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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/X/ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[Fee Required]
For the fiscal year ended January 2, 1995
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[No Fee Required]
For the transition period from to
COMMISSION FILE NUMBER: 1-10079
CYPRESS SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction
of incorporation or organization)
94-2885898
(I.R.S. Employer
Identification No.)
3901 NORTH FIRST STREET, SAN JOSE, CALIFORNIA 95134-1599
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (408) 943-2600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.01 par value New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
form 10-K. /X/
At February 24, 1995, registrant had outstanding 39,500,868 shares of
Common Stock. The market value of voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on February
24, 1995 on the New York Stock Exchange, was approximately $1,066,523,436.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Proxy Statement for Registrant's 1995 Annual Meeting of
Stockholders are incorporated by reference in Items 10, 11, 12 and 13 of Part
III of this 10-K Report.
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PART I
ITEM I. BUSINESS
GENERAL
Cypress Semiconductor Corporation ("Cypress" or the "Company") designs,
develops, manufactures and markets a broad line of high performance digital
integrated circuits for a range of markets, including computers,
telecommunications, instrumentation and military systems. The Company currently
offers approximately 295 products, most of which are designed to equal or exceed
the speed performance of other equivalent commercially available products, from
its static memory, programmable products, computation products and data
communications divisions. Cypress's products are marketed worldwide through a
network of 23 North American sales offices, 6 North American distributors, 19
U.S. sales representative firms, 10 European sales offices, an office in Japan,
an office in Singapore and 28 international sales representative firms. The
Company sells its products to a wide range of customers, including AT&T,
Alcatel, Cisco Systems, Compaq Computer, Digital Equipment, Hewlett-Packard,
IBM, Intel, Motorola, NEC, Northern Telecom, Siemens, and 3Com Corporation. In
1994, international sales contributed 32% of the Company's total sales.
The Company's initial strategy was to provide innovative high performance
CMOS (complementary metal-oxide silicon) integrated circuits to niche markets,
which were believed to be too small to warrant the considerable investment which
would be required for the major established international semiconductor
manufacturers to target those markets. The Company modified its strategy during
1992 to focus on selected high volume products, particularly in the static RAM
and PLD markets, to bring those products to market quickly and at reduced cost
and to achieve significant market acceptance of those targeted products. Because
of the highly competitive nature of the semiconductor industry, its cyclicality
and anticipated pressure on average selling prices over the life of any
particular product, the Company's ability to successfully implement this
strategy and achieve its revenue, earnings and gross margin goals will depend
upon a number of factors, including its ability to maintain its position in the
high performance markets, to increase its presence in the more competitive high
volume markets, to continue to successfully design and develop new products
utilizing advanced semiconductor design and process technologies in a timely
fashion, to improve manufacturing yields and reduce manufacturing costs and
cycle time and to effectively market and sell its products in light of
significant domestic and international competition.
The Company was incorporated in California in December 1982. The Company's
initial public offering of Common Stock occurred in May 1986 at which time the
Company's Common Stock commenced trading on the Nasdaq National Market. In
February 1987, the Company reincorporated in Delaware. The Company listed its
Common Stock on the New York Stock Exchange on October 17, 1988.
PRODUCTS
In 1993, in order to lower costs and accelerate its response to market
opportunities, Cypress reduced the number of business units from eight to
four -- two focused on core technologies (Static Memory Division and
Programmable Products Division) and two on end-market segments (Data
Communications Division and Computation Products Division). The 1994 acquisition
of Contaq Microsystems, Inc., a chipset design group, has increased the number
of products Cypress supports on the PC motherboard. Because the semiconductor
industry is characterized by rapid technological change, resulting in products
with higher speed, densities and performance capabilities and continuing
evolution of process technologies, the Company's success will continue to depend
upon timely development, introduction and market acceptance of new products in
these areas.
Static Memory Division (SMD)
Static RAMs (Static Random Access Memories). High speed static RAMs are
used for storage and retrieval of data in computers and other electronic
systems. Because a computer is required to read from or write into its memory
several times to complete an operation, high performance system designers are
very sensitive to memory access time, which can be a major bottleneck in overall
system performance. Fast static
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RAMs are used for functions such as "cache memory" to store the data being
processed by the computer's central processing unit (CPU). The static RAM market
is characterized by the requirements for many different "densities" (number of
bits per memory circuit) and "organizations" (number of bits available to the
user in a single access of the RAM). This organizational differentiation of the
static RAM market -- when combined with the different RAM features incorporated
by various manufacturers, the need for both military and commercial products,
the need for different package types and the usual grading of product by speed
and power -- produces a complex market structure. The Company's continued
progress in lowering its manufacturing costs has allowed the Static Memory
Division to compete effectively in the high volume personal computer and
workstation markets.
Multichip Modules. The Company's high density memory and logic modules are
assembled from high performance devices in a single surface mount package in
order to create custom or standard enhanced single circuit equivalents such as
multi-megabit static RAMs and complete cache memories used within many high
performance personal computers. These modules can provide the solution to many
of the advanced circuit "building blocks" required by modern systems designers.
The multichip modules allow the Company increased visibility on customer trends
and future needs for single chip memory products and an additional means to
satisfy the present needs of customer systems already incorporating Cypress
products.
Programmable Products Division (PPD)
EPROMs (Erasable Programmable Read-Only Memories). EPROMs are used in
computers and telecommunications systems to store fixed data which is not
altered during machine operation. Customers buy blank EPROMs and program the
data which is required for a specific application. EPROMs are generally used in
systems such as high performance computers, telecommunication equipment,
military equipment and computer peripherals. In September 1984, Cypress
introduced its first high speed CMOS EPROMs and became one of the first
companies to combine the fast operating speeds of PROMs with the low power
consumption of the CMOS technology. The Company believes that it is one of the
broad-line performance and volume leaders in the fast CMOS EPROM market, with
products ranging from 4K to 1Meg in density.
PLDs (Programmable Logic Devices). The "logic" in an electrical system
performs the non-memory functions, such as "floating-point mathematics," or the
organization and routing of signals throughout a computer system. This
constitutes a significant portion of the circuitry in most systems. The Company
manufactures several logic circuits which are programmable by the user. The
Company's PLD products allow the user to replace many standard logic devices
with a single device, thus reducing package count and cost, improving
performance and allowing miniaturization. Cypress's CMOS PLDs are as fast as the
fastest bipolar PLDs but require 50% less power for the same function at the
equivalent speed. The Company's CMOS PLD products are differentiated based on
organization and complexity, including the number of inputs and whether the
outputs are dedicated or programmable. The Company's PLD portfolio consists of a
wide variety of devices ranging from the Flash 16V8 to the very high density
CPLD's (complex PLD's) and FPGA's (field programmable gate array). All Cypress
products are supported by the WARPTM software tool set which is based on VHDL
(very high speed integrated circuit hardware description language), an industry
standard.
FCT (Fast CMOS Technology) Logic Devices. The Company's 1993 acquisition
of certain inventory and technology from Performance Semiconductor Corporation's
FCT product line gives the Company access to widely used logic devices for
implementing bus interface and standard logic functions in high speed systems.
The Company now offers a full compliment of standard logic and bus interface
functions at 8 and 16 Bits.
Data Communications Division (DCD)
The Company's Datacom products serve the high speed data communications
market with a range of products from the physical connection layer to system
level solutions. HOTLinkTM, a high speed, point-to-point serial communications
chip, is the Company's first product addressing this market. HOTLink has ramped
into production as the interface of choice for ECONTM the IBM standard for
connecting mainframes to mass storage (disk farms) devices. RoboKLOK, in
production for over one year, continues to find new applications as the
industry's most flexible programmable skew clock generator. The SST (SONET
Serial
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Transceiver) went from sampling in Q1 to full production and became one of the
top revenue providers by the end of the year. This device produces performance
which is superior to competitive products. The specialty memory devices show
continued strength as the telecom and cellular markets continue to grow. VME
products revenue have grown at a moderate pace and new products will be added in
1995.
Computation Products Division (CPD)
Timing Technology Devices. The Company serves this market through its
subsidiary, IC Designs, Inc. (ICD), in Kirkland, Washington. Timing technology
devices are widely used in personal computers. Consequently, ICD serves high
volume major personal computer manufacturers. ICD's clock oscillators control
the intricate timing of all aspects of a computer system, including signals for
the computer's CPU, video controller, keyboard, disk drives, system bus, serial
ports and real-time clock. ICD's clock synthesizer integrates essentially all
clock requirements of a personal computer, thus reducing size, power consumption
and cost. ICD's programmable metal can oscillator, QuiXTALTM, is able to replace
individual oscillators and control timing signals in virtually every type of
electronic equipment expanding beyond the personal computer market.
Systems Logic. The Company serves the PC compatible systems logic market
with products from its recently acquired company, Contaq Microsystems, Inc. The
group will be taking advantage of its SRAM capabilities to provide products with
significantly higher levels of integration than its competitors. The group's
goal is to provide, from one source, all of the silicon on a PC motherboard,
except the CPU and DRAM.
RESEARCH AND DEVELOPMENT
The Company places great emphasis on research and development. This
involves a significant management time commitment to the improvement of research
and development efficiency. The Company's current product strategy requires
rapid development of new products using emerging process technologies while
minimizing research and development costs. The Company performs research and
development at two levels. Research and development relating to process
technology is managed at the corporate level, while research and development
relating to new product design is managed at the operating level by each of the
divisions, in cooperation with the new product production teams.
The Company's research and development expenditures in 1994 were $53.2
million (13% of revenues), compared with $49.8 million (16% of revenues) in 1993
and $65.0 million (24% of revenues) in 1992. The decline in R&D expenses as a
percent of revenues in 1994 is partially attributed to the sale of its
subsidiary Ross Technology, Inc., in 1993. R&D expenses as a percent of revenues
without the expenses incurred by Ross would have been 15% and 20% in 1993 and
1992, respectively. Although actual research and development spending increased
from the prior year, the rate of growth was surpassed by the growth in revenues.
The Company expects to continue to increase spending in research and development
in order to maintain its competitiveness in new product design and process
technology development.
MANUFACTURING
The Company manufactures its products at three sub-micron wafer fabrication
facilities using its proprietary 0.5, 0.65, 0.8 and 1.2-micron CMOS, 0.8 and
0.5-micron BiCMOS and 0.65-micron Flash technologies. To further its competitive
position, the Company has programs to reduce manufacturing cycle times, improve
yields and lower costs. Cypress San Jose (Fab I), the Company's first
fabrication facility is the heart of Cypress's research and development
operations. Cypress Texas (Fab II) is the Company's largest wafer fabrication
facility. Cypress Minnesota (Fab III), which commenced operations in 1991, has
nearly doubled its manufacturing output from 1993 to 1994. Cypress Minnesota
(Fab IV), currently under construction next to Fab III, is the Company's newest
wafer fabrication facility. Fab IV is planned to be in production during the
second half of 1995. This will be a complete 0.5 micron and below capable 8-inch
wafer fab. During December 1994, Cypress Minnesota demonstrated fully functional
8-inch wafers utilizing its pilot line. Assembly and Test operations continue in
Asia with offshore contractors. In March 1995, the Company made a $1.6 million
deposit on land in the Philippines. The full cost of the land is $3.5 million
which will be
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paid pending the Company's achieving "pioneer" status with the Export Processing
Zone Authority of the Philippines. An Assembly and Test plant is planned to be
operational in 1996.
The process technology for the fabrication of the Company's CMOS
semiconductor products is highly complex and sensitive to dust and other
contaminants, requiring production in a highly controlled, clean environment.
Although the fabrication process is highly controlled, the equipment may not
perform flawlessly. Minute impurities, difficulties in the production process or
defects in the masks can cause a substantial percentage of the wafers to be
rejected or individual die on each wafer to be nonfunctional, which results in
the so called "yield" problem which is indigenous to the semiconductor industry.
The Company's philosophy is to prevent wafer fab yield loss and/or quality
problems through analytical manufacturing controls. The Company tests its
products at various stages in the fabrication process, performs high temperature
burn-in qualification as well as continuous reliability monitoring on all
products, and conducts numerous quality control inspections throughout the
entire production flow using its quality-control analytical equipment. The
Company has, on occasion, experienced delayed product shipments due to lower
than acceptable production yields. Accordingly, to the extent the Company does
not achieve acceptable product yields, its operating results will be adversely
affected.
The raw materials and equipment used in the production of the Company's
integrated circuits are available from several suppliers and the Company is not
dependent upon any single source of supply. Shortages could occur in various
essential materials due to interruption of supply or due to increased demand in
the industry. Shortages have occurred in the Company's history and lead times
have been extended in the industry on occasion without adversely affecting the
Company.
Federal, state and local regulations impose various environmental controls
on the discharge of chemicals and gases used in the manufacturing process.
Increasing public attention has been focused on the environmental impact of
semiconductor operations. The Company believes that its activities conform to
present environmental regulations in all material respects. However, the Company
has from time to time received notice of non-compliance with certain operations
and filing obligations under applicable federal regulations and local
ordinances. While the Company has not experienced any materially adverse effects
on its operations from governmental regulations, there can be no assurance that
such regulations will not in the future impose the need for additional capital
equipment, penalties or other requirements or result in liability for personal
injury or property damage. Further, any failure by semiconductor companies,
including the Company, to adequately control the use of or restrict the
discharge of hazardous substances could also subject them to significant future
liabilities.
MARKETING AND SALES
The Company uses four channels to sell its products: direct OEM (original
equipment manufacturer) sales by the Cypress sales force, direct OEM sales by
manufacturing representative firms, sales through domestic distributors and
sales through international trading companies and representative firms. The
Company's marketing and sales effort is organized around four regions: North
America, Europe, Japan and Asia/Pacific. The Company also has a strategic
accounts group which is responsible for specific customers with worldwide
operations. The Company augments its sales effort with FAEs (field application
engineers) who are specialists in the Company's product portfolio and work with
customers to "design in" Cypress products for their systems. FAEs also help the
Company identify emerging markets and new products.
International revenues were 32% in 1994 compared to 27% in 1992 and 1993.
One distributor accounted for 10% of revenue in 1994 and 11% of revenue in 1993.
The Company warrants its products against defects in materials and workmanship
for a period of one year and the product warranty is generally limited to a
refund of the original purchase price of the product.
BACKLOG
Cypress's sales are typically made pursuant to standard purchase orders for
delivery of catalog products. Generally, the Company's customer relationships
are not subject to long-term contracts. Quantities of the Company's products to
be delivered and delivery schedules, under purchase orders outstanding from time
to
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time, are frequently revised to reflect changes in customer needs. For these
reasons, the Company's backlog as of any particular date is not representative
of actual sales for any succeeding period and the Company believes that backlog
is not a good indicator of future revenue.
COMPETITION
The semiconductor industry is intensely competitive and has been
characterized by price erosion, rapid technological change and heightened
foreign competition in many markets. The industry consists of major domestic and
international semiconductor companies, many of which have substantially greater
financial, technical, marketing, distribution and other resources than the
Company, as well as emerging companies attempting to obtain a share of the
existing market. The Company faces competition from other domestic and foreign
high performance integrated circuit manufacturers, many of which have advanced
technological capabilities and have increased their participation in the CMOS
and BiCMOS market sector. The ability of the Company to compete successfully in
the rapidly evolving high performance end of the integrated circuit technology
spectrum depends on elements both within and outside of its control, including
success in developing new products and process technologies, product quality and
price, diversity of product line, cost effectiveness, the pace at which
customers incorporate the Company's products into their systems, the number and
nature of its competitors and general economic conditions. The Company believes
it competes favorably with respect to developing new products and process
technologies, product quality and price, diversity of product line and cost
effectiveness. Price competition in the future could further erode average
selling prices and adversely affect revenues and operating results.
In the low to medium density static RAM area (16K-bit or less in density),
the Company competes against equivalent products of a few manufacturers such as
Integrated Device Technology (IDT). There is more significant price competition
in the higher-volume 64K-bit and 256K-bit static RAM area in which the Company's
competitors include IDT, Motorola, Micron Technology, Hitachi and other Japanese
and Korean manufacturers, as well as several smaller niche oriented
semiconductor start ups.
There are few CMOS competitors in the relatively small high speed PROM
market. However, with the Company's entry into the EPROM market, the Company
will increasingly compete in CMOS EPROMs with Advanced Micro Devices (AMD), SGS
Thompson, Texas Instruments, Fujitsu, Atmel and Waferscale Integration. The
Company competes extensively against bipolar PROM circuit manufacturers such as
Philips Corporation, AMD and National Semiconductor Corporation.
The Company's PLD competition consists of bipolar products from companies
such as AMD and Texas Instruments, and from CMOS PLDs from larger competitors,
including Samsung, AMD, Actel, Altera, Lattice Semiconductor and Xilinx.
Additionally, the sale of PLDs is, in part, dependent on the availability of
user design software. Both Altera and Xilinx have such software packages.
The Company's data communications and logic products compete against
bipolar products of similar functionality from established companies such as
AMD, as well as CMOS versions of these products from companies such as IDT,
Samsung and Sharp.
The Company competes against companies such as ICS/Avasem and Chrontel with
respect to timing technology products; IDT, Quality Semiconductor and Pericom
with respect to FCT products; and IDT, among others, with respect to module
products.
The Company's system logic products compete with products from Intel, Opti,
VLSI and Taiwanese manufacturers SIS, ALI and UMC.
PATENTS AND LICENSES
The Company currently has 43 patents and has 56 additional patent
applications on file with the United States Patent Office and is preparing to
file several more patent applications. In addition to factors such as
innovation, technological expertise and experienced personnel, the Company
believes that patents are becoming increasingly important to compete in the
industry and has an active program to acquire additional patent protection.
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There can be no assurance that any patent owned by the Company will not be
invalidated, circumvented or challenged, that the rights granted thereunder will
provide competitive advantages to the Company or that any of the Company's
pending or future patent applications, whether or not being currently challenged
by applicable governmental patent examiners, will be issued with the scope of
the claims sought by the Company, if at all. Furthermore, there can be no
assurance that others will not develop technologies that are similar or superior
to the Company's technology, duplicate the Company's technology or design around
the patents owned by the Company.
In addition, the Company is currently and may in the future be involved in
litigation with respect to alleged infringement by the Company of another
party's patents, or may in the future be involved in litigation to enforce its
patents or other intellectual property rights, to protect its trade secrets, to
determine the validity or scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation has in the
past and could in the future result in substantial costs and diversion of
resources and payment of substantial damages and/or royalties or prohibitions
against utilization of essential technologies, and could have a material adverse
effect on the Company's business, financial condition or results of operations.
From time to time the Company has received, and may receive in the future,
notice of claims of infringement of other parties' proprietary rights. Although
the Company does not believe that its products or processes infringe the
proprietary rights of any third parties, there can be no assurance that
infringement or invalidity claims (or claims for indemnification resulting from
infringement claims) will not be asserted against the Company or that any such
assertions will not materially adversely affect the Company's business,
financial condition or results of operations. Irrespective of the validity or
the successful assertion of such claims, the Company could incur significant
costs with respect to the defense thereof which could have a material adverse
effect on the Company's business, financial condition or results of operations.
Moreover, if any claims or actions are asserted against the Company, although
the Company might seek to obtain a license under a third party's intellectual
property rights, there can be no assurance that, under such circumstances, a
license would be available under reasonable terms or at all.
The Company has entered into technology license agreements with third
parties which give those parties the right to use patents and other technology
developed by the Company and which give the Company the right to use patents and
other technology developed by such other parties, some of which involve payment
of royalties and some of which involve access to technology used in the
Company's operations. The Company anticipates that it will continue to enter
into such licensing arrangements in the future. There can be no assurance that
such licenses will continue to be available to the Company on commercially
reasonable terms in the future. The loss of or inability to obtain licenses to
key technology in the future could have a material adverse effect on the
Company's business, operating results or financial condition.
EMPLOYEES
As of January 2, 1995, the Company and its subsidiaries had 1,423
employees, as compared to 1,262 in 1993. The Company's ability to attract and
retain qualified personnel is essential to its continued success. None of the
Company's employees is represented by a collective bargaining agreement, nor has
the Company ever experienced any work stoppage. The Company believes that its
employee relations are good.
ITEM 2. PROPERTIES
The Company's executive offices, engineering and research and development
facilities are located in an approximately 60,000 square foot building at 195
Champion Court, San Jose, California under a lease which will expire in 1999.
The lease rate is subject to variations based on the London interbank offering
rate (LIBOR) and a requirement to sell or acquire the property at the end of the
lease term (see Note 7 of the Consolidated Financial Statements).
Research and development and other Company staff functions are located on
the San Jose site. This office space is composed of approximately 75,000 square
feet in a building located at 4001 North First Street, San Jose, California
under a lease which expires in 1996.
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In December 1988, the Company purchased the two undeveloped industrial lots
on either side of its headquarters building. These similarly sized lots,
comprising a total of approximately 8.5 acres, will be retained for future
expansion of the San Jose building complex.
The Company owns an approximately 65,000 square foot wafer fabrication
facility (Fab II) in Round Rock, Texas, and an approximately 170,000 square foot
wafer fabrication facility (Fab III) and an approximately 100,000 square foot
wafer fabrication facility (Fab IV) under development on 18 acres of land in
Bloomington, Minnesota. The Fab IV lease rate is subject to variations based on
the London interbank offering rate (LIBOR) and a requirement to sell or acquire
the property at the end of the lease term (see Note 7 of the Consolidated
Financial Statements).
The Company leases additional space for domestic sales and design centers
in Huntsville, Alabama; Calabasas, Irvine, San Diego and San Jose, California;
Denver and Colorado Springs, Colorado; Orlando and Tampa, Florida; Roswell,
Georgia; Palatine, Illinois; Columbia, Maryland; Minnetonka, Minnesota;
Starkville, Mississippi; Nashua, New Hampshire; Laurence Harbor, New Jersey;
Poughkeepsie, New York; Raleigh, North Carolina; Beaverton and Portland, Oregon;
Trevose, Pennsylvania; Austin, Houston and Richardson, Texas; and Falls Church,
Virginia. The Company leases international sales and design centers in La Hupe,
Belgium; Les Ulis Cedex, France; Milano, Orbassano and Rome, Italy; Tokyo,
Japan; Taby, Sweden; Cheshire, Basingstoke and Hertfordshire, United Kingdom;
Henstedt-Ulzburg and Zorneding, Germany; and Singapore, Singapore.
ITEM 3. LEGAL PROCEEDINGS
Texas Instruments (TI) has charged the Company and three other
semiconductor companies with infringement of two patents, primarily covering the
plastic encapsulation process used to package semiconductor devices. This action
was filed before the International Trade Commission (ITC) in Washington, D.C.,
and in the U.S. District Court in Dallas, Texas. The ITC has ruled that the
plastic packaging process known as "bottom gating" does infringe, but "top
gating", used now by the Company, does not infringe TI's patent. The Company
contends that the patents are invalid in their entirety. In March of 1993, the
U.S. District Court of Appeals for the Federal Circuit affirmed the ITC's
ruling. A trial date has been scheduled for April 1995 in the U.S. District
Court regarding this matter.
In January and February 1992, the Company and certain of its officers were
named defendants in three purported class-action suits filed in the U.S.
District Court for the Northern District of California. The suits filed are for
alleged violations of the Securities Exchange Act of 1934 and certain provisions
of state law regarding disclosure of short-term business prospects. In 1992, the
three securities class-action complaints were consolidated by the U.S. District
Court for the of California. The trial date has been scheduled for July 10,
1995.
The Company will vigorously defend itself in these matters and, subject to
the inherent uncertainties of litigation and based upon discovery completed to
date, management believes that the possibility of a material adverse impact on
the Company's financial position as a result of these matters is remote.
However, should the outcome of any of the actions be unfavorable, Cypress may be
required to pay damages and other expenses, which could have a material adverse
effect on the Company's financial position. In addition, the Company could be
required to alter certain of its production processes or products as a result of
these matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange under
the trading symbol "CY." The following table sets forth, for the periods
indicated, the low, high and closing sales prices for the Common Stock. The
Company has not paid cash dividends and has no present plans to do so. At
January 2, 1995 there were approximately 2,295 holders of record of the
Company's Common Stock.
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<CAPTION>
PRICE RANGE OF
COMMON STOCK($)
-------------------------
LOW HIGH CLOSE
----- ----- -----
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Fiscal year ended January 2, 1995:
First Quarter..................................... 13.38 19.88 16.13
Second Quarter.................................... 13.88 18.75 16.38
Third Quarter..................................... 15.75 20.50 16.38
Fourth Quarter.................................... 15.50 23.50 23.13
Fiscal year ended January 3, 1994:
First Quarter..................................... 8.63 12.38 10.25
Second Quarter.................................... 9.38 14.50 14.38
Third Quarter..................................... 12.13 16.75 13.00
Fourth Quarter.................................... 11.25 15.13 13.50
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
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YEAR ENDED(1)
----------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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Operating results:
Revenues.................................. $406,359 $304,512 $272,242 $286,829 $225,232
Acquisition-related non-recurring
charges................................ -- (18,271) -- -- --
Restructuring and other non-recurring
costs.................................. -- 408 (39,700) -- --
Income (loss) from operations............. 77,792 10,686 (35,636) 44,759 42,295
Income (loss) before tax.................. 80,115 12,567 (32,928) 51,771 50,349
Net income (loss)......................... 50,472 8,043 (21,010) 34,171 33,230
Net income (loss) per share
Primary................................ $ 1.23 $ 0.21 $ (0.56) $ 0.85 $ 0.87
Fully Diluted.......................... $ 1.20 -- -- -- --
Weighted average common and common
equivalent shares outstanding
Primary................................ 41,160 38,109 37,257 40,334 38,251
Fully Diluted.......................... 44,305 -- -- -- --
Balance sheet data:
Cash and short-term investments........... $193,275 $ 80,590 $ 82,046 $103,703 $ 91,650
Working capital........................... 225,952 124,651 133,966 150,735 139,192
Total assets.............................. 555,699 340,648 320,504 374,603 309,395
Long term debt and capital lease
obligations (excluding current
portion)............................... 93,653 -- 1,597 3,310 5,400
Stockholders' equity...................... 352,999 271,685 262,061 298,612 242,208
</TABLE>
---------------
(1) The Company operates on a 52- or 53-week fiscal year, ending on the Monday
closest to December 31.
8
<PAGE> 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
In 1994, the Company reported record revenues of $406.4 million, an
increase of 33.4% over last year. The growth in revenues resulted in record
profits of $50.5 million, or $1.20 per share, compared to $8.0 million, or $0.21
per share in 1993. This improvement in profitability was driven by the Company's
increased gross margins in 1994. As a result of lower manufacturing costs, gross
margins rose at the rate of one basis point per quarter. Lower costs allowed the
Company to continue to compete effectively in price-competitive, high-volume
markets.
In March, the Company completed a $110-million private placement of 7-year
discounted convertible notes due in 2001. A portion of the net proceeds of $89.4
million is being used to build a new 8-inch wafer fabrication facility in
Minnesota (Fab IV), which will provide additional production capacity.
Construction on the new fab began in the second quarter of 1994, with an
expected completion date in mid-1995.
During 1994, the Company entered into two operating lease agreements with
respect to its manufacturing and office facilities in San Jose and the
construction of its Fab IV manufacturing facility in Minnesota. The San Jose
facilities agreement included a deposit of $13.1 million related to its
obligation to arrange the sale of the facilities at the end of a five-year
period. The lease agreement related to the new Fab IV facility in Minnesota is a
similar arrangement except that the lease period is ten years, and the amount of
the deposit at year-end was $5.4 million. Both deposits are recorded as
restricted investments and are classified as non-current assets on the balance
sheet (see Note 7 of the Consolidated Financial Statements).
RESULTS OF OPERATIONS
In 1994, revenues increased to a record $406.4 million, compared to $304.5
million in 1993 and $272.2 million in 1992. The Static Memory and Data
Communications Divisions were the primary contributors to the growth in
revenues. The increase in revenues in the Static Memory Division was triggered
by an over 60% increase in volume from the previous year due to the strong
demand for cache memory in personal computers. The growth in the Data
Communications Division can be attributed to the introduction of new products,
led by the Specialty Memory line. 1994 was also the first year in which the
Company recorded significant revenues from its newly formed Computation Products
Division.
Cost of revenues as a percent of revenues for 1994 decreased to 55%,
compared to 59% in 1993 and 58% in 1992. Cost of revenues have decreased
steadily throughout 1994. Due to improved yields and faster cycle times in its
domestic production wafer fabrication plants, the Company experienced lower
wafer costs than in previous years. Lower cycle times and improved inventory
management have allowed the Company to reduce days in inventory to 44 compared
to 56 days in 1993 and 89 days in 1992.
Research and development (R&D) expenses decreased to 13% of revenues,
compared to 16% in 1993 and 24% in 1992. The decline in R&D expenses as a
percent of revenues in 1994 is partially attributed to the sale of Ross
Technology, Inc., in June 1993. R&D expenses as a percent of revenues without
the expenses incurred by Ross would have been 15% and 20% in 1993 and 1992,
respectively. Although actual research and development spending increased from
the prior year, the rate of growth was surpassed by the growth in revenues. The
Company expects to continue to increase spending in research and development in
order to maintain its competitiveness in new product design and process
technology development.
Marketing, general and administrative expenses decreased to 13% of revenues
in 1994, compared to 15% in 1993 and 17% in 1992. Although actual spending
increased significantly, the rate of growth was less than the rate of growth in
revenues. As the Company grows, cost control measures will continue to be
maintained.
