith, "Company Common Stock"), of the
Company will be converted into 0.563 (the "Exchange Ratio") of a share of common
stock, par value $0.10 per share ("Parent Common Stock"), of Parent.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company and Parent, as well
as the Merger Agreement and certain related documents. We have also reviewed
certain other information, including financial forecasts, provided to or
discussed with us by the Company and Parent, and have discussed the business and
prospects of the Company and Parent with management of the Company and Parent.
We have also considered certain financial and stock market data of the Company
and Parent, and we have compared those data with similar data for other publicly
held companies in businesses similar to the Company and Parent and we have
considered, to the extent publicly available, the financial terms of certain
other business combinations and other transactions which have recently been
effected. We also considered such other information, financial studies, analyses
and investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have been advised and have assumed, that
such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the Company's and Parent's
managements as to the future financial performance of the Company and Parent and
as to the cost savings and other potential synergies (including the amount,
timing and achievability thereof) anticipated to result from the Merger. You
also have advised us, and we have assumed, that the Merger will be treated as a
tax-free reorganization for U.S. federal income tax purposes. With your consent,
we have also assumed that in the course of obtaining the necessary regulatory
and third party approvals and consents for the Merger, no delay, limitation,
restriction or condition will be imposed that will have a material adverse
effect on the anticipated benefits of the Merger and that the Merger will be
consummated in accordance with the terms of the Merger Agreement, without
waiver, amendment or modification of any material term,
condition or agreement. In addition, we have not been requested to make, and
have not made, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company or Parent, nor have we been
furnished with any such evaluations or appraisals. Our opinion is necessarily
based upon information available to us, and financial, economic, market and
other conditions as they exist and can be evaluated on the date hereof. Our
opinion does not address the relative merits of the Merger as compared to other
transactions or business strategies that might be available to the Company, nor
does it address the underlying business decision of the Company to engage in the
Merger. We are not expressing any opinion as to the actual value of Parent
Common Stock when issued to the Company's stockholders pursuant to the Merger or
the prices at which Parent Common Stock will trade at any time.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger. We will also receive a fee
upon delivery of this opinion. We or our affiliates have in the past provided,
and may in the future provide, certain financial and investment banking services
to the Company and Parent unrelated to the Merger for which we have received,
and expect to receive, compensation. In the ordinary course of our business, we
and our affiliates may actively trade the debt and equity securities and other
financial obligations of both the Company and Parent for our and such
affiliates' own accounts and for the accounts of customers and, accordingly, may
at any time hold a long or short position in such securities and obligations.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the Merger and
does not constitute a recommendation to any stockholder of the Company as to how
such stockholder should vote or act on any matter relating to the proposed
Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the proposed Exchange Ratio is fair to the holders of Company
Common Stock from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ DANIEL V. SCHLEIFMAN
-----------------------------------------
Daniel V. Schleifman
MANAGING DIRECTOR
B-2