Income from operations increased significantly in 1994, growing to $77.8
million. Income from operations in 1993 was $10.7 million, and in 1992, the
Company incurred a $35.6 million operating loss. The increase in operating
income can be attributed to significant revenue growth and better operating
margins realized due to lower operating expenses, improved manufacturing
efficiencies, and cost control measures. Included in
9
<PAGE> 11
operating income for 1993 were non-recurring charges of $18.3 million related to
acquisitions made by the Company. The operating loss experienced in 1992
included a $39.7 million charge for restructuring and other non-recurring costs.
Without these non-recurring charges, operating income would have been $29.0
million in 1993, and $4.1 million in 1992.
Net interest income in 1994 increased to $2.3 million, compared to $1.9
million in 1993, but lower than the $2.7 million in 1992. Cash investments have
increased due to the $89.4 million of net proceeds received from the convertible
subordinated notes issued in March of this year. The higher average balance of
investments and the increased average rate of return on short-term investments
in 1994 resulted in the improvement in interest income. This increase was
partially offset by additional interest expense related to the issuance of the
convertible notes.
The Company recorded income tax expense of $29.6 million in 1994, compared
to $4.5 million in 1993 and an $11.9 million income tax benefit in 1992 as a
result of the pre-tax loss of $32.9 million during that period. The effective
tax rate in 1994, 1993, and 1992 was 37.0%, 36.0%, and 36.2%, respectively.
In 1994, the Company's net income was $50.5 million, an increase from 1993
net income of $8.0 million and 1992 net loss of $21.0 million. Net income for
1993 would have been $19.5 million without acquisition-related, non-recurring
charges and $4.3 million for 1992 without the restructuring and other
non-recurring charges.
FACTORS AFFECTING FUTURE RESULTS
A number of uncertainties exist that could have an impact on the Company's
future, including general economic conditions, the rate of growth of the
networking, computer and telecommunications markets, and the need to accelerate
new product introductions. The Company's products continue to encounter
increased competition, and as a result, are subject to decreases in average
selling prices. Typically, the Company requires new orders, in addition to its
existing backlog, to meet that quarter's revenue plan. In addition, the
semiconductor industry is generally characterized by a highly competitive,
rapidly changing environment, where results are often significantly impacted by
the introduction of new products, new manufacturing technologies, and rapid
changes in the demand for products, which can lead to unpredictability in
monthly revenue. Due to the effect of these forces on the Company's future
operations, past performance should be only one indicator of future performance
and investors should not use historical trends to anticipate results in future
periods.
Current pending litigation and claims are set forth in Note 7 of the Notes
to Consolidated Financial Statements. The Company will vigorously defend itself
in these matters and, subject to the inherent uncertainties of litigation and
based upon discovery completed to date, management believes that the possibility
of a material adverse impact on the Company's financial position as a result of
these matters is remote. However, should the outcome of any of the actions be
unfavorable, the Company may be required to pay damages and other expenses,
which could have a material adverse effect on the Company's financial position.
In addition, the Company could be required to alter certain of its production
processes or products as a result of these matters.
FINANCIAL CONDITION
The Company's financial condition remained strong throughout 1994. Cash,
cash equivalents, and short-term investments at the end of fiscal year 1994 were
$193.3 million, an increase of $112.7 million from fiscal year-end 1993. Cash
generated from operations grew in 1994 to $122.1 million, compared to $68.9
million and $33.7 million in 1993 and 1992, respectively. A significant increase
in revenues and more efficient manufacturing resulted in an increase in cash
generated from operations.
Cash used for investing activities increased to $222.5 million, compared to
$41.9 million and $28.0 million in 1993 and 1992, respectively. Capital
expenditures for 1994 grew to $112.4 million. This is a significant increase
from the $55.5 million of capital expenditures made in 1993 and $31.9 million in
1992. The increase
10
<PAGE> 12
in capital is primarily due to the expansion of the Company's manufacturing
capacity and the construction of the new state-of-the-art, 8-inch fabrication
facility in Minnesota (Fab IV).
Cash generated from financing activities increased to $96.0 million in
1994, compared to a cash use of $1.8 million in 1993 and $18.4 million in 1992.
The primary reason for the growth in cash from financing activities was the
$89.4 million net proceeds received from the issuance of the convertible
subordinated notes in March 1994. The Company also received $24.5 million from
the issuance of capital stock through the exercise of employee and other stock
options. In 1993 and 1992, the cash received from the exercise of stock options
was $20.4 million and $11.0 million, respectively. In 1994, the Company entered
into two operating lease agreements with respect to its office and manufacturing
facilities in San Jose and Minnesota. These agreements require that the Company
maintain a specific level of restricted cash or investments to serve as
collateral for these leases. These restricted investments of $18.5 million at
year-end are classified as non-current assets on the balance sheet. In 1993 and
1992, the Company repurchased treasury stock in transactions totalling $19.7
million and $26.4 million, respectively. In 1994, no treasury stock was
repurchased.
The Company anticipates that existing sources of liquidity and cash flows
from operations will be sufficient to satisfy its cash needs in the foreseeable
future. The Company may, from time to time, as market conditions warrant,
purchase shares of its own common stock on the open market, invest in
complementary technologies, products, or businesses, or raise additional capital
through public and private markets.
11
<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CYPRESS SEMICONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 3,
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 33,308 $ 37,657
Short-term investments............................................... 159,967 42,933
---------- ----------
Total cash, cash equivalents, and short-term investments............. 193,275 80,590
Accounts receivable, net of allowances for doubtful accounts and
customer returns of $1,393 in 1994 and $1,347 in 1993............. 67,763 46,247
Other receivables.................................................... 2,426 7,957
Inventories.......................................................... 28,372 29,285
Other current assets................................................. 25,278 21,759
---------- ----------
Total current assets.............................................. 317,114 185,838
Property, plant and equipment, net..................................... 201,590 133,920
Other assets........................................................... 36,995 20,890
======== ========
$ 555,699 $ 340,648
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 55,777 $ 26,024
Accrued compensation and employee benefits........................... 10,544 7,071
Other accrued liabilities............................................ 11,714 12,570
Deferred income on sales to distributors............................. 9,688 8,851
Income taxes payable................................................. 3,439 6,671
---------- ----------
Total current liabilities......................................... 91,162 61,187
Convertible subordinated notes......................................... 93,653 --
Deferred income taxes.................................................. 11,209 4,432
Other long-term liabilities............................................ 6,676 3,344
---------- ----------
Total liabilities................................................. 202,700 68,963
---------- ----------
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; none
issued and outstanding............................................ -- --
Common stock, $.01 par value, 75,000,000 shares authorized;
43,683,000 and 40,973,000 issued; 38,910,000 and 36,200,000
outstanding....................................................... 437 410
Additional paid-in capital........................................... 238,661 207,846
Retained earnings.................................................... 159,985 109,513
---------- ----------
399,083 317,769
Less shares of common stock held in treasury, at cost; 4,773,000
shares at January 2, 1995 and January 3, 1994..................... (46,084) (46,084)
---------- ----------
Total stockholders' equity........................................ 352,999 271,685
---------- ----------
$ 555,699 $ 340,648
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
12
<PAGE> 14
CYPRESS SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 28,
1995 1994 1992
---------- ----------- ------------
<S> <C> <C> <C>
Revenues.............................................. $ 406,359 $ 304,512 $ 272,242
Costs and expenses:
Cost of revenues.................................... 222,620 179,821 158,159
Research and development............................ 53,188 49,798 64,951
Marketing, general and administrative............... 52,759 46,344 45,068
Acquisition-related non-recurring charges........... -- 18,271 --
Restructuring and other non-recurring costs......... -- (408) 39,700
---------- ----------- ------------
Total operating costs and expenses.................... 328,567 293,826 307,878
---------- ----------- ------------
Operating income (loss)............................... 77,792 10,686 (35,636)
Interest expense...................................... (4,041) (289) (440)
Interest income and other............................. 6,364 2,170 3,148
---------- ----------- ------------
Income (loss) before income taxes..................... 80,115 12,567 (32,928)
(Provision) benefit for income taxes.................. (29,643) (4,524) 11,918
---------- ----------- ------------
Net income (loss)..................................... $ 50,472 $ 8,043 $ (21,010)
======== ========== ==========
Net income (loss) per share:
Primary.......................................... $ 1.23 $ 0.21 $ (0.56)
======== ========== ==========
Fully diluted.................................... $ 1.20 $ -- $ --
======== ========== ==========
Weighted average common and common equivalent shares
outstanding:
Primary.......................................... 41,160,000 38,109,000 37,257,000
Fully diluted.................................... 44,305,000 -- --
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
13
<PAGE> 15
CYPRESS SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(SHARES AND DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------ ------ -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 30, 1991............. 37,840 $378 $175,754 $122,480 -- $ 298,612
Issuance of common stock under employee
stock plans............................. 1,100 11 9,059 9,070
Tax benefit resulting from stock option
transactions............................ 1,748 1,748
Repurchase of common stock under share
repurchase program...................... (2,873) $(26,359) (26,359)
Net loss for the year..................... (21,010) (21,010)
------ ------ -------- -------- -------- -------------
Balances at December 28, 1992............. 36,067 389 186,561 101,470 (26,359) $ 262,061
Issuance of common stock under employee
stock plans and other................... 2,033 21 17,051 17,072
Tax benefit resulting from stock option
transactions............................ 4,234 4,234
Repurchase of common stock under share
repurchase program...................... (1,900) (19,725) (19,725)
Net income for the year................... 8,043 8,043
------ ------ -------- -------- -------- -------------
Balances at January 3, 1994............... 36,200 410 207,846 109,513 (46,084) $ 271,685
Issuance of common stock under employee
stock plans and other................... 2,710 27 24,475 24,502
Tax benefit resulting from stock option
transactions............................ 6,340 6,340
Net income for the year................... 50,472 50,472
------ ------ -------- -------- -------- -------------
Balances at January 2, 1995............... 38,910 $437 $238,661 $159,985 $(46,084) $ 352,999
====== ====== ======== ======== ======== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
14
<PAGE> 16
CYPRESS SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 28,
1995 1994 1992
---------- ---------- ------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)......................................... $ 50,472 $ 8,043 $(21,010)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 45,039 41,245 47,634
Non-cash interest and amortization of debt issuance
costs................................................ 1,639 -- --
Provision for restructuring and other non-recurring
costs................................................ -- (408) 34,723
Acquisition-related non-recurring charges.............. -- 18,271 --
Deferred income taxes.................................. 1,257 (6,209) (11,570)
Changes in operating assets and liabilities:
Receivables.......................................... (15,985) (7,093) 12,156
Inventories.......................................... 913 11,800 451
Other assets......................................... (3,908) (2,278) 1,020
Accounts payable and accrued liabilities............. 31,999 (1,132) (12,805)
Deferred income...................................... 837 3,488 (5,234)
Income taxes payable and deferred income taxes....... 9,885 3,203 (11,680)
---------- ---------- ------------
Net cash flow generated from operating activities........... 122,148 68,930 33,685
---------- ---------- ------------
Cash flow from investing activities:
Decrease (increase) in short-term investments............. (117,034) 26,742 8,957
Acquisition of property, plant, and equipment............. (112,370) (55,485) (31,899)
Sale of equipment......................................... 7,918 -- --
Acquisition of IC Designs, Inc., net of cash acquired..... -- (16,629) --
Acquisition of FCT product line........................... -- (5,270) --
Buyout of minority interest in subsidiaries............... -- (7,356) --
Sale of Ross Technology, Inc.............................. -- 17,087 --
Other..................................................... (969) (967) (5,090)
---------- ---------- ------------
Net cash flow used for investing activities................. (222,455) (41,878) (28,032)
---------- ---------- ------------
Cash flow from financing activities:
Principal payments on capital lease obligations and
short-term debt........................................ -- (2,490) (4,206)
Issuance of convertible subordinated notes, net of
issuance costs......................................... 89,443 -- --
Restricted investments related to building lease
agreement.............................................. (18,513) -- --
Repurchase of common stock................................ -- (19,725) (26,359)
Issuance of capital stock................................. 24,502 20,449 10,962
Other..................................................... 526 -- 1,250
---------- ---------- ------------
Net cash flow generated (used) for financing activities..... 95,958 (1,766) (18,353)
---------- ---------- ------------
Net increase (decrease) in cash and cash equivalents........ (4,349) 25,286 (12,700)
Cash and cash equivalents, beginning of year................ 37,657 12,371 25,071
---------- ---------- ------------
Cash and cash equivalents, end of year...................... $ 33,308 $ 37,657 $ 12,371
========= ======== ==========
Supplemental disclosures:
Cash paid during the year for:
Interest............................................... $ 1,677 $ 289 $ 440
Income taxes........................................... $ 24,214 $ 1,635 $ 5,892
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
15
<PAGE> 17
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Cypress Semiconductor Corporation (the "Company" or "Cypress") was
incorporated in California in December 1982, commenced business activities on
April 7, 1983, and reincorporated in Delaware in February 1987. The Company
designs, develops and manufactures a broad range of high-performance integrated
circuits. The Company sells to the networking, military, computer,
telecommunications and instrumentation application markets.
The Company's operations outside the U.S. primarily relate to foreign sales
offices. The assets, liabilities, and results of operations of these entities
were not significant for any of the years presented. The Company conducts
European operations and imports its products through a subsidiary located in the
Netherlands, Cypress Semiconductor International, Incorporated (CSII). Export
revenues, principally to customers in Europe, Japan, and Canada, were 32%, 27%,
and 27% of total revenues in 1994, 1993, and 1992, respectively. As of January
2, 1995, all of the Company's subsidiaries are wholly owned, except for Cypress
Semiconductor (Texas), Inc. (CTI), the Company's wafer fabrication facility in
Texas, which is approximately 17% owned by Altera Corporation (Altera). Altera
receives wafer fab capacity commensurate with its ownership percentage.
In 1992, sales to one customer accounted for 12% of total revenue. No one
customer accounted for greater than 10% of revenues in 1994 or 1993.
Additionally, sales to one distributor accounted for 10%, 11% and 10% of total
revenues in 1994, 1993 and 1992, respectively.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
Fiscal years 1994, 1993, and 1992 ended January 2, 1995, January 3, 1994,
and December 28, 1992, respectively. The Company operates on a 52- or 53-week
fiscal year, ending on the Monday closest to December 31. Fiscal years 1994 and
1992 each comprised 52 weeks and fiscal year 1993 comprised 53 weeks.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
REVENUE RECOGNITION
Revenue from product sales direct to customers is recognized upon shipment.
Certain of the Company's sales to domestic distributors are made under
agreements allowing certain rights of return and price protection on merchandise
unsold by the distributors. Accordingly, the Company defers recognition of sales
and profit on such sales until the merchandise is sold by the domestic
distributors.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
All highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
Effective January 4, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in
Debt and Equity Securities." Upon adoption of SFAS 115, the Company classified,
and continues to classify, all investments as available for sale, based upon the
Company's intention to use these investments to fund working capital needs. The
investments, which all have contractual maturities of less than two years, are
carried at cost plus accrued interest, which approximated market for the entire
fiscal year.
16
<PAGE> 18
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the carrying amounts of the investments at January 2, 1995 is
as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Corporate debt securities......................... $ 5,958
State and municipal obligations................... 138,195
Other............................................. 15,814
-----------
Total........................................... $159,967
================
</TABLE>
INVENTORIES
Inventories are valued at standard costs that approximate actual costs, but
not in excess of market. Cost is determined on a first-in, first-out basis.
Market is based on estimated net realizable value. The components of inventories
are as follows:
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 3,
1995 1994
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials.......................................... $ 8,519 $ 8,820
Work-in-process........................................ 12,325 13,103
Finished goods......................................... 7,528 7,362
---------- ----------
Total................................................ $ 28,372 $ 29,285
======= =======
</TABLE>
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation and
amortization are computed for financial reporting purposes using the
straight-line method over the estimated useful lives of the assets, or lease
term if less than useful life. Accelerated methods of computing depreciation are
used for tax purposes. The components of property, plant, and equipment are as
follows:
<TABLE>
<CAPTION>
USEFUL LIVES JANUARY 2, JANUARY 3,
IN YEARS 1995 1994
------------ ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Land.................................... $ 7,558 $ 7,558
Machinery and equipment................. 3 to 5 336,747 265,847
Buildings and leasehold improvements.... 7 to 10 32,257 32,067
Furniture and fixtures.................. 5 4,110 3,984
---------- ----------
380,672 309,456
Accumulated depreciation and
amortization.......................... (179,082) (175,536)
---------- ----------
Total................................. $ 201,590 $ 133,920
========= =========
</TABLE>
GOODWILL
Goodwill acquired in connection with the purchase of other businesses is
recorded at cost and amortized over a four- or five-year period using the
straight-line method. At each fiscal year-end, the Company determines whether
there has been any permanent impairment in the value of goodwill. The
measurement of possible impairment is based on determining whether projected
undiscounted future cash flows from
17
<PAGE> 19
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operations exceed the net book value of the goodwill as of the measurement date.
As of January 2, 1995, there has been no such impairment.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." The
statement requires that the Company follow the liability method of accounting
for income taxes which requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences between
the financial statement carrying amounts and the tax bases of assets and
liabilities.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of shares of outstanding common stock and common equivalent shares, when
dilutive. Common equivalent shares include shares issuable under the Company's
stock option plans as determined by the treasury stock method. Fully diluted
earnings per share assumes full conversion of the convertible subordinated note
into common shares and the elimination of the related interest requirements (net
of income taxes).
TRANSLATION OF FOREIGN CURRENCIES
The Company translates accounts denominated in foreign currencies in
accordance with Statement of Financial Accounting Standards No. 52, using the
United States dollar as the functional currency. Foreign currency transaction
gains and losses have not been material in any year.
NOTE 2: RESTRUCTURING AND OTHER NON-RECURRING COSTS
In June 1993, Cypress sold its SPARCTM microprocessor subsidiary, Ross
Technology, Inc., to Fujitsu Limited for $21.8 million. The Company received an
aggregate of $16.6 million in 1993, and $4.3 million in 1994. In addition to the
divestiture of Ross, the Company restructured the equity of two of its
subsidiaries, Aspen Semiconductor Corporation and Multichip Technology
Incorporated, by acquiring employee minority interests consisting of stock
options and stock received from exercised stock options. Aspen Semiconductor was
absorbed into two of Cypress's divisions, Static Memory and Programmable
Products. Multichip Technology is now integrated as a part of the Static Memory
division. These restructuring activities and the divestiture of Ross resulted in
a net one-time pre-tax credit of $408,000.
In 1992, the Company undertook several restructuring actions. In the second
quarter, the Company transferred a significant portion of its assembly, test,
mark, and shipping (back-end production) offshore to Bangkok, together with a
reduction in headcount. In the fourth quarter, the Company (1) transferred the
remaining portion of back-end production to Bangkok; (2) consolidated the
majority of wafer production in the Company's six-inch wafer manufacturing
plants in Texas and Minnesota; (3) consolidated other facilities; and (4)
further reduced headcount. These actions resulted in pre-tax charges of $2.5
million and $23.7 million in the second and fourth quarters, respectively. This
restructuring was completed in 1993 with no significant adjustments to amounts
provided in 1992.
During the fourth quarter of 1992, the Company recorded a pre-tax charge of
$13.5 million for several legal matters and claims, some of which were resolved
in 1993 at amounts approximating charges recorded in 1992. Remaining legal
reserves at the end of 1994 were $5.1 million and are included in Other Accrued
Liabilities.
18
<PAGE> 20
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3: ACQUISITIONS AND RELATED CHARGES
In the fourth quarter of 1993, the Company acquired 100% of IC Designs,
Inc., a manufacturer of timing technology products for the personal computer
market, for $16.3 million plus $4 million for certain covenants not to compete.
The aggregate purchase price of $20.3 million was allocated to assets purchased
and liabilities assumed based on independent appraisal as follows:
<TABLE>
<S> <C>
Current assets.......................................... $ 6,600,000
Covenant not to compete................................. 4,000,000
R&D in process.......................................... 11,000,000
Completed technology.................................... 4,000,000
Goodwill................................................ 2,000,000
Other assets............................................ 400,000
Current liabilities..................................... (1,800,000)
Deferred taxes.......................................... (5,900,000)
-----------
Total................................................. $20,300,000
==========
</TABLE>
The following summarizes the unaudited pro forma results of operations of
the Company for 1993 and 1992 assuming the acquisition of IC Designs had
occurred at the beginning of 1992 (dollars in thousands, except per share
amounts):
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
JANUARY 3, DECEMBER 28,
1994 1992
----------- ------------
(UNAUDITED)
<S> <C> <C>
Revenues.................................... $ 317,280 $283,026
Net income (loss)........................... $ 9,076 $(21,148)
Net income (loss) per share................. $ 0.24 $ (0.57)
</TABLE>
In December 1993, the Company acquired the inventory and technology of the
high-speed logic product line of Performance Semiconductor for an aggregate cost
of $5.3 million. This cost has been allocated based on independent appraisal as
follows:
<TABLE>
<S> <C>
Inventory............................................... $ 2,100,000
R&D in process.......................................... 3,100,000
Completed technology.................................... 1,100,000
Liabilities............................................. (1,000,000)
-----------
Total................................................. $ 5,300,000
==========
</TABLE>
The pro forma effect of this product line is not significant. These
acquisitions have been accounted for on the purchase method and the intangible
assets acquired, including covenants not to compete, completed technology and
goodwill, are being amortized over three to five years.
Acquired R&D in process aggregating $14.1 million was charged to expense in
the fourth quarter of 1993. In addition, the Company recorded a non-recurring
charge of $4.2 million for certain restructuring activities of Cypress,
necessitated by the increased volume requirements associated with these
acquisitions. This includes costs of moving a significant portion of back-end
manufacturing operations to an additional Cypress facility, including $2.7
million for the write-down of equipment that will be disposed of and $1.5
million for costs of
19
<PAGE> 21
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
moving certain equipment. The Company expects to complete these restructuring
activities in 1995 at costs approximating the amounts originally provided.
NOTE 4: CONVERTIBLE SUBORDINATED NOTES
On March 31, 1994, the Company completed a $110 million private placement
of 7-year discounted convertible subordinated notes. The notes are due in the
year 2001, with a coupon rate of 3.15 percent and a yield-to-maturity of 6.04
percent. The notes are convertible into approximately 3,969,600 shares of common
stock and are callable by the Company three years from the date of issuance. Net
proceeds were $89.4 million, after issuance costs of $2.9 million. The discount
is being amortized using the effective interest rate method over the life of the
notes. The Company must also maintain compliance with certain financial
covenants. At year-end, the convertible subordinated notes totalled $93.7
million, which approximates fair market value.
NOTE 5: COMMON STOCK OPTION AND OTHER EMPLOYEE BENEFIT PLANS
1994 STOCK OPTION PLAN
In 1994, the Company adopted a new stock option plan (the New Plan). The
New Plan replaced the Company's 1985 Incentive Stock Option Plan and the 1988
Directors' Stock Option Plan (the Terminated Plans) with respect to future
option grants. Under terms of the New Plan, options may be granted to qualified
employees, consultants, officers and directors of the Company or its
majority-owned subsidiaries. Options become exercisable over a vesting period as
determined by the Board of Directors and expire over terms not exceeding ten
years from the date of grant. The option price for shares granted under the New
Plan is typically equal to the fair market value of the common stock at the date
of grant. The New Plan includes shares that remained available under the
Terminated Plans and provides for an annual increase in shares available for
issuance pursuant to nonstatutory stock options equal to 4.5% of the Company's
outstanding common stock at the end of each fiscal year.
Table 1 summarizes information relating to shares under option and shares
available for grant under the Terminated and New Plans.
20
<PAGE> 22
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TABLE 1. SHARES UNDER OPTION AND AVAILABLE FOR GRANT
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
SHARES ------------------------------
AVAILABLE NUMBER OF
FOR GRANT SHARES PRICE RANGE
---------- ---------- ---------------
<S> <C> <C> <C>
Balance, December 30, 1991........................ 3,383,306 8,411,548 $ 2.00 - $20.38
Options granted................................. (5,792,115) 5,792,115 $ 8.88 - $16.00
Options exercised............................... -- (405,557 ) $ 2.00 - $15.13
Options cancelled............................... 4,726,428 (4,726,428) $ 4.00 - $20.38
---------- ----------
Balance, December 28, 1992........................ 2,317,619 9,071,678 $ 2.00 - $18.50
Options granted................................. (3,236,270) 3,236,270 $10.00 - $14.38
Options exercised............................... -- (1,580,751) $ 2.00 - $11.00
Options cancelled............................... 1,374,442 (1,374,442) $ 2.00 - $14.38
---------- ----------
Balance, January 3, 1994.......................... 455,791 9,352,755 $ 2.00 - $18.50
Options authorized.............................. 3,000,000 -- -- --
Options granted................................. (2,774,361) 2,774,361 $15.13 - $22.50
Options exercised............................... -- (1,957,563) $ 2.00 - $16.88
Options cancelled............................... 683,659 (683,659 ) $ 2.49 - $20.00
---------- ----------
Balance, January 2, 1995.......................... 1,365,089 9,485,894 $ 2.00 - $18.50
========= ==========
Options exercisable on January 2, 1995............ 4,770,472 $ 2.00 - $22.50
==========
</TABLE>
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
In 1986, the Company approved an Employee Qualified Stock Purchase Plan,
which allows eligible employees of the Company and its subsidiaries to purchase
shares of common stock through payroll deductions. The Plan consists of
consecutive 24-month offering periods composed of four 6-month exercise periods.
The shares can be purchased at the lower of 85% of the fair market value of the
common stock at the date of commencement of this two-year offering period or at
the last day of each 6-month exercise period. Purchases are limited to 10% of an
employee's eligible compensation, subject to a maximum annual employee
contribution limited to a $25,000 market value (calculated as employee's
enrollment price multiplied by purchased shares). Of the 2,800,000 shares
authorized under the Plan, 2,324,251 shares were issued through 1994 including,
450,248, 452,507, and 693,936 shares in 1994, 1993, and 1992, respectively.
OTHER EMPLOYEE BENEFIT PLANS
The Company also maintains a Section 401(k) Plan, Profit Sharing Plan, and
Key Employee Bonus Plan. The 401(k) Plan provides participating employees with
an opportunity to accumulate funds for retirement and hardship. Eligible
participants may contribute up to 20% of their eligible earnings to the Plan
Trust.
Under the Profit Sharing Plan, all qualified employees are provided an
equal share of bonus payments, which are based on the Company achieving a
targeted level of earnings per share. In 1994 and 1993, $5,241,000 and
$1,599,000, respectively, were charged to operations in connection with the
Profit Sharing Plan.
In 1994, a Key Employee Bonus Plan was established which provides for bonus
payments to selected employees upon achievement of certain Company and
individual performance targets. In 1994, $1,902,000 was charged to operations in
connection with this Plan.
21
<PAGE> 23
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6: INCOME TAXES
The components of the provision for income taxes are summarized in Table 2.
Income (loss) before taxes is principally attributed to domestic operations.
The tax provision differs from the amounts obtained by applying the
statutory U.S. federal income tax rate to income before taxes as shown in Table
3.
The components of the net deferred tax asset as January 2, 1995 and January
3, 1994 under FAS 109 were as follows:
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 3,
1995 1994
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Deferred income on sales to distributors....................... $ 3,988 $ 3,680
Inventory reserves and basis differences....................... 5,077 4,788
Reserve for restructuring...................................... 2,032 2,351
Asset valuation and other reserves............................. 6,851 3,498
State tax net of federal tax................................... 297 --
Other, net..................................................... 4,616 3,982
---------- ----------
Total deferred tax asset..................................... 22,861 18,299
---------- ----------
Deferred tax liabilities:
Excess of tax over book depreciation........................... (11,829) (3,716)
State taxes net of federal benefit............................. -- (527)
Other, net..................................................... (38) (1,399)
---------- ----------
Total deferred tax liability................................. (11,867) (5,642)
---------- ----------
Net deferred tax asset......................................... $ 10,994 $ 12,657
======== =======
</TABLE>
The net deferred tax asset at January 2, 1995, is substantially realizable
through carry-back to prior years taxable income. Other Current Assets include
current deferred tax assets of $22,203,000 at January 2, 1995 and $17,088,000 at
January 3, 1994, respectively.
22
<PAGE> 24
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TABLE 2. COMPONENTS OF THE PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 28,
1995 1994 1992
---------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense (benefit):
U.S. Federal.................................... $ 24,998 $ 9,507 $ (923)
State and local................................. 3,286 1,055 398
Foreign......................................... 101 171 177
---------- ---------- ------------
Total current..................................... 28,385 10,733 (348)
---------- ---------- ------------
Deferred tax expense (benefit):
U.S. Federal.................................... 709 (5,918) (9,019)
State and local................................. 549 (291) (2,551)
---------- ---------- ------------
Total deferred.................................... 1,258 (6,209) (11,570)
---------- ---------- ------------
Total........................................ $ 29,643 $ 4,524 $(11,918)
======= ======= ==========
</TABLE>
TABLE 3. TAX PROVISION DIFFERENCES
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
JANUARY 2, JANUARY 3, DECEMBER 28,
1995 1994 1992
---------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Statutory rate.................................... 35% 35% 34%
Tax at U.S. statutory rate........................ $ 28,040 $4,398 $(11,195)
State income taxes, net of federal benefit........ 2,492 497 (1,421)
Tax credits....................................... (300) (679) (379)
Net FSC benefit................................... (427) (974) --
Benefit of tax free investments................... (1,324) -- --
Other, net........................................ 1,162 1,282 1,077
---------- ---------- ------------
Total........................................ $ 29,643 $4,524 $(11,918)
======= ======= ==========
</TABLE>
NOTE 7: COMMITMENTS AND CONTINGENCIES
OPERATING LEASE COMMITMENTS
The Company leases most of its manufacturing and office facilities under
noncancelable operating lease agreements that expire at various dates through
2004. These leases require the Company to pay taxes, insurance, and maintenance
expenses, and provide for renewal options at the then fair market rental value
of the property.
In September 1994, the Company entered into a five-year operating lease for
office and manufacturing facilities in San Jose, California. In December 1994,
the Company entered into a ten-year operating lease for wafer fabrication
facilities being constructed (Fab IV) in Bloomington, Minnesota. These leases
require quarterly payments which vary based on the London interbank offering
rate (LIBOR). Both leases provide the Company with the option of either
acquiring the properties at their original cost or arranging for the property to
be acquired at the end of the respective lease terms. The Company is
contingently liable under certain first-loss clauses for up to $20.5 million at
January 2, 1995. Furthermore, the Company must maintain restricted cash or
investments ($18.5 million at January 2, 1995) to serve as collateral for these
leases and maintain
23
<PAGE> 25
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
compliance with certain financial covenants. Management believes that this
contingent liability will not have a material adverse effect on the Company's
financial position or results of operations.
The aggregate annual rental commitments under noncancelable operating
leases as of January 2, 1995, are:
<TABLE>
<CAPTION>
FISCAL YEAR (DOLLARS IN THOUSANDS)
-------------------------------------------------- ----------------------
<S> <C>
1995.............................................. $ 3,497
1996.............................................. 3,667
1997.............................................. 3,554
1998.............................................. 3,354
1999.............................................. 2,248
2000 and thereafter............................... 7,636
----------
Total........................................... $ 23,956
================
</TABLE>
Rental expense was approximately $4,954,000 in 1994, $4,036,000 in 1993,
and $4,782,000 in 1992.
LITIGATION AND ASSERTED CLAIMS
In the normal course of business, the Company receives and makes inquiries
with regard to possible patent infringement. Where deemed advisable, the Company
may seek or extend licenses or negotiate settlements.
Texas Instruments (TI) has charged the Company and three other
semiconductor companies with infringement of two patents, primarily covering the
plastic encapsulation process used to package semiconductor devices. This action
was filed before the International Trade Commission (ITC) in Washington, D.C.,
and in the U.S. District Court in Dallas, Texas. The ITC has ruled that the
plastic packaging process known as "bottom gating" does infringe, but that "top
gating," used now by the Company, does not infringe TI's patent. The Company
contends that the patents are invalid in their entirety. In March 1993, the U.S.
District Court of Appeals for the Federal Circuit affirmed the ITC's ruling. A
trial date has been scheduled for April 1995 in the U.S. District Court
regarding this matter.
In January and February 1992, the Company and certain of its officers were
named defendants in three purported class-action suits filed in the United
States District Court for the Northern District of California. The suits filed
are for alleged violations of the Securities Exchange Act of 1934 and certain
provisions of state law regarding disclosure of short-term business prospects.
In 1992, the three securities class-action complaints were consolidated by the
U.S. District Court of California. The trial date has been scheduled for July
10, 1995.
The Company will vigorously defend itself in these matters and, subject to
the inherent uncertainties of litigation and based upon discovery completed to
date, management believes that the possibility of a material adverse impact on
the Company's financial position as a result of these matters is remote.
However, should the outcome of any of the actions be unfavorable, the Company
may be required to pay damages and other expenses, which could have a material
adverse effect on the Company's financial position. In addition, the Company
could be required to alter certain of its production processes or products as a
result of these matters.
NOTE 8: RELATED PARTIES
During 1990, the Company made a cost-basis investment of $1.0 million in
Vitesse Semiconductor Series E Preferred Stock (which has been converted to
common stock since Vitesse's public offering) and guaranteed an equipment lease
line of credit for Vitesse, of $3.5 million, maturing on August 31, 1997. The
outstanding principal balance related to the lease line at January 2, 1995, was
$0.9 million. As of January 2,
24
<PAGE> 26
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1995, the Company's cost-basis investment was $1,000,000. The Company's
chairman, board member, and its president are members of the Vitesse Board of
Directors.
During 1992, the Company made a cost-basis investment of $2.0 million in
QuickLogic Series D preferred stock. An additional $189,000 was invested in 1994
and $195,000 in 1993. The Company also recorded sales to QuickLogic of
$1,972,000 in 1994 and at fiscal year-end 1994, the Company had a receivable due
from QuickLogic of $787,000 and a payable due QuickLogic of $207,000. Under
certain circumstances, the Company may be required to make additional
investments in QuickLogic. The Company's chairman is a member of the Board of
Directors of QuickLogic.
During 1994, 1993 and 1992, the Company paid approximately $254,000,
$291,000 and $242,000, respectively, to a member of the Board of Directors for
consulting services.
25
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Cypress Semiconductor Corporation:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows present fairly, in all material respects, the financial position of
Cypress Semiconductor Corporation and its subsidiaries at January 2, 1995 and
January 3, 1994, and the results of their operations and their cash flows for
each of the three years in the period ended January 2, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Jose, California
January 20, 1995
26
<PAGE> 28
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
JANUARY
2, OCTOBER 3, JULY 4, APRIL 4,
1995 1994 1994 1994
-------- ------------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues...................................... $111,172 $ 104,013 $100,217 $90,957
Gross margin.................................. 52,206 47,250 44,541 39,742
Net income.................................... 15,765 13,611 11,571 9,525
Net income per share
Primary..................................... $ 0.37 $ 0.33 $ 0.29 $ 0.24
======== ========== ======== =======
Fully diluted............................... $ 0.36 $ 0.32 $ -- $ --
======== ========== ======== =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
JANUARY
3, SEPTEMBER 27, JUNE 28, MARCH 29,
1994 1993 1993 1993
-------- ------------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues...................................... $ 83,012 $ 77,037 $ 74,753 $69,710
Gross margin.................................. 35,352 31,686 29,526 28,127
Net income (loss)............................. (4,088) 6,077 3,605 2,449
Net income (loss) per share................... $ (0.11) $ 0.16 $ 0.10 $ 0.07
======== ========== ======== =======
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
27
<PAGE> 29
PART III
Certain information required by Part III is omitted from this Report in
that the registrant has filed a definitive proxy statement pursuant to
Regulation 14A (the "Proxy Statement") not later than 120 days after the end of
the fiscal year covered by this Report, and certain information included therein
is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's directors required by this Item is
incorporated by reference to the Company's Proxy Statement.
EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information regarding each of the Company's current executive
officers is set forth below:
<TABLE>
<CAPTION>
OFFICER
NAME AGE POSITION SINCE
-------------------------------------- --- ----------------------------------------- -------
<S> <C> <C> <C>
T. J. Rodgers......................... 46 President and Chief Executive Officer 1982
Antonio R. Alvarez.................... 38 Vice President, Research and Development 1993
Emmanuel Hernandez.................... 39 Vice President, Finance & Administration, 1993
Chief Financial Officer
J. Daniel McCranie.................... 51 Vice President, Marketing and Sales 1993
Lothar Maier.......................... 39 Vice President, Wafer Fabrication, 1994
President, Cypress Semiconductor
(Minnesota), Inc.
</TABLE>
Except as set forth below, each of the Company's executive officers has
been engaged in his principal occupation described above during the past five
years. There is no family relationship between any director or executive officer
of the Company.
Antonio R. Alvarez joined the Company in May 1987 as a Senior Technical
Engineer. Mr. Alvarez was transferred to the Company's subsidiary, Aspen
Semiconductor Corporation, in April 1988 as the Manager of BiCMOS Technology. In
October 1989, Mr. Alvarez returned to the Company as Vice President, Research
and Development. In February 1993, Mr. Alvarez also became responsible for Fab 1
when it was merged with the research and development department. Prior to
joining the Company in 1987, Mr. Alvarez worked in various engineering and
management positions at Motorola Corporation from September 1979 through July
1987. His last position at Motorola was as a senior member of the technical
staff. Mr. Alvarez became an executive officer of the Company in March 1993.
Emmanuel Hernandez joined the Company in June 1993 as Corporate Controller.
In January 1994, Mr. Hernandez was promoted to Vice President, Finance and
Administration, and Chief Financial Officer. Prior to joining the Company, Mr.
Hernandez held financial positions with National Semiconductor.
J. Daniel McCranie joined the Company in October 1993 as Vice President of
Marketing and Sales. Prior to joining the Company, Mr. McCranie was President
and CEO of SEEQ Technology. Mr. McCranie also held the position of Vice
President of Sales and Marketing for SEEQ prior to becoming President and CEO.
Previously, he held marketing and sales positions at Harris Semiconductor, AMD,
American Microsystems and Signetics.
Lothar Maier joined the Company in July 1983 as Manufacturing Engineering
Manager. Mr. Maier assumed full responsibility for Fab I in February of 1988,
and held this position until the end of December 1990. Mr. Maier was transferred
to the Company's subsidiary, Cypress Semiconductor (Minnesota), Inc. in January
1991 as subsidiary President. In December 1994, Mr. Maier was promoted to
Corporate Vice President of Wafer Fabrication.
28
<PAGE> 30
The information concerning the Company's executive officers required by
this Item is included in Part I hereof under the title "Executive Officers of
the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
29
<PAGE> 31
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
(1) FINANCIAL STATEMENTS PAGE
--------------------------------------------------------------------------------- ----
<S> <C> <C>
Consolidated Balance Sheets at January 2, 1995 and January 3, 1994...............
Consolidated Statements of Operations for the three years ended January 2,
1995.............................................................................
Consolidated Statements of Stockholders' Equity for the three years ended January
2, 1995..........................................................................
Consolidated Statements of Cash Flows for the three years ended January 2,
1995.............................................................................
Notes to Consolidated Financial Statements.......................................
Report of Independent Accountants................................................
(2) FINANCIAL STATEMENT SCHEDULES: PAGE
Report of Independent Accountants on Financial Statement Schedule for the three
years ended January 2, 1995...................................................... F-1
II. Valuation and qualifying accounts and reserves................................... F-2
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------------ -------------------------------------------------------------------------------
<S> <C>
3.1(1) Restated Certificate of Incorporation, as amended.
3.2(3) Certificate of Amendment of Restated Certificate of Incorporation, as amended.
3.3(1) Bylaws, as amended.
10.1(3)(5) 1985 Incentive Stock Option Plan, and forms of Incentive Stock Option Agreement
and Nonstatutory Option
10.3(2)(5) 1988 Directors' Stock Option Plan and form of Agreement, as amended.
10.4(5)(4) Bialek consulting agreement, dated October 28, 1993.
10.5(4)(5) 1994 Stock Option Plan.
10.6(5) Employee Qualified Stock Purchase Plan, as amended.
10.7 Indenture dated March 15, 1994 between the Company and The First National Bank
of Boston.
10.8 Lease Agreement dated December 29, 1994 between the Company and Sumitomo Bank
Leasing and Finance, Inc
10.9 Lease dated September 1, 1994 between the Company and BNP Leasing Corporation.
10.10(5) Cypress Semiconductor Corporation 1995 Key Employee Bonus Plan Agreement.
10.11(5) Loan agreement for J. Daniel McCranie.
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------------ -------------------------------------------------------------------------------
<S> <C>
10.12(5) Relocation agreement for Lothar Maier.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Accountants.
24.1 Power of Attorney (see page 34).
27 Financial Data Schedule.
</TABLE>
---------------
(1) Previously filed as exhibits to Registration Statement on Form S-1 (No.
33-12153) which became effective on March 4, 1987 and incorporated herein by
reference.
(2) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990.
(3) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1992.
(4) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended January 3, 1994.
(5) Management compensatory plan, contract or arrangement.
(b) Reports on Form 8-K
None.
31
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, Cypress Semiconductor Corporation, a
corporation organized and existing under the laws of the State of Delaware, has
duly caused this Annual Report to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of San Jose, State of California, on the
27th day of March 1995.
CYPRESS SEMICONDUCTOR CORPORATION
By: /s/ EMMANUEL HERNANDEZ
------------------------------------
Emmanuel Hernandez, Chief
Financial
Officer, Vice President, Finance
and
Administration
POWER OF ATTORNEY
Each of the officers and directors of Cypress Semiconductor Corporation
whose signature appears below hereby constitutes and appoints T.J. Rodgers and
Emmanuel Hernandez and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution, each with power to act alone, to sign
and execute on behalf of the undersigned any amendment or amendments to this
Report on Form 10-K, and to perform any acts necessary to be done in order to
file such amendment, and each of the undersigned does hereby ratify and confirm
all that said attorneys-in-fact and agents, or their or his substitutes, shall
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------------------------------ --------------------------------- ---------------
<S> <C> <C>
/s/ T.J. President, Chief Executive March 27, 1995
RODGERS Officer and Director (Principal
------------------------------------------ Executive Officer)
T.J. Rodgers
/s/ EMMANUEL HERNANDEZ Chief Financial Officer, Vice March 27, 1995
------------------------------------------ President, Finance and
Emmanuel Hernandez Administration (Principal
Financial and Accounting Officer)
/s/ PIERRE R. LAMOND Chairman of the Board of March 27, 1995
------------------------------------------ Directors
Pierre R. Lamond
/s/ FRED B. Director March 27, 1995
BIALEK
------------------------------------------
Fred B. Bialek
/s/ ERIC Director March 27, 1995
BENHAMOU
------------------------------------------
Eric Benhamou
/s/ JOHN C. Director March 27, 1995
LEWIS
------------------------------------------
John C. Lewis
</TABLE>
32
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Cypress Semiconductor Corporation
Our audits of the consolidated financial statements referred to in our
report dated January 20, 1995 appearing on page of this Annual Report on Form
10-K also included an audit of the Financial Statement Schedule listed in Item
14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
San Jose, California
January 20, 1995
F-1
<PAGE> 35
SCHEDULE II
CYPRESS SEMICONDUCTOR CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
CHARGED TO CHARGED TO
BEGINNING COSTS OTHER ENDING
DESCRIPTION BALANCE AND EXPENSES ACCOUNTS DEDUCTIONS BALANCE
------------------------------------- ---------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
1992
Allowance for sales returns and
doubtful accounts............... $ 643,000 $333,000 $200,000 $(343,000) $ 833,000
1993
Allowance for sales returns and
doubtful accounts............... $ 833,000 $738,000 $125,000 $(349,000) $1,347,000
1994
Allowance for sales returns and
doubtful accounts............... $1,347,000 $610,000 $ -- $(564,000) $1,393,000
</TABLE>
F-2
<PAGE> 1
Exhibit 10.6
CYPRESS SEMICONDUCTOR CORPORATION
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
The following constitute the provisions of the Employee Stock Purchase
Plan (herein called the "Plan")* of Cypress Semiconductor Corporation (herein
called the "Company").
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan shall, accordingly, be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.
2. Definitions.
(a) "Act" shall mean the Securities Exchange Act of 1934,
as amended.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(d) "Common Stock" shall mean the Common Stock, no par
value, of the Company.
(e) "Company" shall mean Cypress Semiconductor
Corporation, a Delaware corporation.
(f) "Compensation" shall mean all regular straight time
earnings, payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses and commissions (except to the extent that the
exclusion of any such items for all participants is specifically directed by
the Board or its committee).
(g) "Continuous Status as an Employee" shall mean the
absence of any interruption or termination of service as an Employee.
Continuous Status as an Employee shall not be considered interrupted in the
case of a leave of absence agreed to in writing by the Company, provided that
such leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
(h) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole
discretion as eligible to participate in the Plan.
------------------------------------
* As amended effective January 25, 1995.
<PAGE> 2
(i) "Employee" shall mean any person, including an
officer, who is customarily employed for at least twenty (20) hours per week
and more than five (5) months in a calendar year for at least three (3) months
by the Company or one of its Designated Subsidiaries.
(j) "Exercise Date" shall mean the date one day prior to
the date six (6) months, twelve (12) months, eighteen (18) months or
twenty-four (24) months after the Offering Date of each Offering Period.
(k) "Exercise Period" shall mean a period commencing on
an Offering Date or on the day after an Exercise Date and terminating one day
prior to the date six (6) months later.
(l) "Offering Period" shall mean a period of twenty-four
(24) months consisting of four (4) six-month Exercise Periods during which
options granted pursuant to the Plan may be exercised.
(m) "Offering Date" shall mean the first day of each
Offering Period of the Plan.
(n) "Plan" shall mean this Employee Qualified Stock
Purchase Plan.
(o) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) Any Employee as defined in paragraph 2 who shall be
employed by the Company on the date his participation in the Plan is effective
shall be eligible to participate in the Plan, subject to limitations imposed by
Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 425(d) of the Code)
would own stock and/or hold outstanding options to purchase stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary of the Company, or (ii)
which permits his rights to purchase stock under all employee stock purchase
plans of the Company and its subsidiaries to accrue at a rate which exceeds
Twenty-Five Thousand Dollars ($25,000) of fair market value of such stock
determined at the time such option is granted) for each calendar year in which
such option is outstanding at any time.
4. Offering Periods. The plan shall be implemented by
twenty-four (24) month Offering Periods beginning every six (6) months. The
Plan shall continue thereafter until terminated in accordance with paragraph 20
hereof. Subject to the requirements of paragraph 20, the Board of Directors of
the Company shall have the power to change the duration of Offering Periods
-2-
<PAGE> 3
with respect to future offerings without shareholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first offering period to be affected.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deduction on
the form provided by the Company and filing it with the Company's payroll
office prior to the applicable Offering Date, unless a later time for filing
the subscription agreement is set by the Board for all eligible Employees with
respect to a given offering.
(b) Payroll deductions for a participant shall commence
on the first payroll following the Offering Date and shall end on the Exercise
Date of the offering to which such authorization is applicable, unless sooner
terminated by the participant as provided in paragraph 11.
6. Payroll Deductions.
(a) At the time a participant files his subscription
agreement, he shall elect to have payroll deductions made on each payday during
the Offering Period in amounts from two (2%) to ten percent (10%) of the
Compensation which he received on the payday immediately preceding the Offering
Date. The aggregate of such payroll deductions during any Offering Period
shall not exceed ten percent (10%) of his aggregate Compensation during said
offering period.
(b) All payroll deductions made by a participant shall be
credited to his account under the Plan. A participant may not make any
additional payments into such account.
(c) A participant may discontinue his participation in
the Plan as provided in paragraph 11, or may decrease or increase the rate or
amount of his payroll deductions during the Offering Period (within the
limitations of paragraph 6(a)) by completing and filing with the Company a new
subscription agreement authorizing a change in the rate or amount of payroll
deductions; provided, however, that a participant may not change the rate or
amount of his payroll deductions more than two (2) times in any one calendar
year. The change in rate shall be effective fifteen (15) days following the
Company's receipt of the new authorization. Subject to the limitations of
paragraph 6(a), a participant's subscription agreement shall remain in effect
for successive Offering Periods unless revised as provided herein or terminated
as provided in paragraph 11.
(d) Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and paragraph 3(b)
herein, a participant's payroll deductions may be decreased to 0% at such time
during any Exercise Period which is scheduled to end during the current
calendar year that the aggregate of all payroll deductions accumulated with
respect to such Exercise Period and any other Exercise Period ending within the
same calendar year equal $21,250. Payroll deductions shall recommence at the
rate provided in such participant's subscription
-3-
<PAGE> 4
agreement at the beginning of the first Exercise Period which is scheduled to
end in the following calendar year, unless terminated by the participant as
provided in paragraph 11.
7. Grant of Option.
(a) On the Offering Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period a number
of shares of the Company's Common Stock determined by dividing such Employee's
payroll deductions accumulated prior to such Exercise Date and retained in the
Participant's account as of the Exercise Date by the lower of (i) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Offering Date or (ii) eighty-five percent (85%) of the fair market value
of a share of the Company's Common Stock on the Exercise Date; provided,
however, that the maximum number of Shares an Employee may purchase during each
Offering Period shall be determined at the Offering Date by dividing $100,000
by the fair market value of a share of the Company's Common Stock on the
Offering Date, and provided further that such purchase shall be subject to the
limitations set forth in paragraphs 3(b) and 13 hereof. Exercise of the option
shall occur as provided in paragraph 8, unless the participant has withdrawn
pursuant to paragraph 11, and shall expire on the last day of the Offering
Period. Fair market value of a share of the Company's Common Stock shall be
determined as provided in paragraph 7(b) herein.
(b) The option price per share of the shares offered in a
given Exercise Period shall be the lower of: (i) eighty-five percent (85%) of
the fair market value of a share of the Common Stock of the Company on the
Offering Date; or (ii) eighty-five percent (85%) of the fair market value of a
share of the Common Stock of the Company on the Exercise Date. The fair market
value of the Company's Common Stock on a given date shall be determined by the
Board in its discretion; provided, however, that where there is a public market
for the Common Stock, the fair market value per share shall be the closing
price of the Common Stock for such date on the New York Stock Exchange or on
such other stock exchange as the Company's Common Stock may be traded or, if
not traded on a stock exchange, as reported by the NASDAQ National Market
System, or, in the event the Common Stock is not listed on a stock exchange or
NASDAQ's National Market System, the fair market value per share shall be the
mean of the bid and asked prices of the Common Stock reported for such date in
over-the-counter trading.
8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in paragraph 11, his option for the purchase of shares will be
exercised automatically on each Exercise Date of the Offering Period, and the
maximum number of full shares subject to option shall be purchased for such
participant at the applicable option price with the accumulated payroll
deductions in his account. Any amount remaining in the participant's account
after an Exercise Date shall be held in the account until the next Exercise
Date of the Offering Period, unless the Offering Period has been oversubscribed
or has terminated with such Exercise Date, in which case such amount shall be
refunded to the participant. During a participant's lifetime, a participant's
option to purchase shares hereunder is exercisable only by him.
-4-
<PAGE> 5
9. Delivery. As promptly as practicable after the Exercise Date
of each Exercise Period, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his option. Any cash remaining to the credit of a participant's
account under the Plan after a purchase by him of shares at the termination of
each Exercise Period which is insufficient to purchase a full share of Common
Stock of the Company shall be applied to the participant's account for the next
Exercise Period.
10. Automatic Transfer to Low Price Offering Period. In the event
that the fair market value of the Company's Common Stock is lower on an
Exercise Date than it was on the first Offering Date for that Offering Period,
all Employees participating in the Plan on the Exercise Date shall be deemed to
have withdrawn from the Offering Period immediately after the exercise of their
option on such Exercise Date and to have enrolled as participants in a new
Offering Period which begins on or about the day following such Exercise Date.
A participant may elect to remain in the previous Offering Period by filing a
written statement declaring such election with the Company prior to the time of
the automatic change to the new Offering Period.
11. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all
the payroll deductions credited to his account and not yet used to exercise his
option under the Plan at any time by giving written notice to the Company. All
of the participant's payroll deductions credited to his account will be paid to
such participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made
during the Offering Period. If a participant withdraws from an Offering
Period, payroll deductions will not resume at the beginning of the succeeding
Offering Period unless the participant delivers to the Company a new
subscription agreement. Except for deemed withdrawals under paragraph 10, a
participant who withdraws from the Plan may not enroll to participate in a
subsequent Offering Period for at least six (6) months.
(b) Upon termination of the participant's Continuous
Status as an Employee prior to an Exercise Date for any reason, including
retirement or death, the payroll deductions credited to such participant's
account during the Offering Period but not yet used to exercise the option will
be returned to such participant or, in the case of his death, to the person or
persons entitled thereto under paragraph 15, and such participant's option will
be automatically terminated.
(c) In the event an Employee fails to remain in
Continuous Status as an Employee of the Company for at least twenty (20) hours
per week during an Offering Period in which the Employee is a participant, he
will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to his account will be returned to such participant and
such participant's option terminated.
-5-
<PAGE> 6
(d) A participant's withdrawal from an Offering Period
will not have any effect upon his eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
(e) A participant's withdrawal from an offering will not
have any effect upon his eligibility to participate in any similar plan which
may hereafter be adopted by the Company.
12. Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be 3,800,000
shares, subject to adjustment upon changes in capitalization of the Company as
provided in paragraph 19. If the total number of shares which would otherwise
be subject to options granted pursuant to paragraph 7(a) hereof on the Exercise
Date exceeds the number of shares then available under the Plan (after
deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant is as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of payroll deductions, if necessary.
(b) The participant will have no interest or voting right
in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the
Plan will be registered in the name of the participant or in the name of the
participant and his spouse.
14. Administration. The Plan shall be administered by the Board
of Directors of the Company or a committee appointed by the Board. The
administration, interpretation or application of the Plan by the Board or its
committee shall be final, conclusive and binding upon all participants.
Members of the Board who are eligible Employees are permitted to participate in
the Plan, provided that:
(a) Members of the Board who are eligible to participate
in the Plan may not vote on any matter affecting the administration of the Plan
or the grant of any option pursuant to the Plan.
(b) If a Committee is established to administer the Plan,
no member of the Board who is eligible to participate in the Plan may be a
member of the Committee.
-6-
<PAGE> 7
15. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to the end of the Offering Period but prior to delivery to him of
such shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to the
Exercise Date of the Offering Period.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 15 hereof) by the participant. Any
such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds in accordance with paragraph 11.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees promptly following the Exercise Date, which statements will set forth
the amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each option under the Plan which has not yet been
exercised and the number of shares of Common Stock which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves") as well as the price per share of Common Stock
covered by each option under the Plan which has not yet been exercised, shall
be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split or the payment of a
stock dividend (but only on the Common Stock) or any other increase or decrease
in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided,
-7-
<PAGE> 8
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.
In the event of the proposed dissolution or liquidation of the Company,
the offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the option stock, including shares as to which
the option would not otherwise be exercisable. If the Board makes an option
fully exercisable in lieu of assumption or substitution in the event of a merger
or sale of assets, the Board shall notify the participant that the option shall
be fully exercisable for a period of thirty (30) days from the date of such
notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the
event that the Company effects one or more reorganizations, recapitalizations,
rights offerings or other increases or reductions of shares of its outstanding
Common Stock, and in the event of the Company being consolidated with or merged
into any other corporation.
20. Amendment or Termination. The Board of Directors of the
Company may at any time terminate or amend the Plan. No such termination can
affect options previously granted, nor may an amendment make any change in any
option theretofore granted which adversely affects the rights of any
participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Act or under Section 423 of the Code (or any successor rule or
provision or any other applicable law or regulation), the Company shall obtain
shareholder approval in such a manner and to such a degree as so required.
21. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt thereof.
-8-
<PAGE> 9
22. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company within twelve (12)
months before or after the date the Plan is adopted. Such shareholder approval
shall be obtained in the degree and manner required under the General
Corporation Law of the State of Delaware.
23. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
24. Term of Plan. The Plan shall be come effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the shareholders of the Company as described in paragraph 22. It shall
continue for a term of twenty (20) years unless sooner terminated under
paragraph 20.
-9-
<PAGE> 10
CYPRESS SEMICONDUCTOR CORPORATION
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Date: ____________
_____ Change in Payroll
Deduction Rate
_____ Change of Beneficiary
1. ____________________________hereby elects to participate in the Cypress
Semiconductor Corporation Employee Qualified Stock Purchase Plan (the
"Stock Purchase Plan") and subscribes to purchase shares of the
Company's Common Stock, with par value $.01, in accordance with this
Subscription Agreement and the Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of _____% of my Compensation (not less than 2% nor more than 10%) on
each payday during the Offering Period in accordance with the Stock
Purchase Plan. Such deductions are to continue for succeeding
Offering Periods until I give written instructions for a change in or
termination of such deductions.
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price
determined in accordance with the Stock Purchase Plan. I further
understand that, except as otherwise set forth in the Stock Purchase
Plan, shares will be purchased for me automatically on each Exercise
Date of the Offering Period unless I otherwise withdraw from the Stock
Purchase Plan by giving written notice to the Company for such
purpose.
4. Shares purchased for me under the Stock Purchase Plan should be issued
in the name(s) of:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
5. I understand that if I dispose of any shares received by me pursuant
to the Stock Purchase Plan within two years after the Offering Date
(the first day of the Offering Period during which I purchased such
shares) or within one year after the date on which such shares were
delivered to me, I may be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount generally measured as the excess of the fair market value of
the shares at the time such shares were delivered to me over the price
which I paid for the shares, and that I may be required to provide
income tax withholding on that amount. I hereby agree to notify the
Company in writing within 30 days
<PAGE> 11
after the date of any such disposition. However, if I dispose of such
shares at any time after the expiration of the two-year and one-year
holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income
only to the extent of an amount equal to the lesser of (1) the excess
of the fair market value of the shares at the time of such disposition
over the purchase price which I paid for the shares under the option,
or (2) the excess of the fair market value of the shares over the
option price, measured as if the option had been exercised on the
Offering Date. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gains.
6. I have received a copy of the Company's most recent prospectus which
describes the Stock Purchase Plan and a copy of the complete "Cypress
Semiconductor Employee Qualified Stock Purchase Plan." I understand
that my participation in the Stock Purchase Plan is in all respects
subject to the terms of the Plan.
7. I hereby agree to be bound by the terms of the Stock Purchase Plan.
The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Stock Purchase Plan:
NAME: (Please print) -------------------------------------------
(First) (Middle) (Last)
-------------------------------------------
(Address)
-------------------------------------------
NAME: (Please print) -------------------------------------------
(First) (Middle) (Last)
-------------------------------------------
(Address)
-------------------------------------------
-2-
<PAGE> 12
Employee's Social
Security Number: -------------------------------------------
Employee's Address:* -------------------------------------------
-------------------------------------------
-------------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
------------------------- -------------------------
Signature of Employee
------------------------------
* It is the participant's responsibility to notify the company's stock
administrator in the event of a change of address.
-3-
<PAGE> 1
============================================================
CYPRESS SEMICONDUCTOR CORPORATION
AND
THE FIRST NATIONAL BANK OF BOSTON
TRUSTEE
__________
INDENTURE
DATED AS OF MARCH 15, 1994
__________
3.15% CONVERTIBLE SUBORDINATED NOTES
DUE 2001
============================================================
<PAGE> 2
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TRUSTEE'S CERTIFICATE OF AUTHENTICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
OPTION TO ELECT REDEMPTION UPON A FUNDAMENTAL CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Schedule A - Changes to Principal Amount of Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Applicable Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Conversion Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Fundamental Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Fundamental Change Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Fundamental Change Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Issue Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
NASDAQ System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Note or Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Noteholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Original Issue Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
PORTAL Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Predecessor Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
QIB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Reference Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Restricted Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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* This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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Trading Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Trigger Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION,
REGISTRATION AND EXCHANGE OF NOTES
SECTION 2.01. Designation, Amount and Issue of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.02. Form of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.03. Date and Denomination of Notes; Payments of Interest . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.04. Execution of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.05. Exchange and Registration of Transfer of Notes; Restrictions on Transfers; Depositary . . . . . . . 29
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 2.07. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 2.08. Cancellation of Notes Paid, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE THREE
REDEMPTION OF NOTES
SECTION 3.01. Redemption Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.02. Notice of Redemption; Selection of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.03. Payment of Notes Called for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.04. No Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.05. Conversion Arrangement on Call for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE FOUR
SUBORDINATION OF NOTES
SECTION 4.01. Agreement of Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.02. Payments to Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.03. Subrogation of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.04. Authorization by Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.05. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.06. Trustee's Relation to Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.07. No Impairment of Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.01. Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.02. Offices for Notices and Payments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.03. Appointments to Fill Vacancies in Trustee's Office . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.04. Provision as to Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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ARTICLE SIX
NOTEHOLDERS' LISTS AND
REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 6.01. Noteholders' Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.02. Preservation of Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND
NOTEHOLDERS IN THE EVENT OF DEFAULT
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.02. Payment of Notes on Default; Suit Therefor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.03. Application of Monies Collected by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.04. Proceedings by Noteholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.05. Proceedings by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.06. Remedies Cumulative and Continuing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.07. Direction of Proceedings and Waiver of Defaults by Majority Noteholders . . . . . . . . . . . . . . 62
SECTION 7.08. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.09. Undertaking to Pay Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE EIGHT
CONCERNING THE TRUSTEE
SECTION 8.01. Duties and Responsibilities of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.02. Reliance on Documents, Opinions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.03. No Responsibility for Recitals, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.04. Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes . . . . . . . . . . . . . . . 67
SECTION 8.05. Monies to be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.06. Compensation and Expenses of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.07. Officers' Certificate as Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.08. Eligibility of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.09. Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.10. Acceptance by Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.11. Succession by Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE NINE
CONCERNING THE NOTEHOLDERS
SECTION 9.01. Action by Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.02. Proof of Execution by Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.03. Who Are Deemed Absolute Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.04. Company-Owned Notes Disregarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.05. Revocation of Consents; Future Holders Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE TEN
NOTEHOLDERS' MEETINGS
SECTION 10.01. Purposes of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 10.02. Call of Meetings by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
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SECTION 10.03. Call of Meetings by Company or
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.04. Qualifications for Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.05. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 10.06. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 10.07. No Delay of Rights by Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION 11.01. Supplemental Indentures without Consent
of Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.02. Supplemental Indentures with Consent of
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.03. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.04. Notation on Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.05. Evidence of Compliance of Supplemental
Indenture to be Furnished to the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE TWELVE
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 12.01. Company May Consolidate, etc., on
Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.02. Successor Corporation to be
Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.03. Opinion of Counsel to be Given Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.01. Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 13.02. Deposited Monies to be Held in Trust by
Trustee . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.03. Paying Agent to Repay Monies Held . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.04. Return of Unclaimed Monies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 14.01. Indenture and Notes Solely Corporate
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE FIFTEEN
CONVERSION OF NOTES
SECTION 15.01. Right to Convert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 15.02. Exercise of Conversion Privilege;
Issuance of Common Stock on Conversion;
No Adjustment for Interest or Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 15.03. Cash Payments in Lieu of Fractional
Shares . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 15.04. Conversion Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
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SECTION 15.05. Adjustment of Conversion Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 15.06. Effect of Reclassification,
Consolidation, Merger or Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 15.07. Taxes on Shares Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 15.08. Reservation of Shares; Shares to be
Fully Paid; Compliance with Governmental
Requirements; Listing of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 15.09. Responsibility of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 15.10. Notice to Holders Prior to Certain
Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 15.11. Simultaneous Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 15.12. Notice to Holders of Notes; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 15.13. Successive Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 15.14. Company Determination Final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 15.15. General Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
ARTICLE SIXTEEN
REDEMPTION OF NOTES AT OPTION OF HOLDERS
SECTION 16.01. Option to Elect Redemption Upon a
Fundamental Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SECTION 16.02. Deposit of Funds for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
ARTICLE SEVENTEEN
MISCELLANEOUS PROVISIONS
SECTION 17.01. Provisions Binding on Company's
Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 17.02. Official Acts by Successor Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 17.03. Addresses for Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 17.04. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 17.05. Evidence of Compliance with Conditions
Precedent; Certificates to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 17.06. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 17.07. No Security Interest Created . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 17.08. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 17.09. Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 17.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
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INDENTURE dated as of March 15, 1994 between Cypress
Semiconductor Corporation, a Delaware corporation (hereinafter sometimes called
the "Company," as more fully set forth in Section 1.01), and The First National
Bank of Boston, a national banking association organized and existing under the
laws of the United States of America, as trustee hereunder (hereinafter
sometimes called the "Trustee," as more fully set forth in Section 1.01).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has
duly authorized the issue of its 3.15% Convertible Subordinated Notes due 2001
(hereinafter sometimes called the "Notes"), in an aggregate principal amount at
maturity not to exceed $110,000,000 and, to provide the terms and conditions
upon which the Notes are to be authenticated, issued and delivered, the Company
has duly authorized the execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be
borne by the Notes, the form of conversion notice, the form of assignment, and
the form of option to elect redemption upon a Fundamental Change are to be
substantially in the following forms, respectively:
[FORM OF FACE OF NOTE]
FORM OF LEGEND FOR GLOBAL NOTE: UNLESS THIS CERTIFICATE IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, THIS NOTE BEARS
ORIGINAL ISSUE DISCOUNT. THE ISSUE PRICE WITH RESPECT TO EACH $1,000
OF PRINCIPAL AMOUNT AT MATURITY OF THIS NOTE IS $839.03, THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT WITH RESPECT TO EACH $1,000 OF PRINCIPAL
AMOUNT AT MATURITY OF THIS NOTE IS $160.97, THE ISSUE DATE IS MARCH
30, 1994 AND THE YIELD TO MATURITY BASED ON SEMIANNUAL COMPOUNDING IS
6.04%.
<PAGE> 8
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE NOTE
EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL
NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE
EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED
HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE
EXCEPT (A) TO CYPRESS SEMICONDUCTOR CORPORATION OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE FIRST NATIONAL BANK OF
BOSTON, AS TRUSTEE, A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE
EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT OR (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE NOTE
EVIDENCED HEREBY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF
SUCH NOTE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A
PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE,
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED AFTER THE EXPIRATION OF THREE YEARS FROM THE ORIGINAL ISSUANCE
OF THE NOTE EVIDENCED HEREBY. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
2.
<PAGE> 9
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
CYPRESS SEMICONDUCTOR CORPORATION
3.15% CONVERTIBLE SUBORDINATED NOTE DUE 2001
No. 1 $__________
CUSIP 232806 AA 7
Cypress Semiconductor Corporation, a corporation duly
organized and validly existing under the laws of the State of Delaware (the
"Company", which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received hereby promises to pay
to CEDE & CO., or registered assigns, the principal sum of $___________ Dollars
on March 15, 2001 at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts, and to pay interest,
semi-annually on March 15 and September 15 of each year, commencing September
15, 1994 on said principal sum at said office or agency, in like coin or
currency, at the rate per annum of 3.15% from the March 15 or the September 15,
as the case may be, next preceding the date of this Note to which interest has
been paid or duly provided for, unless the date hereof is a date to which
interest has been paid or duly provided for, in which case from the date of
this Note, or unless no interest has been paid or duly provided for on the
Notes, in which case from March 30, 1994 until payment of said principal sum
has been made or duly provided for. Notwithstanding the foregoing, if the date
hereof is after any March 1 or September 1, as the case may be, and before the
following March 15 or September 15, this Note shall bear interest from such
March 15 or September 15; provided, however, that if the Company shall default
in the payment of interest due on such March 15 or September 15, then this Note
shall bear interest from the next preceding March 15 or September 15 to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for on the Notes, from March 30, 1994. The interest so payable
on any March 15 or September 15 will be paid to the person in whose name this
Note (or one or more Predecessor Notes) is registered at the close of business
on the record date, which shall be the March 1 or September 1 (whether or not a
business day) next preceding such March 15 or September 15, provided that any
such interest not punctually paid or duly provided for shall be payable as
provided in the Indenture. Interest may, at the option of the Company, be paid
by check mailed to the registered address of such person.
3.
<PAGE> 10
The aggregate principal amount of the Note in global form represented
hereby may from time to time be reduced or increased to reflect
exchanges of a part of this Note in global form for definitive Notes
or exchanges of definitive Notes for a part of this Note in global
form or conversions or redemptions of a part of this Note in global
form or cancellations of a part of this Note in global form or
transfers of definitive Notes in return for a part of this Note in
global form or transfers of a part of this Note in global form
effected by delivery of definitive Notes, in each case, and in any
such case, by means of notations on the Schedule of Exchanges,
Conversions, Redemptions, Cancellations and Transfers on the last page
hereof. Notwithstanding any provision of this Note to the contrary,
(i) exchanges of a part of this Note in global form for definitive
Notes, (ii) exchanges of definitive Notes for a part of this Note in
global form, (iii) conversions or redemptions of a part of this Note
in global form, (iv) cancellations of a part of this Note in global
form, (v) transfers of definitive Notes in return for a part of this
Note in global form and (vi) transfers of a part of this Note in
global form effected by delivery of definitive Notes may be effected
without the surrendering of this Note in global form, provided that
appropriate notations on the Schedule of Exchanges, Conversions,
Redemptions, Cancellations and Transfers are made by the Trustee, or
the Custodian at the direction of the Trustee, to reflect the
appropriate reduction or increase, as the case may be, in the
aggregate principal amount of this Note in global form resulting
therefrom or as a consequence thereof.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, including, without limitation, provisions
subordinating the payment of principal amount at maturity, Issue Price, accrued
Original Issue Discount, Redemption Price, Fundamental Change Redemption Price
and interest, if any, in respect of the Notes to the prior payment in full of
all Senior Indebtedness as defined in the Indenture and provisions giving the
holder of this Note the right to convert this Note into Common Stock of the
Company on the terms and subject to the limitations referred to on the reverse
hereof and as more fully specified in the Indenture. Such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Note shall be deemed to be a contract made under the laws
of the State of New York, and for all purposes shall be construed in accordance
with and governed by the laws of said State.
4.
<PAGE> 11
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been manually
signed by the Trustee under the Indenture.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
CYPRESS SEMICONDUCTOR CORPORATION
Dated: By:
---------------------------------
Title:
[Seal]
Attest:
-----------------------------
Secretary
5.
<PAGE> 12
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF BOSTON, as
Trustee
By:
------------------------------------
Authorized Signatory
6.
<PAGE> 13
CYPRESS SEMICONDUCTOR CORPORATION
3.15% CONVERTIBLE SUBORDINATED NOTE
DUE 2001
This Note is one of a duly authorized issue of Notes of the
Company, designated as its 3.15% Convertible Subordinated Notes due 2001
(herein called the "Notes"), limited to the aggregate principal amount at
maturity of $110,000,000 all issued or to be issued under and pursuant to an
Indenture dated as of March 15, 1994 (herein called the "Indenture"), between
the Company and The First National Bank of Boston (herein called the
"Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Notes.
In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the Issue Price, and accrued Original
Issue Discount and accrued interest, if any, through the date of declaration on
all Notes may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions provided
in the Indenture.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount at maturity of the Notes at the time outstanding,
evidenced as in the Indenture provided, to execute supplemental indentures
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or modifying in
any manner the rights of the holders of the Notes; provided, however, that no
such supplemental indenture shall (i) extend the fixed maturity of any Note,
reduce the rate or extend the time for payment of interest thereon, change the
rate of accrual or extend the time of payment in connection with Original Issue
Discount thereof, reduce the principal amount at maturity, accrued Original
Issue Discount, Issue Price, Redemption Price or Fundamental Change Redemption
Price thereof, change the obligation of the Company to make redemption of any
Note upon the happening of any Fundamental Change as referred to below in a
manner adverse to the Noteholders, impair or affect the right of any Noteholder
to institute suit for the payment thereof, change the currency in which the
Notes and other amounts in respect thereof are payable, modify the provisions
of the Indenture with respect to the subordination of the Notes in a manner
adverse to the Noteholders in any material respect, or impair the right to
convert the Notes into Common Stock subject to the terms set forth in the
Indenture, including Section 15.06 of the Indenture, without the consent of the
holder of each Note so affected or (ii) reduce the aforesaid percentage of
Notes, the
7.
<PAGE> 14
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Notes then outstanding. It is also
provided in the Indenture that, prior to any declaration accelerating the
maturity of the Notes, the holders of a majority in aggregate principal amount
at maturity of the Notes at the time outstanding may on behalf of the holders
of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of principal
amount at maturity, Issue Price, accrued Original Issue Discount, Redemption
Price, Fundamental Change Redemption Price or interest, if any, in respect of
any of the Notes or a failure by the Company to convert any Notes into Common
Stock of the Company. Any such consent or waiver by the holder of this Note
(unless revoked as provided in the Indenture) shall be conclusive and binding
upon such holder and upon all future holders and owners of this Note and any
Notes which may be issued in exchange or substitution herefor, irrespective of
whether or not any notation thereof is made upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and
in the manner provided in the Indenture, expressly subordinate and subject in
right of payment to the prior payment in full of all Senior Indebtedness of the
Company as defined in the Indenture, whether outstanding at the date of the
Indenture or thereafter incurred, and this Note is issued subject to the
provisions of the Indenture with respect to such subordination. Each holder of
this Note, by accepting the same, agrees to and shall be bound by such
provisions and authorizes the Trustee on his behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
appoints the Trustee his attorney-in-fact for such purpose.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal amount at maturity,
Issue Price, accrued Original Issue Discount, Redemption Price, Fundamental
Change Redemption Price and interest, if any, in respect of this Note at the
place, at the respective times, at the rate and in the coin or currency herein
prescribed.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months. Accrual of Original Issue Discount shall
be calculated on the basis of a 360-day year of twelve 30-day months,
compounded semi-annually.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount at maturity and any multiple thereof.
At the office or agency of the Company referred to on the face hereof, and in
the manner and subject to the limitations provided in the Indenture, but
without payment of any
8.
<PAGE> 15
service charge (but with the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed upon any registration or exchange
of Notes), Notes may be exchanged for a like aggregate principal amount at
maturity of Notes of other authorized denominations.
The Company may not redeem the Notes prior to March 15, 1997.
On or after that date, the Company may, at its option, redeem the Notes as a
whole, or from time to time in part, on any date prior to maturity, upon
mailing a notice of such redemption not less than thirty nor more than sixty
days before the date fixed for redemption to the holders of Notes at their last
registered addresses, all as provided in the Indenture, at the following
optional Redemption Prices per $1,000 principal amount at maturity (which
prices reflect accrued Original Issue Discount calculated to each such date),
together in each case with accrued interest to the date fixed for redemption.
The Redemption Price of a Note redeemed between such dates would include an
additional amount reflecting the additional Original Issue Discount accrued
since the next preceding date in the table to the actual Redemption Date.
<TABLE>
<CAPTION>
(1) (2) (3)
Accrued
Original Redemption
Note Issue Price
Redemption Date Issue Price Discount (1) + (2)
--------------- ----------- -------- ----------
<S> <C> <C> <C>
March 15, 1997 $839.03 $59.59 $898.62
March 15, 1998 839.03 82.72 921.75
March 15, 1999 839.03 107.27 946.30
March 15, 2000 839.03 133.32 972.35
At stated maturity 839.03 160.97 1,000.00
</TABLE>
Notwithstanding the foregoing, if the date fixed for redemption is a March 15
or September 15, then the interest payable on such date shall be paid to the
holder of record on the next preceding March 1 or September 1.
The Notes are not subject to redemption through the operation
of any sinking fund.
If a Fundamental Change (as defined in the Indenture) occurs
at any time prior to March 15, 2001, each holder of Notes shall have the right,
at such holder's option, to require the Company to redeem all or any part of
such holder's Notes on the date (the "Fundamental Change Redemption Date") (or
if such date is not a business day, the next succeeding business day) that is
30 days after the date of the Company's notice of such Fundamental Change.
Such redemption shall be made at a price (the "Fundamental
9.
<PAGE> 16
Change Redemption Price") equal to the Issue Price plus accrued Original Issue
Discount to the Fundamental Change Redemption Date; provided that, with respect
to a Fundamental Change, if the Applicable Price (as defined in the Indenture)
is less than the Reference Market Price (as defined in the Indenture), the
Company shall redeem such Notes at a price equal to the foregoing Fundamental
Change Redemption Price multiplied by the fraction obtained by dividing the
Applicable Price by the Reference Market Price. In each case, the Company
shall also pay accrued interest, if any, on such Notes to the Fundamental
Change Redemption Date; provided that if such Fundamental Change Redemption
Date is a March 15 or September 15, then the interest payable on such date
shall be paid to the holder of record of the Note on the next preceding March 1
or September 1. The Company shall mail to all holders of record of the Notes a
notice of the occurrence of a Fundamental Change and of the redemption right
arising as a result thereof on or before the tenth day after the occurrence of
such Fundamental Change. For a Note to be so repaid at the option of the
holder, the Company must receive at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York
such Note with the form entitled "Option to Elect Redemption Upon a Fundamental
Change" on the reverse thereof duly completed, together with such Notes duly
endorsed for transfer, on or before the 30th day after the date of such notice
(or if such 30th day is not a business day, the immediately preceding business
day). All questions as to the validity, eligibility (including time of
receipt) and acceptance of any Note for redemption shall be determined by the
Company, whose determination shall be final and binding.
Subject to the provisions of the Indenture, the holder hereof
has the right, at his option, at any time after 60 days following the latest
date of original issuance of any of the Notes through the close of business on
March 15, 2001, or, as to all or any portion hereof called for redemption,
prior to the close of business on the business day immediately preceding the
date fixed for redemption (unless the Company shall default in payment due upon
redemption thereof), to convert the principal hereof or any portion of such
principal which is $1,000 principal amount at maturity or a multiple thereof,
into that number of fully paid and nonassessable shares of the Company's Common
Stock, as said shares shall be constituted at the date of conversion, obtained
by dividing the principal amount at maturity of this Note or portion thereof to
be converted by $1,000 and multiplying the result so obtained by 36.0837 (the
"Conversion Rate") or such Conversion Rate as adjusted from time to time as
provided in the Indenture, upon surrender of this Note, together with a
conversion notice as provided in the Indenture, to the Company at the office or
agency of the Company maintained for that purpose in the Borough of Manhattan,
The City of New York, and, unless the shares issuable on conversion are to be
issued in the same name as this Note, duly
10.
<PAGE> 17
endorsed by, or accompanied by instruments of transfer in form satisfactory to
the Company duly executed by, the holder or by his duly authorized attorney.
No adjustments in respect of accrued Original Issue Discount, interest or
dividends will be made upon any conversion; provided, however, that if this
Note shall be surrendered for conversion during the period from the close of
business on any record date for the payment of interest to the opening of
business on the following interest payment date, this Note (unless it or the
portion being converted shall have been called for redemption during the period
from the close of business on any record date for the payment of interest to
the close of business on the following interest payment date) must be
accompanied by an amount, in New York Clearing House funds, equal to the
interest payable on such interest payment date on the principal amount at
maturity being converted; provided further, however, that no such payment shall
be required if the Company exercises its right to redeem the Notes on March 15,
1997. No fractional shares will be issued upon any conversion, but an
adjustment in cash will be made, as provided in the Indenture, in respect of
any fraction of a share which would otherwise be issuable upon the surrender of
any Note or Notes for conversion.
Any Notes called for redemption, unless surrendered for
conversion on or before the close of business on the business day immediately
preceding the date fixed for redemption, may be deemed to be purchased from the
holder of such Notes at an amount equal to the applicable Redemption Price,
together with accrued interest to the date fixed for redemption, by one or more
investment bankers or other purchasers who may agree with the Company to
purchase such Notes from the holders thereof and convert them into Common Stock
of the Company and to make payment for such Notes as aforesaid to the Trustee
in trust for such holders.
Upon due presentment for registration of transfer of this Note
at the office or agency of the Company in the Borough of Manhattan, The City of
New York, a new Note or Notes of authorized denominations for an equal
aggregate principal amount at maturity will be issued to the transferee in
exchange herefor, subject to the limitations provided in the Indenture, without
charge except for any tax or other governmental charge imposed in connection
therewith.
The Company, the Trustee, any paying agent, any conversion
agent and any Note registrar may deem and treat the registered holder hereof as
the absolute owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon made by
anyone other than the Company or any Note registrar), for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
paying agent nor any other conversion agent
11.
<PAGE> 18
nor any Note registrar shall be affected by any notice to the contrary. All
payments made to or upon the order of such registered holder shall, to the
extent of the sum or sums paid, satisfy and discharge liability for monies
payable on this Note.
No recourse for the payment of the principal amount at
maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Fundamental Change Redemption Price or interest, if any, in respect of this
Note, or for any claim based hereon or otherwise in respect hereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
the Indenture or any indenture supplemental thereto or in any Note, or because
of the creation of any indebtedness represented thereby, shall be had against
any incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and released.
Unless otherwise defined herein, terms used in this Note have
the definitions described to them in the Indenture.
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this Note, shall be construed as though they were written out in
full according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT --
TEN ENT -- as tenants by the entireties ___________________ Custodian
(Cust)
JT TEN -- as joint tenants with right of survivorship and not _______________________ under
as tenants in common (Minor)
Uniform Gifts to Minors Act
_____________________ (State)
</TABLE>
Additional abbreviations may also be used
though not in the above list.
12.
<PAGE> 19
CONVERSION NOTICE
To: Cypress Semiconductor Corporation
The undersigned registered holder of this Note hereby
irrevocably exercises the option to convert this Note, or portion hereof (which
is $1,000 principal amount at maturity or a multiple thereof) below designated,
into shares of Common Stock of Cypress Semiconductor Corporation in accordance
with the terms of the Indenture referred to in this Note, and directs that the
shares issuable and deliverable upon the conversion, together with any check in
payment for fractional shares and any Notes representing any unconverted
principal amount at maturity hereof, be issued and delivered to the registered
holder hereof unless a different name has been indicated below. If shares or
any portion of this Note not converted are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto. Any amount required to be paid by the undersigned on
account of interest accompanies this Note.
Dated:
____________________________________
____________________________________
Signature(s)
Signature(s) must be guaranteed
by a commercial bank or trust
company or a member firm of a
major stock exchange if shares
of Common Stock are to be issued,
or Notes to be delivered, other
than to or in the name of
registered holder.
_____________________________
Signature Guarantee
13.
<PAGE> 20
Fill in for registration of
shares of Common Stock and
and Notes to be issued
other than to and in the
name of the registered holder:
______________________________
(Name)
______________________________
(Street Address)
______________________________
(City, State and Zip Code)
Please print name and address
Principal amount at maturity to
be converted (if less than all):
$_____,000
_________________________________
Social Security or Other
Taxpayer Identification Number
14.
<PAGE> 21
ASSIGNMENT
For value received _________________ hereby sell(s), assign(s) and transfer(s)
unto ______________________________
(Please insert social security or other
taxpayer identification number of
assignee)
the within Note and hereby irrevocably constitutes and appoints ______________
attorney to transfer the said Note on the books of the Company, with full power
of substitution in the premises.
In connection with any transfer of the within Note occurring within three years
of the original issuance of such Note, the undersigned confirms that such Note
is being transferred:
/ / To Cypress Semiconductor Corporation or a subsidiary thereof; or
/ / Pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
/ / To an Institutional Accredited Investor pursuant to and in
compliance with the Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Regulation S under the
Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Rule 144 under the Securities
Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
/ / The transferee is an Affiliate of the Company.
15.
<PAGE> 22
Dated: __________________________
__________________________
Signature(s)
Signature(s) must be guaranteed by
a commercial bank or trust company
or a member firm of a major stock
exchange if shares of Common Stock
or Notes to be delivered, other
than to or in the name of the
registered holder.
__________________________________
Signature Guarantee
16.
<PAGE> 23
OPTION TO ELECT REDEMPTION
UPON A FUNDAMENTAL CHANGE
To: Cypress Semiconductor Corporation
The undersigned registered holder of this Note hereby
irrevocably acknowledges receipt of a notice from Cypress Semiconductor
Corporation (the "Company") as to the occurrence of a Fundamental Change with
respect to the Company and requests and instructs the Company to redeem this
Note, or portion hereof (which is $1,000 principal amount at maturity or a
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Note, at the Fundamental Change Redemption Price
together with accrued interest to such date, to the registered holder hereof.
Principal amount at maturity to
be converted (if less than all):
$_____,000
Dated: _______________________
__________________________________
__________________________________
Signature(s)
__________________________________
Social Security or Other
Taxpayer Identification Number
NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of the Note in every particular without
alteration or enlargement or any change whatever.
17.
<PAGE> 24
Schedule A
Changes to Principal Amount of Global Security
<TABLE>
<CAPTION>
Principal Amount of
Securities by which
this Global Security
Is To Be Reduced or
Increased, and Remaining Principal
Reason for Reduction Amount of this Notation
Date or Increase Global Security Made by
-------- -------------------- ------------------- ---------
<S> <C> <C> <C>
________ ____________________ ___________________ _________
________ ____________________ ___________________ _________
________ ____________________ ___________________ _________
________ ____________________ ___________________ _________
________ ____________________ ___________________ _________
________ ____________________ ___________________ _________
________ ____________________ ___________________ _________
________ ____________________ ___________________ _________
</TABLE>
18.
<PAGE> 25
AND WHEREAS, all acts and things necessary to make the Notes,
when executed by the Company and authenticated and delivered by the Trustee, as
in this Indenture provided, the valid, binding and legal obligations of the
Company, and to constitute these presents a valid agreement according to its
terms, have been done and performed, and the execution of this Indenture and
the issue hereunder of the Notes have in all respects been duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which
the Notes are, and are to be, authenticated, issued and delivered, and in
consideration of the premises and of the purchase and acceptance of the Notes
by the holders thereof, the Company covenants and agrees with the Trustee for
the equal and proportionate benefit of the respective holders from time to time
of the Notes (except as otherwise provided below), as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions. The terms defined in this Section
1.01 (except as herein otherwise expressly provided or unless the context
otherwise requires) for all purposes of this Indenture and of any indenture
supplemental hereto shall have the respective meanings specified in this
Section 1.01. The words "herein," "hereof" and "hereunder" and words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other Subdivision. The terms defined in this Article
include the plural as well as the singular.
Affiliate: The term "Affiliate" with respect to any specified
Person means any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such specified Person. For
the purposes of this definition, "control," when used with respect to any
specified Person means the power to direct or cause the direction of the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Applicable Price: The term "Applicable Price" shall mean (i)
in the event of a Fundamental Change in which the holders of the Common Stock
receive only cash, the amount of
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cash received by the holder of one share of Common Stock and (ii) in the event
of any other Fundamental Change, the average of the last reported sale price
for the Common Stock (determined as set forth in subsection (f) of Section
15.05) during the ten Trading Days (as defined in subsection (f) of Section
15.05) prior to the record date for the determination of the holders of Common
Stock entitled to receive cash, securities, property or other assets in
connection with such Fundamental Change, or, if there is no such record date,
the date upon which the holders of Common Stock shall have the right to receive
such cash, securities, property or other assets in connection with the
Fundamental Change.
Board of Directors: The term "Board of Directors" shall mean
the Board of Directors of the Company or a committee of such Board duly
authorized to act for it hereunder.
Business Day: The term "Business Day" shall mean a day, other
than a Saturday, a Sunday or a legal holiday, on which the Trustee and banking
institutions located in San Francisco, California, Boston, Massachusetts and
the Borough of Manhattan, The City of New York are open for the purpose of
conducting a commercial banking business.
Common Stock: The term "Common Stock" shall mean any stock of
any class of the Company which has no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which is not subject to redemption
by the Company. Subject to the provisions of Section 15.06, however, shares
issuable on conversion of Notes shall include only shares of Common Stock, $.01
par value per share (which is the class designated as Common Stock of the
Company at the date of this Indenture), or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which are not subject to redemption by the Company; provided that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion to which the
total number of shares of such class resulting from all such reclassifications
bears to the total number of shares of all such classes resulting from all such
reclassifications.
Company: The term "Company" shall mean Cypress Semiconductor
Corporation, a Delaware corporation, and subject to the provisions of Article
Twelve shall include its successors and assigns.
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Conversion Rate: The term "Conversion Rate" shall have the
meaning specified in Section 15.04.
Depositary: The term "Depositary" means, with respect to the
Notes issuable or issued in whole or in part in global form, the person
specified in Section 2.05 as the Depositary with respect to the Notes, until a
successor shall have been appointed and become such pursuant to the applicable
provisions of this Indenture, and thereafter, "Depositary" shall mean or
include such successor.
Event of Default: The term "Event of Default" shall mean any
event specified in Section 7.01, continued for the period of time, if any, and
after the giving of the notice, if any, therein designated.
Exchange Act: The term "Exchange Act" means the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
Fundamental Change: The term "Fundamental Change" means the
occurrence of any transaction or event in connection with which all or
substantially all the Common Stock shall be exchanged for, converted into,
acquired for or constitute solely the right to receive consideration (whether
by means of an exchange offer, liquidation, tender offer, consolidation,
merger, combination, reclassification, recapitalization or otherwise) which is
not all or substantially all common stock listed (or, upon consummation of such
transaction or event, which will be listed) on a United States national
securities exchange or approved for quotation in the NASDAQ System or any
similar United States system of automated dissemination of quotations of
securities prices.
Fundamental Change Redemption Date: The term "Fundamental
Change Redemption Date" has the meaning ascribed to it in Section 16.01(a).
Fundamental Change Redemption Price: The term "Fundamental
Change Redemption Price" has the meaning ascribed to it in Section 16.01(a).
Indenture: The term "Indenture" shall mean this instrument as
originally executed or, if amended or supplemented as herein provided, as so
amended or supplemented.
Issue Price: The term "Issue Price" shall mean, with respect
to any Note (or any portion thereof), 83.903% of the principal amount at
maturity of such Note (or such portion thereof).
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NASDAQ System: The term "NASDAQ System" shall mean the
electronic inter-dealer quotation system operated by NASDAQ, Inc., a subsidiary
of the National Association of Securities Dealers, Inc.
Note or Notes: The terms "Note" or "Notes" shall mean any
Note or Notes, as the case may be, authenticated and delivered under this
Indenture.
Noteholder: The terms "Noteholder" or "holder of Notes," or
other similar terms, shall mean any person in whose name at the time a
particular Note is registered on the books of the Company kept for that purpose
in accordance with the terms hereof.
Officers' Certificate: The term "Officers' Certificate," when
used with respect to the Company, shall mean a certificate signed both (a) by
its Chairman of the Board of Directors, or any Vice-Chairman of the Board of
Directors, or its President or any Vice President (whether or not designated by
a number or numbers or a word or words added before or after the title "Vice
President") and (b) by its Treasurer, or Controller, or Secretary or any
Assistant Secretary.
Opinion of Counsel: The term "Opinion of Counsel" shall mean
an opinion in writing signed by legal counsel, who may be an employee of or
counsel to the Company or other counsel acceptable to the Trustee.
Original Issue Discount: The term "Original Issue Discount"
of any Note means the difference between the Issue Price and the principal
amount at maturity of the Note as set forth on the face of the Note. For
purposes of this Indenture and the Notes, accrual of Original Issue Discount
shall be calculated on the basis of a 360-day year of twelve 30-day months,
compounded semi-annually.
outstanding: The term "outstanding," when used with reference
to Notes, shall, subject to the provisions of Section 9.04, mean, as of any
particular time, all Notes authenticated and delivered by the Trustee under
this Indenture, except
(a) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Notes, or portions thereof, for the payment or redemption
of which monies in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than the
Company) or shall have been
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set aside and segregated in trust by the Company (if the Company shall
act as its own paying agent), provided that if such Notes are to be
redeemed prior to the maturity thereof, notice of such redemption
shall have been given as in Article Three or Article Sixteen, as the
case may be, provided, or provision satisfactory to the Trustee shall
have been made for giving such notice;
(c) Notes paid or Notes in lieu of or in substitution for
which other Notes shall have been authenticated and delivered pursuant
to the terms of Section 2.06 unless proof satisfactory to the Trustee
is presented that any such Notes are held by bona fide holders in due
course; and
(d) Notes converted into Common Stock pursuant to Article
Fifteen hereof and Notes not deemed outstanding pursuant to Section
3.02.
Person: The term "Person" shall mean a corporation, an
association, a partnership, an organization, an individual, a joint venture, a
joint stock company, a trust, a government or a political subdivision thereof
or a governmental agency, and shall include any successor (by merger or
otherwise) of such entity.
PORTAL Market: The term "PORTAL" Market shall mean the
Private Offerings, Resales and Trading through Automated Linkages Market
operated by the National Association of Securities Dealers Inc. or any
successor thereto.
Predecessor Note: The term "Predecessor Note" of any
particular Note shall mean every previous Note evidencing all or a portion of
the same debt as that evidenced by such particular Note; and, for the purposes
of this definition, any Note authenticated and delivered under Section 2.06 in
lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the lost, destroyed or stolen Note.
Principal Office: The term "Principal Office" or "principal
office of the Trustee," or other similar term, shall mean the principal office
of the Trustee at which at any particular time its corporate trust business
shall be administered, which office is, at the date as of which this Indenture
is dated, located at Blue Hills Office Park, 150 Royall Street, Canton,
Massachusetts 02021, Attn: Corporate Trust Division, Mail Stop 45-02-15.
QIB: The term "QIB" shall mean a "qualified institutional
buyer" as defined in Rule 144A.
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Redemption Price: The term "Redemption Price" means the
applicable Redemption Price as set forth in the Note, including any accrued
Original Issue Discount referred to therein.
Reference Market Price: The term "Reference Market Price"
shall initially mean $12.50 and in the event of any adjustment to the
Conversion Rate pursuant to subsection (a), (b) or (c) of Section 15.05, the
Reference Market Price shall also be adjusted so that the Reference Market
Price after giving effect to any such adjustment shall equal the Reference
Market Price immediately prior to such adjustment multiplied by a fraction, the
numerator of which is the Conversion Rate immediately prior to such adjustment
and the denominator of which is the Conversion Rate after such adjustment.
Responsible Officer: The term "Responsible Officer," when
used with respect to the Trustee, shall mean any officer in the Principal
Office of the Trustee assigned by the Trustee to administer its corporate trust
matters.
Restricted Note: The term "Restricted Note" means any Note
that bears or is required to bear the legend set forth in Section 2.05(d).
Rule 144A: The term "Rule 144A" shall mean Rule 144A as
promulgated under the Securities Act.
Securities Act: The term "Securities Act" means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
Senior Indebtedness: The term "Senior Indebtedness" shall
mean the principal of, premium, if any, and interest on, and any other payment
due pursuant to any of the following (including, without limitation, fees,
costs and expenses, and, to the extent allowed or permitted to the holder of
such Senior Indebtedness against the bankruptcy or other insolvency estate of
the Company in such proceeding, any interest accruing after the filing of a
petition initiating any proceeding pursuant to any bankruptcy law, in each case
to the extent provided for in the instrument or other documentation relating to
such indebtedness), whether outstanding at the date hereof or hereafter
incurred or created:
(a) all indebtedness of the Company for money borrowed
(including any indebtedness secured by a mortgage, conditional sales
contract or other lien which is (i) given to secure all or part of the
purchase price of property subject thereto, whether given to the
vendor
24.
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of such property or to another or (ii) existing on property at the
time of acquisition thereof);
(b) all indebtedness of the Company evidenced by notes,
debentures, bonds or other instrument (excluding indebtedness for
trade payables or constituting the deferred purchase price of assets
or services incurred in the ordinary course of business);
(c) all indebtedness or other obligations of the Company with
respect to interest rate and currency swap agreements, cap, floor and
collar agreements, currency spot and forward contracts and other
similar agreements and arrangements;
(d) all lease obligations of the Company which are
capitalized on the books of the Company in accordance with generally
accepted accounting principles;
(e) all indebtedness of others of the kinds described in any
of the preceding clauses (a), (b) or (c) and all lease obligations of
others of the kind described in the preceding clause (d) assumed by or
guaranteed (directly or indirectly including, without limitation,
through an agreement to purchase, contingent or otherwise), in any
manner by the Company and all obligations of the Company under any
such guarantee or other arrangement; and
(f) all deferrals, renewals, extensions or refundings of, or
amendments, modifications or supplements to, indebtedness (or
guarantee or other arrangements) of the kinds described in any of the
preceding clauses (a), (b), (c) or (e) and all renewals or extensions
of lease obligations of the kinds described in any of the preceding
clauses (d) or (e);
unless, in the case of any particular indebtedness, lease, renewal, extension
or refunding, the instrument or lease creating or evidencing the same or the
assumption or guarantee of the same expressly provides that such indebtedness,
lease, renewal, extension or refunding is subordinate to any other indebtedness
of the Company or is not superior in right of payment to, or is pari passu
with, the Notes. Notwithstanding the foregoing, Senior Indebtedness shall not
include any indebtedness or lease obligation of any kind of the Company to any
subsidiary of the Company, a majority of the voting stock of which is owned by
the Company.
Trading Day: The term "Trading Day" means a day during which
trading in securities generally occurs on the
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New York Stock Exchange or, if the applicable security is not listed on the New
York Stock Exchange, on the principal other national or regional securities
exchange on which the applicable security is then listed or, if the applicable
security is not listed on a national or regional securities exchange, on the
NASDAQ System or, if the applicable security is not quoted on the NASDAQ
System, on the principal other market on which the applicable security is then
traded.
Trigger Event: The term "Trigger Event" is defined in Section
15.05(g).
Trustee: The term "Trustee" shall mean The First National
Bank of Boston and, subject to the provisions of Article Eight hereof, shall
also include its successors and assigns as Trustee hereunder.
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION,
REGISTRATION AND EXCHANGE OF NOTES
SECTION 2.01. Designation, Amount and Issue of Notes. The
Notes shall be designated as "3.15% Convertible Subordinated Notes due 2001."
Notes not to exceed the aggregate principal amount at maturity of $110,000,000
(except pursuant to Sections 2.05, 2.06, 3.03, 15.02 and 16.01) upon the
execution of this Indenture, or from time to time thereafter, may be executed
by the Company and delivered to the Trustee for authentication, and the Trustee
shall thereupon authenticate and deliver said Notes to or upon the written
order of the Company, signed both (a) by its Chairman of the Board of
Directors, or any Vice-Chairman of the Board of Directors, or its President or
any Vice President (whether or not designated by a number or numbers or a word
or words added before or after the title "Vice President") and (b) by its
Treasurer, or Controller, or Secretary or any Assistant Secretary, without any
further action by the Company hereunder.
SECTION 2.02. Form of Notes. The Notes and the Trustee's
certificate of authentication to be borne by the Notes shall be substantially
in the form as in this Indenture above recited. Any of the Notes may have
imprinted thereon such legends or endorsements as the officers executing the
same may approve (execution thereof to be conclusive evidence of such approval)
and as are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange
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on which the Notes may be listed or any trading system in which the Notes may
be admitted, or to conform to usage.
Any Note in global form shall represent such of the
outstanding Notes as shall be specified therein and shall provide that it shall
represent the aggregate amount of outstanding Notes from time to time endorsed
thereon and that the aggregate amount of outstanding Notes represented thereby
may from time to time be increased or reduced to reflect transfers or exchanges
permitted hereby. Any endorsement of a Note in global form to reflect the
amount of any increase or decrease in the amount of outstanding Notes
represented thereby shall be made by the Trustee or at the direction of the
Trustee, in such manner and upon instructions given by the holder of such Note.
Payment of principal of and interest and premium, if any, on any Note in global
form shall be made to the holder of such Note.
SECTION 2.03. Date and Denomination of Notes; Payments of
Interest. The Notes shall be issuable in registered form without coupons in
denominations of $1,000 principal amount at maturity and any multiple thereof.
Every Note shall be dated the date of its authentication, shall bear interest
from the applicable date and shall be payable on the dates specified on the
face of the form of Note recited above.
The person in whose name any Note (or its Predecessor Note) is
registered at the close of business on any record date with respect to any
interest payment date shall be entitled to receive the interest payable on such
interest payment date notwithstanding the cancellation of such Note upon any
transfer or exchange subsequent to the record date and prior to such interest
payment date. As provided in Section 15.02, and subject to the exception
contained therein, interest shall not be payable to such person in the case of
any Note or Notes, or portion thereof, which have been called for redemption
and which are converted on a date subsequent to such record date and prior to
such interest payment date. Interest may, at the option of the Company, be
paid by check mailed to the address of such person on the registry kept for
such purposes, provided that with respect to any holder of Notes with an
aggregate principal amount at maturity equal to or in excess of $10 million, at
the request of such holder on or prior to the record date in writing the
Company shall pay interest on such holder's Notes by wire transfer in
immediately available funds. The term "record date" with respect to any
interest payment date shall mean the March 1 or September 1 preceding said
March 15 or September 15. Interest on the Notes shall be computed on the basis
of a 360-day year of twelve 30-day months. Accrual of Original Issue Discount
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<PAGE> 34
shall be calculated on the basis of a 360-day year of twelve 30-day months,
compounded semi-annually.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any said March 15 or September 15
(herein called "Defaulted Interest") shall forthwith cease to be payable to the
Noteholder on the relevant record date by virtue of his having been such
Noteholder; and such Defaulted Interest shall be paid by the Company, at its
election in each case, as provided in clause (1) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a
special record date for the payment of such Defaulted Interest, which
date shall be fixed in the following manner. The Company shall notify
the Trustee in writing of the amount of Defaulted Interest proposed to
be paid on each Note and the date of the proposed payment (which shall
be not less than 25 days after the receipt by the Trustee of such
notice, unless the Trustee shall consent to an earlier date), and at
the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a special record date for
the payment of such Defaulted Interest which shall be not more than 15
days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such special record date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the special record date therefor to be
mailed, first-class postage prepaid to each Noteholder at his address
as it appears in the Note register, not less than 10 days prior to
such special record date. Notice of the proposed payment of such
Defaulted Interest and the special record date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Notes (or their respective Predecessor Notes) are registered
at the close of business on such special record date and shall no
longer be payable.
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SECTION 2.04. Execution of Notes. The Notes shall be signed
in the name and on behalf of the Company by the facsimile signature of its
President, any of its Vice Presidents or its Chief Executive Officer and
attested by the facsimile signature of its Secretary, Chief Financial Officer
or any of its Assistant Secretaries (which may be printed, engraved or
otherwise reproduced thereon, by facsimile or otherwise). Only such Notes as
shall bear thereon a certificate of authentication substantially in the form
hereinbefore recited, manually executed by the Trustee, shall be entitled to
the benefits of this Indenture or be valid or obligatory for any purpose. Such
certificate by the Trustee upon any Note executed by the Company shall be
conclusive evidence that the Note so authenticated has been duly authenticated
and delivered hereunder and that the holder is entitled to the benefits of this
Indenture.
In case any officer of the Company who shall have signed any
of the Notes shall cease to be such officer before the Notes so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Notes nevertheless may be authenticated and delivered or disposed
of as though the person who signed such Notes had not ceased to be such officer
of the Company; and any Note may be signed on behalf of the Company by such
persons as, at the actual date of the execution of such Note, shall be the
proper officers of the Company, although at the date of the execution of this
Indenture any such person was not such an officer.
SECTION 2.05. Exchange and Registration of Transfer of Notes;
Restrictions on Transfers; Depositary. (a) The Company shall keep at its
principal office, or shall cause to be kept, at one of the offices or agencies
maintained pursuant to Section 5.02, a register (the "Register") in which,
subject to such reasonable regulations as it may prescribe, Notes shall be
registered and the transfer of Notes shall be registered as in this Article Two
provided. Such Register shall be in written form or in any other form capable
of being converted into written form within a reasonable time. At all
reasonable times such Register shall be open for inspection by the Trustee.
The Company may appoint one or more co-registers in accordance with Section
5.02.
Upon surrender for registration of transfer of any Note at any
office or agency maintained by the Company pursuant to Section 5.02 and
satisfaction of the requirements for such transfer set forth in this Section
2.05, the Company shall execute and register, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount at
29.
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maturity and bearing such restrictive legends as may be required by this
Indenture.
Notes may be exchanged for a like aggregate principal amount
at maturity of Notes of other authorized denominations. Notes to be exchanged
shall be surrendered at any office or agency to be maintained by the Company
pursuant to Section 5.02 and the Company shall execute and register and the
Trustee shall authenticate and deliver in exchange therefor the Note or Notes
which the Noteholder making the exchange shall be entitled to receive, bearing
registration numbers not contemporaneously outstanding.
All Notes presented for registration of transfer or for
exchange, redemption, conversion or payment shall (if so required by the
Company or the Trustee) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
the Trustee duly executed by, the holder or his attorney duly authorized in
writing.
No service charge shall be charged to the Noteholder for any
exchange or registration of transfer of Notes, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith.
Neither the Company nor the Trustee shall be required to
exchange or register a transfer of (a) any Notes for a period of 15 days next
preceding any selection of Notes to be redeemed or (b) any Notes or portions
thereof selected or called for redemption or (c) any Notes or portion thereof
surrendered for conversion or (d) any Notes or portion thereof surrendered for
redemption pursuant to Article Sixteen.
All Notes issued upon any transfer or exchange of Notes shall
be valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture as the Notes surrendered upon such
exchange or transfer.
(b) So long as the Notes are eligible for book-entry
settlement with the Depositary (as defined below), or unless otherwise required
by law, all Notes to be traded on the PORTAL Market may be represented by a
Note in global form registered in the name of the Depositary or the nominee of
the Depositary. The transfer and exchange of beneficial interests in such Note
in global form, which does not involve the issuance of a Note in definitive
form, shall be effected through the Depositary, in accordance with this
Indenture
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(including the restrictions on transfer set forth herein) and the procedures of
the Depositary therefor.
At any time at the request of the beneficial holder of an
interest in a Note in global form, such beneficial holder shall be entitled to
obtain a definitive Note upon written request to the Trustee in accordance with
the procedures of the Depositary for the issuance thereof. Upon receipt of any
such request, the Trustee will cause, in accordance with the standing
instructions and procedures of the Depositary, the aggregate principal amount
at maturity of the Note in global form to be reduced and, following such
reduction, the Company will execute and the Trustee will authenticate and
deliver to such beneficial holder (or its nominee) a Note or Notes in the
appropriate aggregate principal amount at maturity of the name of such
beneficial holder (or its nominee) and bearing such restrictive legends as may
be required by this Indenture.
Any transfer of a beneficial interest in a Note in global form
which cannot be effected through book-entry settlement must be effected by the
delivery to the transferee (or its nominee) of a definitive Note or Notes
registered in the name of the transferee (or its nominee) on the books
maintained by the Trustee. With respect to any such transfer, the Trustee will
cause, in accordance with the standing instructions and procedures of the
Depositary, the aggregate principal amount at maturity of the Note in global
form to be reduced and, following such reduction, the Company will execute and
the Trustee will authenticate and deliver to the transferee (or such
transferee's nominee, as the case may be), a Note or Notes in the appropriate
aggregate principal amount at maturity in the name of such transferee (or its
nominee) and bearing such restrictive legends as may be required by this
Indenture.
(c) So long as the Notes are eligible for book-entry
settlement, or unless otherwise required by law, upon any transfer of a
definitive Note to a QIB in accordance with Rule 144A, unless otherwise
requested by the transferor, and upon receipt of the definitive Note or Notes
being so transferred, together with a certification from the transferor that
the transferee is a QIB (or other evidence satisfactory to the Trustee), the
Trustee shall make (or cause to be made) an endorsement on the Note in global
form to reflect an increase in the aggregate principal amount at maturity of
the Notes represented by the Note in global form, the Trustee shall cancel (or
cause to be cancelled) such definitive Note or Notes in accordance with the
standing instructions and procedures of the Depositary, the aggregate principal
amount at maturity of Notes represented by the Note in global form to
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<PAGE> 38
be increased accordingly; provided that no definitive Note, or portion thereof,
in respect of which the Company or an Affiliate of the Company held any
beneficial interest shall be included in such Note in global form until such
definitive Note is freely tradable in accordance with Rule 144(k); provided
further that the Trustee shall issue Notes in definitive form upon any transfer
of a beneficial interest in the Note in global form to the Company or any
Affiliate of the Company.
Any Note in global form may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Indenture as may be required by the
Depositary or by the National Association of Securities Dealers, Inc. in order
for the Notes to be tradeable on the PORTAL Market or as may be required for
the Notes to be tradeable on any other market developed for trading of
securities pursuant to Rule 144A or required to comply with any applicable law
or any regulation thereunder or with the rules and regulations of any
securities exchange upon which the Notes may be listed or traded or to conform
with any usage with respect thereto, or to indicate any special limitations or
restrictions to which any particular Notes are subject.
(d) Every Restricted Note shall be subject to the
restrictions on transfer provided in the legend required to be borne by each
Restricted Note pursuant to this Section 2.05, unless such restrictions on
transfer shall be waived by the written consent of the Company, and the holder
of each Restricted Note, by such Noteholder's acceptance thereof, agrees to be
bound by such restrictions on transfer. As used in this Section 2.05(d) and in
Section 2.05(e), the terms "transfer" encompasses any sale, pledge, transfer or
other disposition of any Restricted Note.
Until three years after the original issuance date of any
Note, any certificate evidencing such Note (and all securities issued in
exchange or substitution therefor, other than Common Stock, if any, issued upon
conversion thereof that shall bear the legend set forth in Section 2.05(e), if
applicable) shall bear a legend in substantially the following form, unless
otherwise agreed by the Company (with written notice thereof to the Trustee):
THE NOTE EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING
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SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS
AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY RESELL OR
OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO CYPRESS
SEMICONDUCTOR CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHED TO THE FIRST NATIONAL BANK OF BOSTON, AS TRUSTEE, A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE), (D) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE NOTE EVIDENCED HEREBY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH NOTE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE FIRST
NATIONAL BANK OF BOSTON, AS TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S.
PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE FIRST
NATIONAL BANK OF BOSTON, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF
THREE YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S.
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PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
Any Note (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired in
accordance with their terms, may upon surrender of such Note for exchange to
the Note registrar in accordance with the provisions of this Section 2.05, be
exchanged for a new Note or Notes, of like tenor and aggregate principal amount
at maturity, which shall not bear the restrictive legend required by this
Section 2.05(d).
Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in this Section 2.05(d)), a Note in global form
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee to a successor Depositary or a nominee of such successor Depositary.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust Company to
act as Depositary with respect to the Notes in global form. Initially, the
global Note shall be issued to the Depositary, registered in the name of Cede &
Co., as the nominee of the Depositary, and deposited with the custodian for
Cede & Co.
If at any time the Depositary for the Note in global form
notifies the Company that it is unwilling or unable to continue as Depositary
for such Note, the Company may appoint a successor Depositary with respect to
such Note. If a successor Depositary for the Note is not appointed by the
Company within 90 days after the Company receives such notice, the Company will
execute, and the Trustee, upon receipt of an Officers' Certificate for
authentication and delivery of Notes, will authenticate and deliver Notes in
definitive form, in an aggregate principal amount at maturity equal to the
principal amount at maturity of the Note in global form, in exchange for the
such Note in the global form.
If a definitive Note is issued in exchange for any portion of
a Note in global form after the close of business at the office or agency where
such exchange occurs on any record date and before the opening of business at
such office or agency on the next succeeding interest payment date, interest
will not be payable on such interest payment date in respect of such Note, but
will be payable on such interest payment date only to the person to whom
interest in respect of
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such portion of such Note in global form is payable in accordance with the
provisions of this Indenture.
Definitive Notes issued in exchange for all or a part of a
Note in global form pursuant to this Section 2.05 shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. Upon execution and authentication, the Trustee shall
deliver such definitive Notes to the person in whose names such definitive
Notes are so registered.
At such time as all interests in a Note in global form have
been redeemed, converted, repurchased or canceled, such Note in global form
shall be canceled by the Trustee in accordance with standing procedures and
instructions of the Depositary. At any time prior to such cancellation, if any
interest in a global Note is exchanged for definitive Notes, redeemed,
converted, canceled, or transferred to a transferee who receives definitive
Notes therefor or any definitive Note is exchanged or transferred for part of a
Note in global form, the principal amount at maturity of such Note in global
form shall, in accordance with the standing procedures and instructions of the
Depositary be reduced or increased, as the case may be, and the Trustee shall
cause an endorsement to be made on such Note in global form to reflect such
reduction or increase.
(e) Until three years after the original issuance date of any
Note, any stock certificate representing Common Stock issued upon conversion of
such Note shall bear a legend in substantially the following form, unless
otherwise agreed by the Company (with written notice thereof to the Trustee):
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF
AGREES THAT UNTIL THE EXPIRATION OF THREE YEARS AFTER THE ORIGINAL
ISSUANCE OF THE NOTE UPON THE CONVERSION OF WHICH THE COMMON STOCK
EVIDENCED HEREBY WAS ISSUED, (1) IT WILL NOT RESELL OR OTHERWISE
TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO CYPRESS
SEMICONDUCTOR CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE 144A, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL
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"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
THE FIRST NATIONAL BANK OF BOSTON, AS TRANSFER AGENT, A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRANSFER AGENT), (D)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT OR (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (2)
PRIOR TO SUCH TRANSFER, IT WILL FURNISH TO THE FIRST NATIONAL BANK OF
BOSTON, AS TRANSFER AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE
COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED AFTER THE
EXPIRATION OF THREE YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE UPON
THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED
OR UPON THE EARLIER SATISFACTION OF THE FIRST NATIONAL BANK OF BOSTON,
AS TRANSFER AGENT, THAT THE COMMON STOCK HAS BEEN OR IS BEING OFFERED
AND SOLD IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
(f) Any certificate evidencing a Note that has been
transferred to an Affiliate of the Company within three years after the
original issuance date of the Note, as evidenced by a notation on the
Assignment Form for such transfer or in the representation letter delivered in
respect thereof, shall, until three years after the last date on which the
Company or any Affiliate of the Company was an owner of such Note, bear a
legend in substantially the following form, unless otherwise agreed by the
Company (with written notice thereof to the Trustee);
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS
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ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO CYPRESS
SEMICONDUCTOR CORPORATION OR ANY SUBSIDIARY THEREOF, (B) IN A
TRANSACTION REGISTERED UNDER THE SECURITIES ACT OR (C) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) AND (2) THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THE NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFER IS PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE FIRST
NATIONAL BANK OF BOSTON, AS TRUSTEE, SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Any stock certificate representing Common Stock issued upon conversion of such
Note shall also bear a legend in substantially the form indicated above, unless
otherwise agreed by the Company (with written notice thereof to the Trustee).
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes. In
case any temporary or definitive Note shall become mutilated or be apparently
destroyed, lost or stolen, the Company in its discretion may execute, and upon
its request the Trustee shall authenticate and deliver, a new Note, bearing a
number not contemporaneously outstanding, in exchange and substitution for the
mutilated Note, or in lieu of and in substitution for the Note so apparently
destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company and to the Trustee such security or indemnity as
may be required by them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company and
to the Trustee evidence to their satisfaction of the destruction, loss or theft
of such Note and of the ownership thereof.
The Trustee may authenticate any such substituted Note and
deliver the same upon the receipt of such security or indemnity as the Trustee
and the Company may require. Upon
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the issuance of any substituted Note, the Company may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses connected therewith. In
case any Note which has matured or is about to mature or has been called for
redemption or is about to be converted into Common Stock shall become mutilated
or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Note, pay or authorize the payment of or convert or authorize the
conversion of the same (without surrender thereof except in the case of a
mutilated Note) if the applicant for such payment or conversion shall furnish
to the Company and to the Trustee such security or indemnity as may be required
by them to save each of them harmless and, in case of destruction, loss or
theft, evidence satisfactory to the Company and the Trustee of the destruction,
loss or theft of such Note and of the ownership thereof.
Every substituted Note issued pursuant to the provisions of
this Section 2.06 by virtue of the fact that any Note is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the apparently destroyed, lost or stolen Note shall be found at
any time, and shall be entitled to all the benefits of (but shall be subject to
all the limitations set forth in) this Indenture equally and proportionately
with any and all other Notes duly issued hereunder. To the extent permitted by
law, all Notes shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment
or conversion of mutilated, destroyed, lost or stolen Notes and shall preclude
any and all other rights or remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement
or payment or conversion of negotiable instruments or other securities without
their surrender.
SECTION 2.07. Temporary Notes. Pending the preparation of
definitive Notes, the Company may execute and the Trustee shall authenticate
and deliver temporary Notes (printed or lithographed). Temporary Notes shall
be issuable in any authorized denomination, and substantially in the form of
the definitive Notes but with such omissions, insertions and variations as may
be appropriate for temporary Notes, all as may be determined by the Company.
Every such temporary Note shall be executed by the Company and authenticated by
the Trustee upon the same conditions and in substantially the same manner, and
with the same effect, as the definitive Notes. Without unreasonable delay the
Company will execute and deliver to the Trustee definitive Notes and thereupon
any or all temporary Notes may be surrendered in exchange therefor,
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at each office or agency maintained by the Company pursuant to Section 5.02 and
the Trustee shall authenticate and deliver in exchange for such temporary Notes
an equal aggregate principal amount at maturity of definitive Notes. Such
exchange shall be made by the Company at its own expense and without any charge
therefor. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes
authenticated and delivered hereunder.
SECTION 2.08. Cancellation of Notes Paid, etc. All Notes
surrendered for the purpose of payment, redemption, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Note registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall
be promptly canceled by it, and no Notes shall be issued in lieu thereof except
as expressly permitted by any of the provisions of this Indenture. The Trustee
shall destroy canceled Notes (unless the Company directs it to do otherwise)
and shall deliver a certificate of such destruction to the Company. If the
Company shall acquire any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Notes unless
and until the same are delivered to the Trustee for cancellation.
ARTICLE THREE
REDEMPTION OF NOTES
SECTION 3.01. Redemption Prices. The Company may not redeem
the Notes prior to March 31, 1997. On or after that date, the Company may, at
its option, redeem all or from time to time any part of the Notes on any date
prior to maturity, upon notice as set forth in Section 3.02, and at the
optional Redemption Prices set forth in the form of Note hereinabove recited,
together with interest, if any, to the date fixed for redemption.
SECTION 3.02. Notice of Redemption; Selection of Notes. In
case the Company shall desire to exercise the right to redeem all or, as the
case may be, any part of the Notes pursuant to Section 3.01 for redemption and,
it or, at its request, the Trustee in the name of and at the expense of the
Company, shall mail or cause to be mailed a notice of such redemption at least
30 and not more than 60 days prior to the date fixed for redemption to the
holders of Notes so to be redeemed as a whole or in part at their last
addresses as the same appear on the registry books of the Company. Such
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mailing shall be by first class mail. The notice if mailed in the manner
herein provided shall be conclusively presumed to have been duly given, whether
or not the holder receives such notice. In any case, failure to give such
notice by mail or any defect in the notice to the holder of any Note designated
for redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Note.
Each such notice of redemption shall specify the principal
amount at maturity of each Note to be redeemed, the date fixed for redemption,
the Redemption Price at which Notes are to be redeemed, the place or places of
payment, that payment will be made upon presentation and surrender of such
Notes, that interest and Original Issue Discount accrued to the date fixed for
redemption will be paid as specified in said notice, and that on and after said
date interest and Original Issue Discount thereon or on the portions thereof to
be redeemed will cease to accrue. Such notice shall also state the current
Conversion Rate and the date on which the right to convert such Notes or
portions thereof into Common Stock will expire. If fewer than all the Notes
are to be redeemed, the notice of redemption shall identify the Notes to be
redeemed. In case any Note is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount at maturity thereof
to be redeemed and shall state that on and after the date fixed for redemption,
upon surrender of such Note, a new Note or Notes in principal amount at
maturity equal to the unredeemed portion thereof will be issued.
No later than the business day prior to the redemption date
specified in the notice of redemption given as provided in this Section, the
Company will deposit with the Trustee or with one or more paying agents (or, if
the Company is acting as its own paying agent, set aside, segregate and hold in
trust as provided in Section 5.04) an amount of money sufficient to redeem on
the redemption date all the Notes so called for redemption (other than those
theretofore surrendered for conversion into Common Stock) at the appropriate
Redemption Price, together with accrued interest to the date fixed for
redemption. If any Note called for redemption is converted pursuant hereto,
any money deposited with the Trustee or any paying agent or so segregated and
held in trust for the redemption of such Note shall be paid to the Company upon
its request, or, if then held by the Company shall be discharged from such
trust. If fewer than all the Notes are to be redeemed, the Company will give
the Trustee written notice not less than 45 days prior to the redemption date
as to the aggregate principal amount at maturity of Notes to be redeemed.
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If fewer than all the Notes are to be redeemed, the Trustee
shall select, by lot, pro rata or in such other manner as the Trustee shall
deem equitable and fair, the Notes or portions thereof (in multiples of $1,000
principal amount at maturity) to be redeemed. If any Note selected for partial
redemption is converted in part after such selection, the converted portion of
such Note shall be deemed (so far as may be) to be the portion to be selected
for redemption. The Notes (or portions thereof) so selected shall be deemed
duly selected for redemption for all purposes hereof, notwithstanding that any
such Note is converted as a whole or in part before the mailing of the notice
of redemption.
Upon any redemption of less than all Notes, the Company and
the Trustee may treat as outstanding any Notes surrendered for conversion
during the period of 15 days next preceding the mailing of a notice of
redemption and need not treat as outstanding any Note authenticated and
delivered during such period in exchange for the unconverted portion of any
Note converted in part during such period.
SECTION 3.03. Payment of Notes Called for Redemption. If
notice of redemption has been given as above provided, the Notes or portions of
Notes with respect to which such notice has been given shall, unless
theretofore converted into Common Stock pursuant to the terms hereof, become
due and payable on the date and at the place or places stated in such notice at
the applicable Redemption Price, together with interest accrued to the date
fixed for redemption, and on and after said date (unless the Company shall
default in the payment of such Notes at the Redemption Price, together with
interest accrued to said date) Original Issue Discount and interest on the
Notes or portions of Notes so called for redemption shall cease to accrue and
such Notes shall cease after the date fixed for redemption to be convertible
into Common Stock and, except as provided in Sections 8.05 and 13.04, to be
entitled to any benefit or security under this Indenture, and the holders
thereof shall have no right in respect of such Notes except the right to
receive the Redemption Price thereof and unpaid interest to the date fixed for
redemption. On presentation and surrender of such Notes at a place of payment
in said notice specified, the said Notes or the specified portions thereof
shall be paid and redeemed by the Company at the applicable Redemption Price,
together with interest accrued thereon to the date fixed for redemption;
provided that any semi-annual payment of interest becoming due on the date
fixed for redemption shall be payable to the holders of such Notes registered
as such on the relevant record date subject to the terms and provisions of
Section 2.03 hereof.
41.
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Upon presentation of any Note redeemed in part only, the
Company shall execute and the Trustee shall authenticate and deliver to the
holder thereof, at the expense of the Company, a new Note or Notes, of
authorized denominations, in principal amount at maturity equal to the
unredeemed portion of the Note so presented.
Notwithstanding the foregoing, the Trustee shall not redeem
any Notes or mail any notice of optional redemption during the continuance of a
default in payment of principal amount at maturity, Issue Price, accrued
Original Issue Discount, Redemption Price, Fundamental Change Redemption Price
or interest, if any, in respect of the Notes or of any Event of Default. If
any Note called for redemption shall not be so paid upon surrender thereof for
redemption, the Redemption Price and, to the extent legally permitted,
interest, if any, in respect thereof shall, until paid or duly provided for,
bear interest from the date fixed for redemption at the rate borne by the Note
(giving effect to accrual of Original Issue Discount) and such Note shall
remain convertible into Common Stock until the Redemption Price shall have been
paid or duly provided for.
SECTION 3.04. No Sinking Fund. The Notes shall not be
entitled to the benefit of any sinking fund.
SECTION 3.05. Conversion Arrangement on Call for Redemption.
In connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more
investment bankers or other purchasers to purchase such Notes by paying to the
Trustee in trust for the Noteholders, on or before the close of business on the
date fixed for redemption, an amount not less than the applicable Redemption
Price, together with interest accrued to the date fixed for redemption, of such
Notes. Notwithstanding anything to the contrary contained in this Article
Three, the obligation of the Company to pay the Redemption Price of such Notes,
together with interest accrued to the date fixed for redemption, shall be
deemed to be satisfied and discharged to the extent such amount is so paid by
such purchasers. If such an agreement is entered into, a copy of which will be
filed with the Trustee prior to the date fixed for redemption, any Notes not
duly surrendered for conversion by the holders thereof may, at the option of
the Company, be deemed, to the fullest extent permitted by law, acquired by
such purchasers from such holders and (notwithstanding anything to the contrary
contained in Article Fifteen) surrendered by such purchasers for conversion,
all as of immediately prior to the close of business on the date fixed for
redemption, subject to payment of the above amount as aforesaid. At the
direction of the Company, the Trustee
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shall hold and dispose of any such amount paid to it in the same manner as it
would monies deposited with it by the Company for the redemption of Notes.
Without the Trustee's prior written consent, no arrangement between the Company
and such purchasers for the purchase and conversion of any Notes shall increase
or otherwise affect any of the powers, duties, responsibilities or obligations
of the Trustee as set forth in this Indenture, and the Company agrees to
indemnify the Trustee from, and hold it harmless against, any loss, liability
or expense arising out of or in connection with any such arrangement for the
purchase and conversion of any Notes between the Company and such purchasers to
which the Trustee has not consented in writing, including the costs and
expenses incurred by the Trustee in the defense of any claim or liability
arising out of or in connection with the exercise or performance of any of its
powers, duties, responsibilities or obligations under this Indenture.
ARTICLE FOUR
SUBORDINATION OF NOTES
SECTION 4.01. Agreement of Subordination. The Company
covenants and agrees, and each holder of Notes issued hereunder by his
acceptance thereof likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article Four; and each Person holding
any Note, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions.
The payment of the principal amount at maturity, Issue Price,
accrued Original Issue Discount, Redemption Price, Fundamental Change
Redemption Price and interest, if any, in respect of all Notes issued hereunder
shall, to the extent and in the manner hereinafter set forth, be subordinated
and subject in right of payment to the prior payment in full of all Senior
Indebtedness, whether outstanding at the date of this Indenture or thereafter
incurred.
No provision of this Article Four shall prevent the occurrence
of any default or Event of Default hereunder.
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SECTION 4.02. Payments to Noteholders. In the event and
during the continuation of any default in the payment of principal, premium,
interest or any other payment due on any Senior Indebtedness continuing beyond
the period of grace, if any, specified in the instrument or lease evidencing
such Senior Indebtedness, then, unless and until such default shall have been
cured or waived or shall have ceased to exist, no payment shall be made by the
Company with respect to the principal amount at maturity, Issue Price, accrued
Original Issue Discount, Redemption Price, Fundamental Change Redemption Price
or interest, if any, in respect of the Notes, except payments made pursuant to
Article Thirteen hereof from monies deposited with the Trustee pursuant thereto
prior to the happening of such default.
Upon any payment by the Company, or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution or winding-up or liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or
to become due upon all Senior Indebtedness shall first be paid in full, or
payment thereof provided for in money in accordance with its terms, before any
payment is made on account of the principal amount at maturity, Issue Price,
accrued Original Issue Discount, Redemption Price, Fundamental Change
Redemption Price or interest, if any, in respect of the Notes (except payments
made pursuant to Article Thirteen hereof from monies deposited with the Trustee
pursuant thereto prior to the happening of such dissolution, winding-up,
liquidation or reorganization); and upon any such dissolution or winding-up or
liquidation or reorganization any payment by the Company, or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to which the holders of the Notes or the Trustee would be entitled,
except for the provisions of this Article Four, shall (except as aforesaid) be
paid by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
holders of the Notes or by the Trustee under this Indenture if received by them
or it, directly to the holders of Senior Indebtedness (pro rata to such holders
on the basis of the respective amounts of Senior Indebtedness held by such
holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay all
Senior Indebtedness in full, in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness, before any payment or
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distribution is made to the holders of the Notes or to the Trustee.
If, notwithstanding the foregoing, any payment or distribution
of assets of the Company of any kind or character, whether in cash, property or
securities, prohibited by the foregoing, shall be received by the Trustee or
the holders of the Notes before all Senior Indebtedness is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated
by the Company, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in full
in money in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.
For purposes of this Article Four, the words, "cash, property
or securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated at least to the extent provided in this
Article Four with respect to the Notes to the payment of all Senior
Indebtedness which may at the time be outstanding; provided that (i) the Senior
Indebtedness is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of the
Senior Indebtedness (other than leases) and of leases which are assumed are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article Twelve hereof shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 4.02 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
Twelve hereof. Nothing in this Section 4.02 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 8.06.
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Notwithstanding anything in this Indenture to the contrary,
neither the issuance and delivery of junior securities upon conversion of the
Notes in accordance with Article Fifteen nor the payment of cash in lieu of
fractional shares of Common Stock in accordance with Section 15.03 shall be
deemed to constitute a payment or distribution on account of the principal
amount at maturity, Issue Price, accrued Original Issue Discount, Redemption
Price or Fundamental Change Purchase Price or interest, if any, in respect of
the Notes. For the purposes of this paragraph, the term "junior securities"
means (a) shares of any stock of any class of the Company, (b) securities of
the Company which are subordinated in right of payment to all Senior
Indebtedness which may be outstanding at the time of issuance or delivery of
such securities to substantially the same extent as, or to a greater extent
than, the Notes are so subordinated as provided in this Article, and (c) any
securities into which the Notes become convertible pursuant to Section 15.06
which are securities of a Person required to enter into a supplemental
indenture pursuant to such section (or Article Twelve) and are either (x)
shares of any stock of any class of such Person, or (y) securities of such
Person which are subordinated in right of payment to all Senior Indebtedness
which may be outstanding at the time of issuance or delivery of such securities
to substantially the same extent as, or to a greater extent than, the Notes are
so subordinated as provided in this Article. Nothing contained in this Article
or elsewhere in this Indenture or in the Notes is intended to or shall impair,
as among the Company, its creditors other than the holders of Senior
Indebtedness, and the holders of the Notes, the right, which is absolute and
unconditional, of the holder of any Note to convert such Note in accordance
with Article Fifteen.
SECTION 4.03. Subrogation of Notes. Subject to the payment
in full of all Senior Indebtedness, the rights of the holders of the Notes
shall be subrogated to the rights of the holders of Senior Indebtedness to
receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness until the principal amount at
maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Fundamental Change Redemption Price and interest, if any, in respect of the
Notes shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of the Senior Indebtedness of any
cash, property or securities to which the holders of the Notes or the Trustee
would be entitled except for the provisions of this Article Four, and no
payment over pursuant to the provisions of this Article Four, to or for the
benefit of the holders of Senior Indebtedness by holders of the Notes or the
Trustee, shall, as between the Company, its creditors other than holders of
Senior Indebtedness, and the
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holders of the Notes, be deemed to be a payment by the Company to or on account
of the Senior Indebtedness. It is understood that the provisions of this
Article Four are and are intended solely for the purpose of defining the
relative rights of the holders of the Notes, on the one hand, and the holders
of the Senior Indebtedness, on the other hand.
Nothing contained in this Article Four or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness, and the
holders of the Notes, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Notes the principal amount at
maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Fundamental Change Redemption Price and interest, if any, in respect of the
Notes as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
holders of the Notes and creditors of the Company other than the holders of the
Senior Indebtedness, nor shall anything herein or therein prevent the Trustee
or the holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if
any, under this Article Four of the holders of Senior Indebtedness in respect
of cash, property or securities of the Company received upon the exercise of
any such remedy.
Upon any payment or distribution of assets of the Company
referred to in this Article Four, the Trustee, subject to the provisions of
Section 8.01, and the holders of the Notes shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the holders of the Notes, for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Four.
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SECTION 4.04. Authorization by Noteholders. Each holder of a
Note by his acceptance thereof authorizes and directs the Trustee in his behalf
to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article Four and appoints the Trustee his
attorney-in-fact for any and all such purposes.
SECTION 4.05. Notice to Trustee. The Company shall give
prompt written notice to a Responsible Officer of the Trustee of any fact known
to the Company which would prohibit the making of any payment of monies to or
by the Trustee in respect of the Notes pursuant to the provisions of this
Article Four. Notwithstanding the provisions of this Article Four or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment of
monies to or by the Trustee in respect of the Notes pursuant to the provisions
of this Article Four, unless and until a Responsible Officer of the Trustee
shall have received written notice thereof at the Principal Office of the
Trustee from the Company or a holder or holders of Senior Indebtedness or from
any trustee therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 8.01, shall be entitled in all
respects to assume that no such facts exist; provided that if on a date not
fewer than one business day prior to the date upon which by the terms hereof
any such monies may become payable for any purpose (including, without
limitation, the payment of the principal amount at maturity, Issue Price,
accrued Original Issue Discount, Redemption Price, Fundamental Change
Redemption Price or interest, if any, in respect of any Note) the Trustee shall
not have received, with respect to such monies, the notice provided for in this
Section 4.05, then, anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such monies and to
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date.
The Trustee, subject to the provisions of Section 8.01, shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of Senior Indebtedness or a trustee on behalf of any such holder or holders.
If the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article Four, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to
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the amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Four, and if
such evidence is not furnished the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 4.06. Trustee's Relation to Senior Indebtedness. The
Trustee in its individual capacity shall be entitled to all the rights set
forth in this Article Four in respect of any Senior Indebtedness at any time
held by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in this Section or elsewhere in this Indenture shall deprive the
Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Four, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not
be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and,
subject to the provisions of Section 8.01, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to holders of
Notes, the Company or any other Person money or assets to which any holder of
Senior Indebtedness shall be entitled by virtue of this Article Four or
otherwise.
SECTION 4.07. No Impairment of Subordination. No right of
any present or future holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with or (ii) by any election of remedies by any such holder
(including, without limitation, an election to nonjudicially foreclose on any
real or personal property collateral) which in any manner impairs, reduces,
releases or otherwise adversely affects any holder's subrogation, reimbursement
or contribution rights or other rights to proceed against the Company or any
other Person or any collateral.
Without in any way limiting the generality of the foregoing paragraph,
the holders of the Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the holders of the Notes,
without
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incurring responsibility to the holders of the Notes and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the holders of the Notes to the holders of Senior Indebtedness, do
any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner any agreement
under which Senior Indebtedness is outstanding, or increase or decrease the
rate of interest or fees applicable to Senior Indebtedness, or increase or
decrease the principal amount of Senior Indebtedness; (b) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness or obtain an interest in property to secure Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Senior Indebtedness; and (d) exercise or refrain from exercising any rights
against the Company and any other person.
Section 4.08 Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each holder of Notes, by his acceptance thereof,
acknowledges and agrees that the foregoing subordination provisions are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Indebtedness, whether such Senior Indebtedness was created or acquired
before or after the issuance of the Notes, to acquire and continue to hold, or
to continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
Section 4.09 Reinstatement of Subordination. If, at any time, all
or part of any payment of any Senior Indebtedness theretofore made by the
Company or any other Person is rescinded or must otherwise be returned by the
holders of Senior Indebtedness for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of the Company or such
other Person), these subordination provisions shall continue to be effective or
be reinstated, as the case may be, all as though such payment had not been
made.
Section 4.10 Permitted Payments. Nothing contained in this
Article or elsewhere in this Indenture, or in any of the Notes, shall prevent
the Company at any time from making payments at any time of principal amount at
maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Fundamental Change Redemption Price, or interest, if any, in
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respect of the Notes in accordance with the provisions hereof, except as
otherwise provided in this Article.
Section 4.11 Article Applicable to Paying Agents. If at any time
any paying agent other than the Trustee shall have been appointed by the
Company and be then acting hereunder, the term "Trustee" as used in this
Article shall (unless the context otherwise requires) be construed as extending
to and including such paying agent within its meaning as fully for all intents
and purposes as if such paying agent were named in this Article in addition to
or in place of the Trustee; provided, however, that the first paragraph of
Section 4.05 shall not apply to the Company or any Affiliate of the Company if
it or such Affiliate acts as paying agent.
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.01. Payment of Principal, Premium and Interest.
The Company covenants and agrees that it will duly and punctually pay or cause
to be paid the principal amount at maturity, Issue Price, accrued Original
Issue Discount, Redemption Price, Fundamental Change Redemption Price and
interest, if any, in respect of each of the Notes at the places, at the
respective times and in the manner provided herein and in the Notes. Each
installment of interest on the Notes may be paid by mailing checks for the
interest payable to or upon the written order of the holders of Notes entitled
thereto as they shall appear on the registry books of the Company, provided
that with respect to any holder of Notes with an aggregate principal amount at
maturity equal to or in excess of $10 million, at the request of such holder on
or prior to the record date in writing the Company shall pay interest on such
holder's Notes by wire transfer in immediately available funds.
SECTION 5.02. Offices for Notices and Payments, etc. So long
as any of the Notes remain outstanding, the Company will maintain in the
Borough of Manhattan, The City of New York, an office or agency where the Notes
may be presented for payment, and an office or agency where the Notes may be
presented for registration of transfer and for exchange and conversion as
provided for in this Indenture and an office or agency where notices and
demands to or upon the Company in respect of the Notes or of this Indenture may
be served. The Company will give to the Trustee written notice of the location
of each such office or agency and of any change of location thereof. If the
Company shall fail to maintain any
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such office or agency or shall fail to give such notice of the location or of
any change in the location thereof, presentations and demands may be made and
notices may be served at the principal office of the Trustee and the Company
hereby appoints the Trustee at the principal office of the Trustee as its agent
to receive all such presentations, demands and notices.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby initially designates the Trustee as paying
agent, Note registrar and conversion agent and each of the Office of the
Trustee and the office of BancBoston Trust Company of New York, an Affiliate of
the Trustee, at 55 Broadway, New York, New York 10006, as one such office or
agency of the Company for each of the aforesaid purposes.
So long as the Trustee is the Note registrar, the Trustee
agrees to mail, or cause to be mailed, the notices set forth in Section 8.09(a)
and the third paragraph of Section 8.10.
SECTION 5.03. Appointments to Fill Vacancies in Trustee's
Office. The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 8.09, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 5.04. Provision as to Paying Agent. (a) If the
Company shall appoint a paying agent other than the Trustee or an affiliate of
the Trustee, it will cause such paying agent to execute and deliver to the
Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section 5.04:
(1) that it will hold all sums held by it as such agent for
the payment of the principal amount at maturity, Issue Price, accrued
Original Issue Discount, Redemption Price, Fundamental Change
Redemption Price or interest, if any, in respect of the Notes (whether
such sums have been paid to it by the Company or by any other
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obligor on the Notes) in trust for the benefit of the holders of the
Notes;
(2) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the Notes) to make any payment
of the principal amount at maturity, Issue Price, accrued Original
Issue Discount, Redemption Price, Fundamental Change Redemption Price
or interest, if any, in respect of the Notes when the same shall be
due and payable; and
(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the
Trustee all sums so held in trust.
The Company shall, before each due date of the principal
amount at maturity, Issue Price, accrued Original Issue Discount, Redemption
Price, Fundamental Change Redemption Price or interest, if any, in respect of
the Notes, deposit with the paying agent a sum sufficient to pay such amounts
so becoming due, and (unless such paying agent is the Trustee) the Company will
promptly notify the Trustee of any failure to take such action.
(b) If the Company shall act as its own paying agent, it
will, on or before each due date of the principal amount at maturity, Issue
Price, accrued Original Issue Discount, Redemption Price, Fundamental Change
Redemption Price or interest, if any, in respect of the Notes, set aside,
segregate and hold in trust for the benefit of the holders of the Notes a sum
sufficient to pay such amounts so becoming due and will notify the Trustee of
any failure to take such action and of any failure by the Company (or by any
other obligor under the Notes) to make any payment of the principal amount at
maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Fundamental Change Redemption Price or interest, if any, in respect of the
Notes when the same shall become due and payable.
(c) Anything in this Section 5.04 to the contrary
notwithstanding, the Company may, at any time, for the purpose of obtaining a
satisfaction and discharge of this Indenture, or for any other reason, pay or
cause to be paid to the Trustee all sums held in trust by the Company or any
paying agent hereunder as required by this Section 5.04, such sums to be held
by the Trustee upon the trusts herein contained and upon such payment by the
Company or any paying agent to the Trustee, the Company or such paying agent
shall be released from all further liability with respect to such money.
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(d) Anything in this Section 5.04 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this
Section 5.04 is subject to Sections 13.03 and 13.04.
ARTICLE SIX
NOTEHOLDERS' LISTS AND
REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 6.01. Noteholders' Lists. The Company covenants and
agrees that it will furnish or cause to be furnished to the Trustee,
semiannually, not more than 15 days after each March 15 and September 15 in
each year beginning with September 15, 1994, and at such other times as the
Trustee may request in writing, within thirty days after receipt by the Company
of any such request, a list in such form as the Trustee may reasonably require
of the names and addresses of the holders of Notes as of a date not more than
fifteen days prior to the time such information is furnished, except that no
such list need be furnished so long as the Trustee is acting as Note registrar.
SECTION 6.02. Preservation of Lists. The Trustee shall
preserve, in as current a form as is reasonably practicable, all information as
to the names and addresses of the holders of Notes contained in the most recent
list furnished to it as provided in Section 6.01 or maintained by the Trustee
in its capacity as Note registrar, if so acting. The Trustee may destroy any
list furnished to it as provided in Section 6.01 upon receipt of a new list so
furnished.
If the Trustee shall be required by law to disclose any
information contained in any list of Noteholders maintained by it, then each
and every holder of the Notes, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
paying agent nor the Note registrar shall be held accountable by reason of the
disclosure of any such information, regardless of the source from which such
information was derived.
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ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND
NOTEHOLDERS IN THE EVENT OF DEFAULT
SECTION 7.01. Events of Default. In case one or more of the
following Events of Default (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body) shall have occurred and
be continuing:
(a) default in the payment of any installment of interest
upon any of the Notes as and when the same shall become due and
payable, and continuance of such default for a period of thirty days;
or
(b) default in the payment of the principal amount at
maturity, Issue Price, accrued Original Issue Discount, Redemption
Price, or Fundamental Change Redemption Price in respect of any of the
Notes as and when the same shall become due and payable either at
maturity, in connection with any redemption pursuant to Articles Three
or Sixteen, by declaration or otherwise; or
(c) failure on the part of the Company duly to observe or
perform any of the covenants or agreements on the part of the Company
in the Notes or in this Indenture (other than a covenant or agreement
a default in whose performance or whose breach is elsewhere in this
Section specifically dealt with) continued for a period of forty-five
days after the date on which written notice of such failure, requiring
the Company to remedy the same, shall have been given to the Company
by the Trustee, or to the Company and the Trustee by the holders of at
least twenty-five percent in aggregate principal amount at maturity of
the Notes at the time outstanding; or
(d) the Company shall have commenced a voluntary case or
other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian, or other
similar official of it or any substantial part of its property, or
shall have consented to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a
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general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
(e) an involuntary case or other proceeding shall be
commenced against the Company seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of ninety consecutive days;
then and in each and every such case (other than an Event of Default specified
in Section 7.1(d) or (e)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than twenty-five percent in aggregate principal amount at maturity of the Notes
then outstanding hereunder, by notice in writing to the Company (and to the
Trustee if given by Noteholders), may declare due and immediately payable the
sum of the Issue Price plus accrued Original Issue Discount from the date of
original issue of the Notes to the date of declaration and the interest accrued
thereon, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.01(d) or (e) occurs and is continuing, the Issue Price of the Notes
plus the Original Issue Discount accrued thereon to the occurrence of such
Event of Default shall be immediately due and payable. This provision,
however, is subject to the condition that if, at any time after the Notes shall
have been so declared due and payable, and before any judgment or decree for
the payment of the monies due shall have been obtained or entered as
hereinafter provided, the Company shall pay or shall deposit with the Trustee a
sum sufficient to pay all matured installments of interest upon all the Notes
and principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, and Fundamental Change Redemption Price in respect of any and
all Notes which shall have become due otherwise than by acceleration (with
interest on overdue installments of interest (to the extent that payment of
such interest is enforceable under applicable law) and on such principal amount
at maturity, Issue Price, accrued Original Issue Discount, Redemption Price and
Fundamental Change Redemption Price at the rate borne by the Notes (giving
effect to accrual of Original Issue Discount), to the date of such payment or
deposit) and amounts due to the Trustee pursuant to Section 8.06, and if any
and all defaults under this
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Indenture, other than the nonpayment of principal amount at maturity, Issue
Price, accrued Original Issue Discount, Redemption Price, Fundamental Change
Redemption Price and interest, if any, in respect of the Notes which shall have
become due by acceleration, shall have been cured or waived pursuant to Section
7.07--then and in every such case the holders of a majority in aggregate
principal amount at maturity of the Notes then outstanding, by written notice
to the Company and to the Trustee, may waive all defaults and Events of Default
and rescind and annul such declaration and its consequences; but no such waiver
or rescission and annulment shall extend to or shall affect any subsequent
default or Event of Default, or shall impair any right consequent thereon. The
Trustee shall not be charged with knowledge and shall not be deemed to have
notice of any default or Event of Default, except an Event of Default under
Section 7.01(a) or (b) in cases where the Trustee is acting as paying agent,
unless written notice thereof stating that such notice is a "Notice of Default"
shall have been given to a Responsible Officer by the Company or a Noteholder
or any agent of a Noteholder; and, in the absence of such written notice, the
Trustee may conclusively assume that there is no default or Event of Default.
In case the Trustee shall have proceeded to enforce any right
under this Indenture and such proceedings shall have been discontinued or
abandoned because of such rescission or annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such
case the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been taken.
SECTION 7.02. Payment of Notes on Default; Suit Therefor.
The Company covenants that (a) in case default shall be made in the payment of
any installment of interest upon any of the Notes as and when the same shall
become due and payable, and such default shall have continued for a period of
thirty days, or (b) in case default shall be made in the payment of the
principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, or Fundamental Change Redemption Price in respect of any of
the Notes as and when the same shall have become due and payable, whether at
maturity of the Notes, in connection with any redemption of a Note pursuant to
Articles Three or Sixteen, by declaration or otherwise--then, upon demand of
the Trustee, the Company will pay to the Trustee, for the benefit of the
holders of the Notes, the whole amount that then shall have become due and
payable on all such Notes for principal amount
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at maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Fundamental Change Redemption Price, or interest, or both, as the case may be,
with interest upon the overdue principal amount at maturity, Issue Price,
accrued Original Issue Discount, Redemption Price and Fundamental Change
Redemption Price and (to the extent that payment of such interest is
enforceable under applicable law) upon the overdue installments of interest at
the rate borne by the Notes (giving effect to the accrual of Original Issue
Discount); and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including a reasonable
compensation to the Trustee, its agents, attorneys and counsel, and any
expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee, the Company may
pay principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, Fundamental Change Redemption Price and interest, if any, in
respect of the Notes to the registered holders, whether or not the Notes are
overdue.
In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any actions or proceedings
at law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or any other
obligor on the Notes and collect in the manner provided by law out of the
property of the Company or any other obligor on the Notes wherever situated the
monies adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy
or for the reorganization of the Company or any other obligor on the Notes
under Title 11 of the United States Code, or any other applicable law, or in
case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Company, the property of the Company or such other
obligor, or in the case of any other similar judicial proceedings relative to
the Company or other obligor upon the Notes, or to the creditors or property of
the Company or such other obligor, the Trustee, irrespective of whether the
principal of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section 7.02, shall be
entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal amount at
maturity,
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Issue Price, accrued Original Issue Discount, Redemption Price, Fundamental
Change Redemption Price and interest, if any, owing and unpaid in respect of
the Notes, and, in case of any judicial proceedings, to file such proofs of
claim and other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee and of the Noteholders allowed in such
judicial proceedings relative to the Company or any other obligor on the Notes,
its or their creditors, or its or their property, and to collect and receive
any monies or other property payable or deliverable on any such claims, and to
distribute the same after the deduction of any amounts due the Trustee under
Section 8.06; and any receiver, assignee or trustee in bankruptcy or
reorganization liquidator, custodian or similar official is hereby authorized
by each of the Noteholders to make such payments to the Trustee, and, if the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due it for compensation,
expenses, advances and disbursements including counsel fees and expenses
incurred by it up to the date of such distribution. To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or adopt on behalf of any Noteholder any
plan of reorganization or arrangement, affecting the Notes or the rights of any
Noteholder, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding.
All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Trustee without
the possession of any of the Notes, or the production thereof on any trial or
other proceeding relative thereto, and any such suit or proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any
proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party) the
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Trustee shall be held to represent all the holders of the Notes, and it shall
not be necessary to make any holders of the Notes parties to any such
proceedings.
SECTION 7.03. Application of Monies Collected by Trustee.
Any monies collected by the Trustee pursuant to this Article Seven shall be
applied in the order following, at the date or dates fixed by the Trustee for
the distribution of such monies, upon presentation of the several Notes, and
stamping thereon the payment, if only partially paid, and upon surrender
thereof if fully paid:
First: To the payment of costs and expenses of collection and
reasonable compensation to the Trustee, its agents, attorneys and
counsel, and of all other expenses and liabilities incurred, and all
advances made, by the Trustee except as a result of its negligence or
bad faith;
Second: Subject to the provisions of Article Four, in case
the principal amount at maturity, Issue Price, accrued Original Issue
Discount, Redemption Price or Fundamental Change Redemption Price in
respect of the outstanding Notes shall not have become due and be
unpaid, to the payment of interest on the Notes in default in the
order of the maturity of the installments of such interest, with
interest (to the extent that such interest has been collected by the
Trustee) upon the overdue installments of interest at the rate borne
by the Notes (giving effect to the accrual of Original Issue
Discount), such payments to be made ratably to the persons entitled
thereto;
Third: Subject to the provisions of Article Four, in case the
principal amount at maturity, Issue Price, accrued Original Issue
Discount, Redemption Price or Fundamental Change Redemption Price in
respect of the outstanding Notes shall have become due, by declaration
or otherwise, and be unpaid to the payment of the whole amount then
owing and unpaid upon the Notes for principal amount at maturity,
Issue Price, accrued Original Issue Discount, Redemption Price,
Fundamental Change Redemption Price and interest, if any, with
interest on the overdue principal amount at maturity, Issue Price,
accrued Original Issue Discount, Redemption Price and Fundamental
Change Redemption Price, and (to the extent that such interest has
been collected by the Trustee) upon overdue installments of interest
at the rate borne by the Notes (giving effect to the accrual of
Original Issue Discount); and in case such monies shall be
insufficient to pay in full the whole amounts so due and unpaid upon
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the Notes, then to the principal amount at maturity, Issue Price,
accrued Original Issue Discount, Redemption Price, Fundamental Change
Redemption Price and interest, if any, without preference or priority
of principal amount at maturity, Issue Price, accrued Original Issue
Discount, Redemption Price or Fundamental Change Redemption Price over
interest, or of interest over principal amount at maturity, Issue
Price, accrued Original Issue Discount, Redemption Price or
Fundamental Change Redemption Price or of any installment of interest
over any other installment of interest, or of any Note over any other
Note, ratably to the aggregate of such principal amount at maturity,
Issue Price, accrued Original Issue Discount, Redemption Price,
Fundamental Change Redemption Price and accrued and unpaid interest;
Fourth: Subject to the provisions of Article Four, to the
payment of the remainder, if any, to the Company or any other person
lawfully entitled thereto.
SECTION 7.04. Proceedings by Noteholder. No holder of any
Note shall have any right by virtue of or by availing of any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture, or for the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of default and of the continuance thereof, as
hereinbefore provided, and unless also the holders of not less than twenty-five
percent in aggregate principal amount at maturity of the Notes then outstanding
shall have made written request upon the Trustee to institute such action, suit
or proceeding in its own name as Trustee hereunder and shall have offered to
the Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the Trustee for
sixty days after its receipt of such notice, request and offer of indemnity,
shall have neglected or refused to institute any such action, suit or
proceeding and no direction inconsistent with such written request shall have
been given to the Trustee pursuant to Section 7.07; it being understood and
intended, and being expressly covenanted by the taker and holder of every Note
with every other taker and holder and the Trustee, that no one or more holders
of Notes shall have any right in any manner whatever by virtue of or by
availing of any provision of this Indenture to affect, disturb or prejudice the
rights of any other holder of Notes, or to obtain or seek to obtain priority
over or preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
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common benefit of all holders of Notes (except as otherwise provided herein).
For the protection and enforcement of this Section 7.04, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Notwithstanding any other provisions of this Indenture and any
provision of any Note, however, the right of any holder of any Note to receive
payment of the principal amount at maturity, Issue Price, accrued Original
Issue Discount, Redemption Price, Fundamental Change Redemption Price of such
Note, on or after the respective due dates expressed in such Note, or to
institute suit for the enforcement of any such payment on or after such
respective dates against the Company shall not be impaired or affected without
the consent of such holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in his own behalf and for his own
benefit may enforce, and may institute and maintain any proceeding suitable to
enforce, his rights of conversion as provided herein.
SECTION 7.05. Proceedings by Trustee. In case of an Event of
Default hereunder the Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either by suit in equity or by action at law or by proceeding
in bankruptcy or otherwise, whether for the specific enforcement of any
covenant or agreement contained in this Indenture or in aid of the exercise of
any power granted in this Indenture, or to enforce any other legal or equitable
right vested in the Trustee by this Indenture or by law.
SECTION 7.06. Remedies Cumulative and Continuing. Except as
provided in Section 2.06, all powers and remedies given by this Article Seven
to the Trustee or to the Noteholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any thereof or of any other powers and
remedies available to the Trustee or the holders of the Notes, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Notes to exercise any right or
power accruing upon any default or Event of Default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
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provisions of Section 7.04, every power and remedy given by this Article Seven
or by law to the Trustee or to the Noteholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Noteholders.
SECTION 7.07. Direction of Proceedings and Waiver of Defaults
by Majority Noteholders. The holders of a majority in aggregate principal
amount at maturity of the Notes at the time outstanding determined in
accordance with Section 9.04 shall have the right to direct the time, method,
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee; provided, however,
(a) such direction shall not be in conflict with any rule of law or with this
Indenture and (b) that (subject to the provisions of Section 8.01) the Trustee
shall have the right to decline to follow any such direction if the Trustee
shall be advised by counsel that the action or proceeding so directed may not
lawfully be taken or if the Trustee in good faith by its board of directors or
executive committee, or a trust committee of directors and/or Responsible
Officers shall determine that the action or proceedings so directed could
involve the Trustee in personal liability. Prior to any declaration
accelerating the maturity of the Notes, the holders of a majority in aggregate
principal amount at maturity of the Notes at the time outstanding may on behalf
of the holders of all of the Notes waive any past default or Event of Default
hereunder and its consequences except (i) a default in the payment of principal
amount at maturity, Issue Price, accrued Original Issue Discount, Redemption
Price, Fundamental Change Redemption Price and interest, if any, in respect of
the Notes, (ii) a failure by the Company to convert any Notes into Common Stock
or (iii) a default in respect of a covenant or provision hereof which under
Article 11 cannot be modified or amended without the consent of the holders of
all Notes then outstanding. Upon any such waiver the Company, the Trustee and
the holders of the Notes shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
Whenever any default or Event of Default hereunder shall have been waived as
permitted by this Section 7.07, said default or Event of Default shall for all
purposes of the Notes and this Indenture be deemed to have been cured and to be
not continuing; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
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SECTION 7.08. Notice of Defaults. The Trustee shall, within
ninety days after the occurrence of a default, mail to all Noteholders, as the
names and addresses of such holders appear upon the registry books of the
Company, notice of all defaults known to the Trustee, unless such defaults
shall have been cured or waived before the giving of such notice (the term
"defaults" for the purpose of this Section 7.08 being hereby defined to be the
events specified in clauses (a), (b), (c), (d) and (e) of Section 7.01, not
including periods of grace, if any, or the giving of any notice, or both
provided for therein); and provided that, except in the case of default in the
payment of the principal amount at maturity, Issue Price, accrued Original
Issue Discount, Redemption Price, Fundamental Change Redemption Price and
interest, if any, in respect of any of the Notes, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Noteholders.
SECTION 7.09. Undertaking to Pay Costs. All parties to this
Indenture agree, and each holder of any Note by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made
by such party litigant; provided, that the provisions of this Section 7.09
shall not apply to any suit instituted by the Trustee, to any suit instituted
by any Noteholder, or group of Noteholders, holding in the aggregate more than
ten percent in principal amount at maturity of the Notes outstanding, or to any
suit instituted by any Noteholder for the enforcement of the payment of the
principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, Fundamental Change Redemption Price and interest, if any, in
respect of any Note on or after the due date expressed in such Note or to any
suit for the enforcement of the right to convert any Note in accordance with
the provisions of Article Fifteen.
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ARTICLE EIGHT
CONCERNING THE TRUSTEE
SECTION 8.01. Duties and Responsibilities of Trustee. The
Trustee, prior to the occurrence of an Event of Default and after the curing of
all Events of Default which may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture.
In case an Event of Default has occurred (which has not been cured or waived)
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after
the curing or waiving of all Events of Default which may have
occurred:
(1) the duties and obligations of the Trustee shall
be determined solely by the express provisions of this
Indenture, and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture;
but, in the case of any such certificates or opinions which by
any provisions hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to
the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Officers of the
Trustee, unless it shall be proved
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that the Trustee was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the holders of not less than a majority in
principal amount at maturity of the Notes at the time outstanding
determined as provided in Section 9.04 relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture; and
(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the
provisions of this Section.
None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing
that the redemption of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
SECTION 8.02. Reliance on Documents, Opinions, etc. Except as
otherwise provided in Section 8.01,
(a) the Trustee may rely and shall be protected in acting
upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, debenture, coupon or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors
may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action
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taken or omitted by it hereunder in good faith and in accordance with
such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Noteholders pursuant to the
provisions of this Indenture, unless such Noteholders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or
thereby;
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture;
(f) prior to the occurrence of an Event of Default hereunder
and after the curing or waiving of all Events of Default, the Trustee
shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond, debenture,
coupon or other paper or document unless requested in writing to do so
by the holders of not less than a majority in principal amount at
maturity of the Notes then outstanding; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this Indenture, the Trustee may require reasonable indemnity against
such expense or liability as a condition to so proceeding; the
reasonable expenses of every such examination shall be paid by the
Company or, if paid by the Trustee or any predecessor Trustee, shall
be repaid by the Company upon demand; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed by it with due care hereunder.
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SECTION 8.03. No Responsibility for Recitals, etc. The
recitals contained herein and in the Notes (except in the Trustee's certificate
of authentication) shall be taken as the statements of the Company, and the
Trustee assumes no responsibility for the correctness of the same. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Notes. The Trustee shall not be accountable for the use or application
by the Company of any Notes or the proceeds of any Notes authenticated and
delivered by the Trustee in conformity with the provisions of this Indenture.
SECTION 8.04. Trustee, Paying Agents, Conversion Agents or
Registrar May Own Notes. The Trustee, any paying agent, any conversion agent
or Note registrar, in its individual or any other capacity, may become the
owner or pledgee of Notes with the same rights it would have if it were not
Trustee, paying agent, conversion agent or Note registrar.
SECTION 8.05. Monies to be Held in Trust. Subject to the
provisions of Section 13.04, all monies received by the Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they were received. Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except to the extent otherwise agreed in writing by the Company and the
Trustee.
SECTION 8.06. Compensation and Expenses of Trustee. The
Company covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to, reasonable compensation for all services rendered
by it hereunder in any capacity (which shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust), and the
Company will pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad
faith on the part of the Trustee and arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim of liability in the premises. The
obligations of the Company under this Section 8.06 to compensate or indemnify
the Trustee and to pay or reimburse
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the Trustee for expenses, disbursements and advances shall be secured by a lien
prior to that of the Notes upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the benefit of the holders of
particular Notes. The obligation of the Company under this Section shall
survive the satisfaction and discharge of this Indenture.
SECTION 8.07. Officers' Certificate as Evidence. Except as
otherwise provided in Section 8.01, whenever in the administration of the
provisions of this Indenture the Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such Certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 8.08. Eligibility of Trustee. The Trustee hereunder
shall at all times be a corporation organized and doing business under the laws
of the United States or any State or Territory thereof or of the District of
Columbia authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least five million dollars, subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section 8.08, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 8.08, the Trustee
shall resign immediately in the manner and with the effect specified in Section
8.09.
SECTION 8.09. Resignation or Removal of Trustee. (a) The
Trustee may at any time resign by giving written notice of such resignation to
the Company and by mailing notice thereof to the holders of Notes at their
addresses as they shall appear on the registry books of the Company. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
resigning
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Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment within sixty days after
the mailing of such notice of resignation to the Noteholders, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee, or any Noteholder who has been a bona fide holder of a
Note or Notes for at least six months may, subject to the provisions of Section
7.09, on behalf of himself and all others similarly situated, petition any such
court for the appointment of a successor trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe, appoint a
successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.08 and shall fail to resign after written
request therefor by the Company or by any such Noteholder, or
(2) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.09, any Noteholder who has been a bona fide holder of a
Note or Notes for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor trustee. Such court
may thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount
at maturity of the Notes at the time outstanding may at any time remove the
Trustee and nominate a successor trustee which shall be deemed appointed as
successor trustee unless within ten days after notice to the Company of such
nomination the Company objects thereto, in which case the Trustee so removed or
any Noteholder, upon the terms and conditions and otherwise as in subsection
(a) of this
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Section 8.09 provided, may petition any court of competent jurisdiction for an
appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee to any of the provisions of this Section 8.09 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.10.
SECTION 8.10. Acceptance by Successor Trustee. Any successor
trustee appointed as provided in Section 8.09 shall execute, acknowledge and
deliver to the Company and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect
as if originally named as trustee herein; but, nevertheless, on the written
request of the Company or of the successor trustee, the trustee ceasing to act
shall, upon payment of any amounts then due it pursuant to the provisions of
Section 8.06, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon
request of any such successor trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming
to such successor trustee all such rights and powers. Any trustee ceasing to
act shall, nevertheless, retain a lien upon all property or funds held or
collected by such trustee to secure any amounts then due it pursuant to the
provisions of Section 8.06.
No successor trustee shall accept appointment as provided in
this Section 8.10 unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 8.08.
Upon acceptance of appointment by a successor trustee as
provided in this Section 8.10, the Company and the former trustee shall mail
notice of the succession of such trustee hereunder to the holders of Notes at
their addresses as they shall appear on the registry books of the Company. If
the Company fails to mail such notice within ten days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Company.
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SECTION 8.11. Succession by Merger, etc. Any corporation
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the trust business of the Trustee,
shall be the successor to the Trustee hereunder, provided such corporation
shall be eligible under the provisions of Section 8.08 without the execution or
filing of any paper or any further act on the part of any of the parties
hereto.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture any of the Notes shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor trustee, and deliver
such Notes so authenticated; and in case at that time any of the Notes shall
not have been authenticated, any successor to the Trustee appointed by such
successor trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor trustee; and in all such
cases such certificates shall have the full force which it is anywhere in the
Notes or in this Indenture provided that the certificate of the Trustee shall
have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or authenticate Notes in the name of
any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
ARTICLE NINE
CONCERNING THE NOTEHOLDERS
SECTION 9.01. Action by Noteholders. Whenever in this
Indenture it is provided that the holders of a specified percentage in
aggregate principal amount at maturity of the Notes may take any action
(including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that at the time
of taking any such action the holders of such specified percentage have joined
therein may be evidenced (a) by any instrument or any number of instruments of
similar tenor executed by Noteholders in person or by agent or proxy appointed
in writing, or (b) by the record of the holders of Notes voting in favor
thereof at any meeting of Noteholders duly called and held in accordance with
the provisions of Article Ten, or (c) by a combination of such instrument or
instruments and any such record of such a meeting of Noteholders. Whenever the
Company or the Trustee solicits the
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taking of any action by the holders of the Notes, the Company or the Trustee
may fix in advance of such solicitation, a date as the record date for
determining holders entitled to take such action. The record date shall be not
more than 15 days prior to the date of commencement of solicitation of such
action.
SECTION 9.02. Proof of Execution by Noteholders. Subject to
the provisions of Sections 8.01, 8.02 and 10.05, proof of the execution of any
instrument by a Noteholder or his agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Notes shall be proved by the registry of such Notes or by a
certificate of the Note registrar.
The record of any Noteholders' meeting shall be proved in the
manner provided in Section 10.06.
SECTION 9.03. Who Are Deemed Absolute Owners. The Company,
the Trustee, any paying agent, any conversion agent and any Note registrar may
deem the person in whose name such Note shall be registered upon the books of
the Company to be, and may treat him as, the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving payment of or
on account of the principal amount at maturity, Issue Price, accrued Original
Issue Discount, Redemption Price, Fundamental Change Redemption Price and
interest, if any, in respect of such Note, for conversion of such Note and for
all other purposes; and neither the Company nor the Trustee nor any paying
agent nor any conversion agent nor any Note registrar shall be affected by any
notice to the contrary. All such payments so made to any holder for the time
being, or upon his order, shall be valid, and, to the extent of the sum or sums
so paid, effectual to satisfy and discharge the liability for monies payable
upon any such Note.
SECTION 9.04. Company-Owned Notes Disregarded. In
determining whether the holders of the requisite aggregate principal amount at
maturity of Notes have concurred in any direction, consent, waiver or other
action under this Indenture, Notes which are owned by the Company or any other
obligor on the Notes or by any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or
any other obligor on the Notes shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided that for the
purposes of determining whether the Trustee shall be
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protected in relying on any such direction, consent, waiver or other action
only Notes which a Responsible Officer knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.04 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor.
In the case of a dispute as to such right, any decision by the Trustee taken
upon the advice of counsel shall be full protection to the Trustee. Upon
request of the Trustee, the Company shall furnish to the Trustee promptly an
Officers' Certificate listing and identifying all Notes, if any, known by the
Company to be owned or held by or for the account of any of the above described
persons; and, subject to Section 8.01, the Trustee shall be entitled to accept
such Officers' Certificate as conclusive evidence of the facts therein set
forth and of the fact that all Notes not listed therein are outstanding for the
purpose of any such determinations.
SECTION 9.05. Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the Trustee, as provided
in Section 9.01, of the taking of any action by the holders of the percentage
in aggregate principal amount at maturity of the Notes specified in this
Indenture in connection with such action, any holder of a Note which is shown
by the evidence to be included in the Notes the holders of which have consented
to such action may, by filing written notice with the Trustee at its Principal
Office and upon proof of holding as provided in Section 9.02, revoke such
action so far as concerns such Note. Except as aforesaid any such action taken
by the holder of any Note shall be conclusive and binding upon such holder and
upon all future holders and owners of such Note and of any Notes issued in
exchange or substitution therefor, irrespective of whether any notation in
regard thereto is made upon such Note or any Note issued in exchange or
substitution therefor.
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ARTICLE TEN
NOTEHOLDERS' MEETINGS
SECTION 10.01. Purposes of Meetings. A meeting of
Noteholders may be called at any time and from time to time pursuant to the
provisions of this Article Ten for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee, or to consent to the waiving of
any default hereunder and its consequences, or to take any other
action authorized to be taken by Noteholders pursuant to any of the
provisions of Article Seven;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article Eight;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.02; or
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount at
maturity of the Notes under any other provision of this Indenture or
under applicable law.
SECTION 10.02. Call of Meetings by Trustee. The Trustee may
at any time call a meeting of Noteholders to take any action specified in
Section 10.01, to be held at such time and at such place as the Trustee shall
determine. Notice of every meeting of the Noteholders, setting forth the time
and the place of such meeting and in general terms the action proposed to be
taken at such meeting and the establishment of any record date pursuant to
Section 9.01, shall be mailed to holders of Notes at their addresses as they
shall appear on the registry books of the Company. Such notice shall also be
mailed to the Company. Such notices shall be mailed not less than ten nor more
than ninety days prior to the date fixed for the meeting.
Any meeting of Noteholders shall be valid without notice if
the holders of all Notes then outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all Notes
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
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SECTION 10.03. Call of Meetings by Company or Noteholders.
In case at any time the Company, pursuant to a resolution of its Board of
Directors, or the holders of at least ten percent in aggregate principal amount
at maturity of the Notes then outstanding, shall have requested the Trustee to
call a meeting of Noteholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall
not have mailed the notice of such meeting within ten days after receipt of
such request, then the Company or such Noteholders may determine the time and
the place for such meeting and may call such meeting to take any action
authorized in Section 10.01, by mailing notice thereof as provided in Section
10.02.
SECTION 10.04. Qualifications for Voting. To be entitled to
vote at any meeting of Noteholders a Person shall (a) be a holder of one or
more Notes on the record date pertaining to such meeting or (b) be a Person
appointed by an instrument in writing as proxy by such a holder of one or more
Notes. The only Persons who shall be entitled to be present or to speak at any
meeting of Noteholders shall be the Persons entitled to vote at such meeting
and their counsel and any representatives of the Trustee and its counsel and
any representatives of the Company and its counsel.
SECTION 10.05. Regulations. Notwithstanding any other
provisions of this Indenture, the Trustee may make such reasonable regulations
as it may deem advisable for any meeting of Noteholders, in regard to proof of
the holding of Notes and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination
of proxies, certificates and other evidence of the right to vote, and such
other matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Noteholders as provided in Section 10.03, in which case the
Company or the Noteholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the holders of a majority
in principal amount at maturity of the Notes represented at the meeting and
entitled to vote at the meeting.
Subject to the provisions of Section 9.04, at any meeting each
Noteholder or proxy holder shall be entitled to one vote for each $1,000
principal amount at maturity of Notes held or represented by it; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Note
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challenged as not outstanding and ruled by the chairman of the meeting to be
not outstanding. The chairman of the meeting shall have no right to vote other
than by virtue of Notes held by him or instruments in writing as aforesaid duly
designating him as the person to vote on behalf of other Noteholders. Any
meeting of Noteholders duly called pursuant to the provisions of Section 10.02
or 10.03 may be adjourned from time to time by a majority of the aggregate
principal amount of Notes represented at the meeting, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
SECTION 10.06. Voting. The vote upon any resolution
submitted to any meeting of Noteholders shall be by written ballot on which
shall be subscribed the signatures of the holders of Notes or of their
representatives by proxy and the principal amount at maturity of the Notes held
or represented by them. The permanent chairman of the meeting shall appoint
two inspectors of votes who shall count all votes cast at the meeting for or
against any resolution and who shall make and file with the secretary of the
meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of
Noteholders shall be prepared by the secretary of the meeting and there shall
be attached to said record the original reports of the inspectors of votes on
any vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was mailed as provided in Section 10.02. The record
shall show the principal amount at maturity of the Notes voting in favor of or
against any resolution. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee
to be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
SECTION 10.07. No Delay of Rights by Meeting. Nothing in
this Article Ten contained shall be deemed or construed to authorize or permit,
by reason of any call of a meeting of Noteholders or any rights expressly or
impliedly conferred hereunder to make such call, any hindrance or delay in the
exercise of any right or rights conferred upon or reserved to the Trustee or to
the Noteholders under any of the provisions of this Indenture or of the Notes.
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ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION 11.01. Supplemental Indentures without Consent of
Noteholders. The Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto for one or more of the following
purposes:
(a) to make provision with respect to the conversion rights
of the holders of Notes pursuant to the requirements of Section 15.06;
(b) subject to Article Four, to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the Notes, any
property or assets;
(c) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the
successor corporation of the covenants, agreements and obligations of
the Company pursuant to Article Twelve hereof;
(d) to add to the covenants of the Company such further
covenants, restrictions or conditions as the Board of Directors and
the Trustee shall consider to be for the benefit of the holders of
Notes, and to make the occurrence, or the occurrence and continuance,
of a default in any such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement
of all or any of the several remedies provided in this Indenture as
herein set forth; provided, however, that in respect of any such
additional covenant, restriction or condition such supplemental
indenture may provide for a particular period of grace after default
(which period may be shorter or longer than that allowed in the case
of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon
such default;
(e) to provide for the issuance under this Indenture of Notes
in coupon form (including Notes registrable as to principal only) and
to provide for exchangeability of such Notes with the Notes issued
hereunder in fully registered form and to make all appropriate changes
for such purpose;
(f) to cure any ambiguity or to correct or supplement any
provision contained herein or in any
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supplemental indenture which may be defective or inconsistent with any
other provision contained herein or in any supplemental indenture, or
to make such other provisions in regard to matters or questions
arising under this Indenture which shall not adversely affect the
interests of the holders of the Notes in any material respect;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to comply with the
Trust Indenture Act, or to comply with any requirements in connection
with the qualification of this Indenture under the Trust Indenture
Act, if any, or under any similar federal statute hereafter enacted,
if any.
The Trustee is hereby authorized to join with the Company in
the execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations which may be therein contained and to
accept the conveyance, transfer and assignment of any property thereunder, but
the Trustee shall not be obligated to, but may in its discretion, enter into
any such supplemental indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of
this Section 11.01 may be executed by the Company and the Trustee without the
consent of the holders of any of the Notes at the time outstanding,
notwithstanding any of the provisions of Section 11.02.
SECTION 11.02. Supplemental Indentures with Consent of
Noteholders. With the consent (evidenced as provided in Article Nine) of the
holders of not less than a majority in aggregate principal amount at maturity
of the Notes at the time outstanding, the Company, when authorized by the
resolutions of the Board of Directors, and the Trustee may from time to time
and at any time enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of any supplemental
indenture or of modifying in any manner the rights of the holders of the Notes;
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, change the rate of accrual or extend the
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time of payment in connection with Original Issue Discount, or reduce the
principal amount at maturity, accrued Original Issue Discount, Issue Price,
Redemption Price, Fundamental Change Redemption Price, or interest, if any, or
change the obligation of the Company to make redemption of any Note pursuant to
Article Sixteen in a manner adverse to holders of Notes, or impair or affect
the right of any Noteholder to institute suit for the payment thereof, or make
the principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, Fundamental Change Redemption Price or interest, if any, in
respect thereof payable in any coin or currency other than that provided in the
Notes, or modify the provisions of this Indenture with respect to the
subordination of the Notes in a manner adverse to the Noteholders, or impair
the right to convert the Notes into Common Stock subject to the terms set forth
herein, including Section 15.06, without the consent of the holder of each Note
so affected, or (ii) reduce the aforesaid percentage of Notes, the holders of
which are required to consent to any such supplemental indenture, without the
consent of the holders of all Notes then outstanding.
Upon the request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Noteholders
under this Section 11.02 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall
approve the substance thereof.
SECTION 11.03. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture pursuant to the provisions of this
Article Eleven, this Indenture shall be and be deemed to be modified and
amended in accordance therewith and the respective rights, limitation of
rights, obligations, duties and immunities under this Indenture of the Trustee,
the Company and the holders of Notes shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such modifications and
amendments and all the terms and conditions of any such supplemental indenture
shall
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be and be deemed to be part of the terms and conditions of this Indenture for
any and all purposes.
SECTION 11.04. Notation on Notes. Notes authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article Eleven may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Notes so modified as to conform
to any modification of this Indenture contained in any such supplemental
indenture may be prepared and executed by the Company, authenticated by the
Trustee and delivered in exchange for the Notes then outstanding, upon
surrender of such Notes then outstanding.
SECTION 11.05. Evidence of Compliance of Supplemental
Indenture to be Furnished to the Trustee. The Trustee, subject to the
provisions of Sections 8.01 and 8.02, may receive an Officers' Certificate and
an Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant hereto complies with the requirements of this Article Eleven.
ARTICLE TWELVE
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 12.01. Company May Consolidate, etc., on Certain
Terms. Subject to the provisions of Section 12.02, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of
the Company with or into any other corporation or corporations (whether or not
affiliated with the Company), or successive consolidations or mergers in which
the Company or its successor or successors shall be a party or parties, or
shall prevent any sale, conveyance or lease (or successive sales, conveyances
or leases) of all or substantially all of the property of the Company, to any
other corporation (whether or not affiliated with the Company) authorized to
acquire and operate the same and which shall be organized under the laws of a
State of the United States or the District of Columbia; provided, however, and
the Company hereby covenants and agrees, that upon any such consolidation,
merger, sale, conveyance or lease, the due and punctual payment of the
principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, Fundamental Change Redemption Price and interest, if any, in
respect of all of the Notes, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by the Company, shall be expressly assumed by
supplemental
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indenture satisfactory in form to the Trustee, executed and delivered to the
Trustee by the corporation (if other than the Company) formed by such
consolidation, or into which the Company shall have been merged, or by the
corporation which shall have acquired or leased such property, and such
supplemental indenture shall provide for the applicable conversion rights set
forth in Section 15.06.
SECTION 12.02. Successor Corporation to be Substituted. In
case of any such consolidation, merger, sale, conveyance or lease and upon the
assumption by the successor corporation, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of the
due and punctual payment of the principal amount at maturity, Issue Price,
accrued Original Issue Discount, Redemption Price, Fundamental Change
Redemption Price and interest, if any, in respect of all of the Notes and the
due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Company, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it
had been named herein as the party of the first part. Such successor
corporation thereupon may cause to be signed, and may issue either in its own
name or in the name of Cypress Semiconductor Corporation any or all of the
Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee; and, upon the order of such successor
corporation instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Notes which previously shall have been signed and delivered
by the officers of the Company to the Trustee for authentication, and any Notes
which such successor corporation thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All the Notes so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Notes theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Notes had been issued at the date of the
execution hereof. In the event of any such consolidation, merger, sale,
conveyance or lease, the person named as the "Company" in the first paragraph
of this Indenture or any successor which shall thereafter have become such in
the manner prescribed in this Article Twelve may be dissolved, wound up and
liquidated at any time thereafter and such person shall be released from its
liabilities as obligor and maker of the Notes and from its obligations under
this Indenture.
In case of any such consolidation, merger, sale, conveyance or
lease, such changes in phraseology and form (but
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not in substance) may be made in the Notes thereafter to be issued as may be
appropriate.
SECTION 12.03. Opinion of Counsel to be Given Trustee. The
Trustee, subject to Sections 8.01 and 8.02, shall receive an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, conveyance or lease and any such assumption
complies with the provisions of this Article Twelve.
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 13.01. Discharge of Indenture. When (a) the Company
shall deliver to the Trustee for cancellation all Notes theretofore
authenticated (other than any Notes which shall have been destroyed, lost or
stolen and in lieu of or in substitution for which other Notes shall have been
authenticated and delivered) and not theretofore canceled, or (b) all the Notes
not theretofore canceled or delivered to the Trustee for cancellation shall
have become due and payable, or are by their terms to become due and payable
within one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in trust, funds
sufficient to pay at maturity or upon redemption all of the Notes (other than
any Notes which shall have been mutilated, destroyed, lost or stolen and in
lieu of or in substitution for which other Notes shall have been authenticated
and delivered) not theretofore canceled or delivered to the Trustee for
cancellation, including principal amount at maturity, Issue Price, accrued
Original Issue Discount, Redemption Price, Fundamental Change Redemption Price
and interest, if any, due or to become due to such date of maturity or
redemption date, as the case may be, and if in either case the Company shall
also pay or cause to be paid all other sums payable hereunder by the Company,
then this Indenture shall cease to be of further effect (except as to (i)
remaining rights of registration of transfer, substitution and exchange and
conversion of Notes, (ii) rights hereunder of Noteholders to receive payments
of principal amount at maturity, Issue Price, accrued Original Issue Discount,
Redemption Price, Fundamental Change Redemption Price and interest, if any, in
respect of the Notes and the other rights, duties and obligations of
Noteholders, as beneficiaries hereof with respect to the amounts, if any, so
deposited with the Trustee and (iii) the rights, obligations and immunities of
the Trustee hereunder), and the Trustee, on demand of the Company accompanied
by an Officers' Certificate
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and an Opinion of Counsel as required by Section 17.05 and at the cost and
expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture; the Company, however, hereby
agreeing to reimburse the Trustee for any costs or expenses thereafter
reasonably and properly incurred by the Trustee and to compensate the Trustee
for any services thereafter reasonably and properly rendered by the Trustee in
connection with this Indenture or the Notes.
SECTION 13.02. Deposited Monies to be Held in Trust by
Trustee. Subject to Article Four and Section 13.04, all monies deposited with
the Trustee pursuant to Section 13.01 shall be held in trust and applied by it
to the payment, either directly or through any paying agent (including the
Company if acting as its own paying agent), to the holders of the particular
Notes for the payment or redemption of which such monies have been deposited
with the Trustee, of all sums due and to become due thereon for principal
amount at maturity, Issue Price, accrued Original Issue Discount, Redemption
Price, Fundamental Change Redemption Price and interest, if any.
SECTION 13.03. Paying Agent to Repay Monies Held. Upon the
satisfaction and discharge of this Indenture, all monies then held by any
paying agent of the Notes (other than the Trustee) shall, upon demand of the
Company, be repaid to it or paid to the Trustee, and thereupon such paying
agent shall be released from all further liability with respect to such monies.
SECTION 13.04. Return of Unclaimed Monies. Any monies
deposited with or paid to the Trustee for payment of the principal amount at
maturity, Issue Price, accrued Original Issue Discount, Redemption Price,
Fundamental Change Redemption Price or interest, if any, in respect of Notes
and not applied but remaining unclaimed by the holders of Notes for two years
after the date upon which such amounts shall have become due and payable, shall
be repaid to the Company by the Trustee on demand and all liability of the
Trustee shall thereupon cease with respect to such monies; and the holder of
any of the Notes shall thereafter look only to the Company for any payment
which such holder may be entitled to collect.
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ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 14.01. Indenture and Notes Solely Corporate
Obligations. No recourse for the payment of the principal amount at maturity,
Issue Price, accrued Original Issue Discount, Redemption Price, Fundamental
Change Redemption Price and interest, if any, in respect of any Note, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of the Company in this Indenture
or in any supplemental indenture, or in any Note, or because of the creation of
any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or otherwise;
it being expressly understood that all such liability is hereby expressly
waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issue of the Notes.
ARTICLE FIFTEEN
CONVERSION OF NOTES
SECTION 15.01. Right to Convert. Subject to and upon
compliance with the provisions of this Article, the holder of any Note shall
have the right, at his option, at any time after 60 days following the latest
date of original issuance and prior to the close of business on March 15, 2001
(except that, with respect to any Note or portion of a Note which shall be
called for redemption such right shall terminate, except as provided in the
third paragraph of Section 15.02, at the close of business on the Business Day
next preceding the date fixed for redemption of such Note or portion of a Note
and such right shall terminate with respect to any Note or portion thereof
subject to a duly completed and delivered election for redemption pursuant to
Article Sixteen, unless in each case the Company shall default in payment due
upon redemption thereof) to convert the principal amount at maturity of any
such Note, or any portion of such principal amount at maturity which is $1,000
or a multiple thereof, into that number of fully paid and non-assessable shares
of Common Stock (as such shares shall then be constituted) obtained by dividing
the principal amount at maturity of the Note or portion thereof surrendered for
conversion by $1,000 and
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multiplying the result so obtained by the Conversion Rate in effect at such
time, by surrender of the Note so to be converted in whole or in part in the
manner provided in Section 15.02. A holder of Notes is not entitled to any
rights of a holder of Common Stock until such holder has converted his Notes.
SECTION 15.02. Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for Interest or Dividends. In order
to exercise the conversion privilege, the holder of any Note to be converted in
whole or in part shall surrender such Note at an office or agency maintained by
the Company pursuant to Section 5.02, accompanied by the funds, if any,
required by the last paragraph of this Section, and shall give written notice
of conversion in the form provided on the Notes (or such other notice which is
acceptable to the Company) to the Company at such office or agency that the
holder elects to convert such Note or the portion thereof specified in said
notice. Such notice shall also state the name or names (with address) in which
the certificate or certificates for shares of Common Stock which shall be
issuable on such conversion shall be issued, and shall be accompanied by
transfer taxes, if required pursuant to Section 15.07. Each Note surrendered
for conversion shall, unless the shares issuable on conversion are to be issued
in the same name as the registration of such Note, be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the Company duly
executed by, the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to
any interest in a Note in global form, the beneficial holder must complete the
appropriate instruction form for conversion pursuant to the Depositary's
book-entry conversion procedures, deliver by book-entry delivery an interest in
such Note in global form, furnish appropriate endorsements and transfer
documents if required by the Company or the Trustee or conversion agent, and
pay the funds, if any, required by the last paragraph of this Section 15.02 and
any transfer taxes, if required pursuant to Section 15.07.
As promptly as practicable after the surrender of such Note
and the receipt of such notice and funds and subject to compliance with any
restrictions on transfer if shares issuable on conversion are to be issued in a
name other than that of the Noteholder (as if such transfer were a transfer of
the Note or Notes (or portion thereof) so converted), if any, as aforesaid, the
Company shall issue and shall deliver at such office or agency to such holder,
or on his written order, a certificate or certificates for the number of full
shares issuable upon the conversion of such Note or portion thereof
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in accordance with the provisions of this Article and a check or cash in
respect of any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in Section 15.03. In case any Note
of a denomination greater than $1,000 principal amount at maturity shall be
surrendered for partial conversion, and subject to Section 2.03, the Company
shall execute and the Trustee shall authenticate and deliver to or upon the
written order of the holder of the Note so surrendered, without charge to him,
a new Note or Notes in authorized denominations in an aggregate principal
amount at maturity equal to the unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected on the
date on which such Note (or portion thereof) shall have been surrendered
(accompanied by the funds, if any, required by the last paragraph of this
Section) and such notice shall have been received by the Company, as aforesaid,
and the person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the person in whose name
the certificates are to be issued as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but
such conversion shall be at the Conversion Rate in effect on the date upon
which such Note shall have been surrendered.
Except as described in this Section, holders of the Notes will
not be entitled to any payment or adjustment on account of accrued Original
Issue Discount or accrued and unpaid interest upon conversion of the Notes.
The Company's delivery of the fixed number of shares of Common Stock into which
the Notes are convertible will be deemed to satisfy the Company's obligation to
pay the principal amount at maturity of the Notes and all accrued interest and
Original Issue Discount that has not previously been (or is not simultaneously
being) paid. The Common Stock is treated as issued first in payment of accrued
interest and Original Issue Discount and then in payment or principal.
Any Note or portion thereof surrendered for conversion during
the period from the close of business on the record date for any interest
payment date to the opening of business on the following interest payment date
shall (unless such Note or portion thereof being converted shall have been
called for redemption during the period from the close of business on any
record date for the payment of interest to the close of business on the
following interest payment date) be
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accompanied by payment, in New York Clearing House funds of an amount equal to
the interest otherwise payable on such interest payment date on the principal
amount at maturity being converted; provided, however, that no such payment
need be made if there shall exist at the time of conversion a default in the
payment of interest on the Notes; provided further, however, that no such
payment shall be required in respect of any Note or portion thereof being
called for redemption by the Company on March 15, 1997. An amount equal to
such payment (or, in the case of a redemption by the Company on March 15, 1997,
equal to the interest otherwise payable on such date) shall be paid by the
Company on such interest payment date to the holder of such Note at the close
of business on such record date; provided, however, that if the Company shall
default in the payment of interest on such interest payment date, such amount
shall be paid to the person who made such required payment or, in the case of a
redemption by the Company on March 15, 1997, to the person who converted such
Note. Except as provided above in this Section, no adjustment shall be made
for Original Issue Discount or interest accrued on any Note converted or for
dividends on any shares issued upon the conversion of such Note as provided in
this Article.
SECTION 15.03. Cash Payments in Lieu of Fractional Shares.
No fractional shares of Common Stock or scrip representing fractional shares
shall be issued upon conversion of Notes. If more than one Note shall be
surrendered for conversion at one time by the same holder, the number of full
shares which shall be issuable upon conversion shall be computed on the basis
of the aggregate principal amount at maturity of the Notes (or specified
portions thereof to the extent permitted hereby) so surrendered. If any
fractional share of stock would be issuable upon the conversion of any Note or
Notes, the Company shall make an adjustment therefor in cash at the current
market value thereof. For these purposes, the current market value of a share
of Common Stock shall be the Closing Price on the first Business Day
immediately preceding the day on which the Notes (or specified portions
thereof) are deemed to have been converted and such Closing Price shall be
determined as provided in subsection (f) of Section 15.05.
SECTION 15.04. Conversion Rate. The Conversion Rate shall be
as specified in the form of Note hereinabove set forth, subject to adjustment
as provided in this Article.
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SECTION 15.05. Adjustment of Conversion Rate. The Conversion
Rate shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall (i) pay a dividend, or make a
distribution, in shares of its Common Stock, on its Common Stock, (ii)
subdivide its outstanding Common Stock into a greater number of
shares, or (iii) combine its outstanding Common Stock into a smaller
number of shares, the Conversion Rate in effect immediately prior
thereto shall be adjusted so that the holder of any Note thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock of the Company which he would have owned or
have been entitled to receive after the happening of any of the events
described above had such Note been converted immediately prior to the
happening of such event. An adjustment made pursuant to this
subsection (a) shall become effective immediately after the record
date in the case of a dividend and shall become effective immediately
after the effective date in the case of subdivision or combination.
If any dividend or distribution of the type described in clause (i)
above is not so paid or made, the Conversion Rate shall again be
adjusted to the Conversion Rate which would then be in effect if such
dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all
holders of its Common Stock entitling them (for a period expiring
within 45 days after the record date mentioned below) to subscribe for
or purchase Common Stock at a price per share less than the Current
Market Price per share of Common Stock (as defined in subsection (f)
below) at the record date for the determination of stockholders
entitled to receive such rights or warrants, the Conversion Rate in
effect immediately prior thereto shall be adjusted so that the same
shall equal the rate determined by multiplying the Conversion Rate in
effect immediately prior to the date of issuance of such rights or
warrants by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common
Stock offered for subscription or purchase and the denominator of
which shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so
offered would purchase at such Current Market Price. Such adjustment
shall be made successively whenever any such rights or warrants are
issued, and shall become
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effective immediately after such record date. In determining whether
any rights or warrants entitle the holders to subscribe for or
purchase shares of Common Stock at less than such Current Market
Price, and in determining the aggregate offering price of such shares
of Common Stock, there shall be taken into account any consideration
received by the Company for such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of
Directors. Such adjustment shall be made successively whenever any
such rights or warrants are issued, and shall become effective
immediately after the opening of business on the day following the
record date for the determination of the stockholders entitled to
receive such rights or warrants. To the extent that shares of Common
Stock are not delivered after the expiration of such rights or
warrants, the Conversion Rate shall be readjusted to the Conversion
Rate which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made on the basis of delivery
of only the number of shares of Common Stock actually delivered. If
such rights or warrants are not so issued, the Conversion Rate shall
again be adjusted to be the Conversion Rate which would then be in
effect if such record date for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the holders to
subscribe for or purchase shares of Common Stock at less than such
Current Market Price, and in determining the aggregate offering price
of such shares of Common Stock, there shall be taken into account any
consideration received by the Company for such rights or warrants, the
value of such consideration, if other than cash, to be determined by
the Board of Directors.
(c) In case the Company shall distribute to all holders of
its Common Stock any shares of any class of capital stock of the
Company (other than Common Stock) or evidences of its indebtedness or
assets (excluding cash dividends or other distributions to the extent
paid from retained earnings of the Company) or rights or warrants to
subscribe for or purchase any of its securities (excluding those
referred to in subsection (b) above) (any of the foregoing hereinafter
in this subsection the "Distributed Securities"), then in each such
case the Conversion Rate shall be adjusted so that the same shall
equal the rate determined by multiplying the Conversion Rate in effect
immediately prior to the date of such distribution by a fraction of
which the numerator shall be the Current Market Price per share (as
defined in subsection (f) below) of the Common Stock on such record
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date the denominator of which shall be the Current Market Price per
share (as defined in subsection (f) below) of the Common Stock on the
record date mentioned below less the fair market value on such record
date (as determined by the Board of Directors of the Company, whose
determination shall be conclusive, and described in a certificate
filed with the Trustee) of the Distributed Securities applicable to
one share of Common Stock, and. Such adjustment shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such distribution. Notwithstanding
the foregoing, in the event the then fair market value (as so
determined) of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the
relevant record date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Noteholder shall have the right
to receive upon conversion the amount of Distributed Securities such
holder would have received had such holder converted each Note on such
record date. In the event that such distribution is not so paid or
made, the Conversion Rate shall again be adjusted to the Conversion
Rate which would then be in effect if such distribution had not been
declared. If the Board of Directors determines the fair market value
of any distribution for purposes of this subsection (c) by reference
to the actual or when issued trading market for any securities, it
must in doing so consider the prices in such market over the same
period used in computing the Current Market Price of the Common Stock.
Notwithstanding the foregoing provisions of this subsection
(c), no adjustment shall be made thereunder for any distribution of
Distributed Securities if the Company makes proper provision so that
each holder of a Note who converts such Note (or any portion thereof)
after the record date for such distribution shall be entitled to
receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion, the amount and kind of
Distributed Securities that such holder would have been entitled to
receive if such holder had, immediately prior to such record date,
converted such Note, into Common Stock, provided that, with respect to
any Distributed Securities that are convertible, exchangeable or
exercisable, the foregoing provision shall only apply to the extent
(and so long as) the Distributed Securities receivable upon conversion
of such Note would be convertible, exchangeable or exercisable, as
applicable, without any loss of rights or privileges
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for a period of at least 60 days following conversion of such Note.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding (x) any
quarterly cash dividend on the Common Stock to the extent the
aggregate cash dividend per share of Common Stock in any fiscal
quarter does not exceed the greater of (A) the amount per share of
Common Stock of the next preceding quarterly cash dividend on the
Common Stock to the extent such preceding quarterly dividend did not
require any adjustment of the Conversion Rate pursuant to this Section
15.05(d) (as adjusted to reflect subdivisions or combinations of the
Common Stock), and (B) 3.75% of the average of the last reported sales
price of the Common Stock (determined as provided in Section 15.05(f))
during the ten Trading Days (as defined in Section 15.05(f)) next
preceding the date of declaration of such dividend and (y) any
dividend or distribution in connection with the liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary), then, in such case, unless the Company elects to reserve
such cash for distribution to the holders of the Notes upon the
conversion of the Notes so that any such holder converting Notes will
receive upon such conversion, in addition to the shares of Common
Stock to which such holder is entitled, the amount of cash which such
holder would have received if such holder had, immediately prior to
the record date for such distribution of cash, converted its Notes
into Common Stock, the Conversion Rate shall be adjusted so that the
same shall equal the rate determined by multiplying the Conversion
Rate in effect immediately prior to the record date by a fraction of
which the numerator shall be such Current Market Price of the Common
Stock, such adjusted to be effective immediately prior to the opening
of business on the day following the record date and the denominator
of which shall be the Current Market Price of the Common Stock on the
record date less the amount of cash so distributed (and not excluded
as provided above) applicable to one share of Common Stock and;
provided, however, that in the event the portion of the cash so
distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the
record date, in lieu of the foregoing adjustment, adequate provision
shall be made so that each Noteholder shall have the right to receive
upon conversion the amount of cash such holder would have received had
such holder converted each Note on the record date. If such dividend
or distribution is not so paid or made, the Conversion Rate shall
again be adjusted
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to be the Conversion Rate which would then be in effect if such
dividend or distribution had not been declared.
If any adjustment is required to be made as set forth in this
subsection (d) as a result of a distribution that is a quarterly
dividend, such adjustment shall be based upon the amount by which such
distribution exceeds the amount of the quarterly cash dividend
permitted to be excluded pursuant hereto. If an adjustment is
required to be made as set forth in this Subsection (d) above as a
result of a distribution that is not a quarterly dividend, such
adjustment shall be based upon the full amount of the distribution.
(e) In case a tender or exchange offer made by the
Company or any subsidiary of the Company for all or any portion of the
Common Stock shall expire and such tender or exchange offer shall
involve the payment by the Company or such subsidiary of consideration
per share of Common Stock having a fair market value (as determined by
the Board of Directors or, to the extent permitted by applicable law,
a duly authorized committee thereof, whose determination shall be
conclusive, and described in a resolution of the Board of Directors or
such duly authorized committee thereof, as the case may be, at the
last time (the "Expiration Time") tenders or exchanges may be made
pursuant to such tender or exchange offer (as it shall have been
amended) that exceeds the Current Market Price of the Common Stock on
the Trading Day next succeeding the Expiration Time, the Conversion
Rate shall be adjusted so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately
prior to the Expiration Time by a fraction of which the numerator
shall be sum of (x) the fair market value (determined as aforesaid) of
the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or
exchange offer) of all shares validly tendered or exchanged and not
withdrawn as of the Expiration Time (the shares deemed so accepted up
to any such maximum, being referred to as the "Purchased Shares") and
(y) the product of the number of shares of Common Stock outstanding
(less any Purchased Shares) on Expiration Time and the Current Market
Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction to become effective immediately prior
to the opening of business on the day following the Expiration Time
and the denominator of which shall be the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) on the
Expiration Time multiplied by the Current Market
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Price of the Common Stock on the Trading Day next succeeding the
Expiration Time and. If the Company is obligated to purchase shares
pursuant to any such tender or exchange offer, but the Company is
permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Rate
shall again be adjusted to be the Conversion Rate which would then be
effect if such tender or exchange offer had not been made.
(f) For the purpose of any computation under subsections (b),
(c), (d) and (e) above, the Current Market Price per share of Common
Stock at any date shall be deemed to be the average of the last
reported sale prices for the ten consecutive Trading Days (as defined
below) preceding the day before the record date with respect to any
distribution, issuance or other event requiring such computation. The
"Closing Price" with respect to any securities on any day shall mean
the closing sale price regular way on such day or, in case no such
sale takes place on such day, the average of the reported closing bid
and asked prices, regular way, in each case on the New York Stock
Exchange, or, if such security is not listed or admitted to trading on
such Exchange, on the principal national security exchange or
quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to
trading on any national securities exchange or quotation system, the
average of the closing bid and asked prices of such security on the
over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similar generally
accepted reporting service, or if not so available, in such manner as
furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution.
The "fair market value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's length transaction. The
"record date" shall mean, with respect to any dividend, distribution
or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in
which the Common Stock (or other applicable security) is exchanged for
or converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders entitled to
receive such cash, securities or other property (whether such date is
fixed by the Board of Directors or by statute, contract or otherwise).
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(g) Rights or warrants distributed by the Company to all
holders of Common Stock entitling the holders thereof to subscribe for
or purchase shares of the Company's capital stock (either initially or
under certain circumstances), which rights or warrants, until the
occurrence of a specified event or events ("Trigger Event"):
(i) are deemed to be transferred with such shares
of Common Stock,
(ii) are not exercisable, and
(iii) are also issued in respect of future issuances
of Common Stock,
shall not be deemed distributed for purposes of Section 15.05(a) until
the occurrence of the earliest Trigger Event. In addition, in the
event of any distribution of rights or warrants, or any Trigger Event
with respect thereto, that shall have resulted in an adjustment to the
Conversion Rate under Section 15.05(a), (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased
without exercise by any holders thereof, the Conversion Rate shall be
readjusted upon such final redemption or repurchase to give effect to
such distribution or Trigger Event, as the case may be, as though it
were a cash distribution, equal to the per share redemption or
repurchase price received by a holder of Common Stock with respect to
such rights or warrants (assuming such holder had retained such rights
or warrants), made to all holders of Common Stock as of the date of
such redemption or repurchase, and (2) in the case of any such rights
or warrants all of which shall have expired without exercise by any
holder thereof, the Conversion Rate shall be readjusted as if such
issuance had not occurred.
(h) No adjustment in the Conversion Rate shall be required
unless such adjustment would require an increase or decrease of at
least l% in such rate; provided, however, that any adjustments which
by reason of this subsection (h) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Article Fifteen shall be made by the
Company and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. Anything in this Section
15.05 to the contrary notwithstanding, the Company shall be entitled
to make such increases in the Conversion Rate, in addition to those
required by this Section 15.05, as
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it in its discretion shall determine to be advisable in order that any
stock dividends, subdivision of shares, distribution of rights to
purchase stock or securities, or a distribution of securities
convertible into or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable. To the extent
permitted by applicable law, the Company from time to time may
increase the Conversion Rate by any amount for any period of time if
the period is at least 20 days, the increase is irrevocable during the
period and the Board of Directors shall have made a determination that
such increase would be in the best interests of the Company, which
determination shall be conclusive. Whenever the Conversion Rate is so
increased, the Company shall mail to Noteholders and file with the
Trustee and the Conversion Agent a notice of the increase. The
Company shall mail the notice at least 15 days before the date the
increased Conversion Rate takes effect. The notice shall state the
increased Conversion Rate and the period it will be in effect.
(i) Whenever the Conversion Rate is adjusted, as herein
provided, the Company shall promptly file with the Trustee and any
conversion agent other than the Trustee an Officers' Certificate
setting forth the Conversion Rate after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
Promptly after delivery of such certificate, the Company shall prepare
a notice of such adjustment of the Conversion Rate setting forth the
adjusted Conversion Rate and the date on which such adjustment becomes
effective and shall mail such notice of such adjustment of the
Conversion Rate to the holder of each Note at his last address
appearing on the Note register provided for in Section 2.05 of this
Indenture.
(j) In any case in which this Section 15.05 provides that an
adjustment shall become effective immediately after a record date for
an event, the Company may defer until the occurrence of such event (i)
issuing to the holder of any Note converted after such record date and
before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (ii)
paying to such holder any amount in cash in lieu of any fraction
pursuant to Section 15.03.
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SECTION 15.06. Effect of Reclassification, Consolidation,
Merger or Sale. If any of the following events occur, namely (i) any
reclassification or change of outstanding shares of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), (ii) any
consolidation, merger or combination of the Company with another corporation as
a result of which holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock, or (iii) any sale or conveyance of the
properties and assets of the Company as, or substantially as, an entirety to
any other corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock, then the Company or
the successor or purchasing corporation, as the case may be, shall execute with
the Trustee a supplemental indenture providing that each Note shall be
convertible into the kind and amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance by a holder of a
number of shares of Common Stock issuable upon conversion of such Notes
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance. Such supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article.
The Company shall cause notice of the execution of such
supplemental indenture to be mailed to each holder of Notes, at his address
appearing on the Note register provided for in Section 2.05 of this Indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, consolidations, mergers, combinations, and sales.
SECTION 15.07. Taxes on Shares Issued. The issue of stock
certificates on conversions of Notes shall be made without charge to the
converting Noteholder for any U.S. tax in respect of the issue thereof. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of stock in any name
other than that of the holder of any Note converted, and the Company shall not
be required to issue or deliver any such stock certificate unless and until the
person or persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
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SECTION 15.08. Reservation of Shares; Shares to be Fully
Paid; Compliance with Governmental Requirements; Listing of Common Stock. The
Company shall provide, free from preemptive rights, out of its authorized but
unissued shares, sufficient shares to provide for the conversion of the Notes
from time to time as such Notes are presented for conversion.
Before taking any action which would cause an adjustment
increasing the Conversion Rate so that the shares of Common Stock issuable upon
conversion of the Notes would be issued for less than the par value of such
Common Stock, the Company will take all corporate action which may be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable shares of such Common Stock at such adjusted Conversion Rate.
The Company covenants that all shares of Common Stock which
may be issued upon conversion of Notes will upon issue be fully paid and
nonassessable by the Company and free from all taxes, liens and charges with
respect to the issue thereof.
The Company covenants that if any shares of Common Stock to be
provided for the purpose of conversion of Notes hereunder require registration
with or approval of any governmental authority under any Federal or State law
before such shares may be validly issued upon conversion, the Company will in
good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
The Company further covenants that if at any time the Common
Stock shall be listed on the New York Stock Exchange or any other national
securities exchange the Company will, if permitted by the rules of such
exchange, list and keep listed so long as the Common Stock shall be so listed
on such exchange, all Common Stock issuable upon conversion of the Notes.
SECTION 15.09. Responsibility of Trustee. The Trustee and
any other conversion agent shall not at any time be under any duty or
responsibility to any holder of Notes to determine whether any facts exist
which may require any adjustment of the Conversion Rate or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Note; and the Trustee and
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any other conversion agent make no representations with respect thereto.
Subject to the provisions of Section 8.01, neither the Trustee nor any
conversion agent shall be responsible for any failure of the Company to issue,
transfer or deliver any shares of Common Stock or stock certificates or other
securities or property or cash upon the surrender of any Note for the purpose
of conversion or to comply with any of the duties, responsibilities or
covenants of the Company contained in this Article. Without limiting the
generality of the foregoing, neither the Trustee nor any conversion agent shall
be under any responsibility to determine the correctness of any provisions
contained in any supplemental indenture entered into pursuant to Section 15.06
relating either to the kind or amount of shares of stock or securities or
property (including cash) receivable by Noteholders upon the conversion of
their Notes after any event referred to in such Section 15.06 or to any
adjustment to be made with respect thereto, but, subject to the provisions of
Section 8.01 may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Officers' Certificate
(which the Company shall be obligated to file with the Trustee prior to the
execution of any such supplemental indenture) with respect thereto.
SECTION 15.10. Notice to Holders Prior to Certain Actions.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock (other than in cash out of retained
earnings); or
(b) the Company shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or purchase
any share of any class or any other rights or warrants; or
(c) of any reclassification of the Common Stock of the
Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par
value, or from no par value to par value), or of any consolidation or
merger to which the Company is a party and for which approval of any
shareholders of the Company is required, or of the sale or transfer of
all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the
99.
<PAGE> 106
Note register, provided for in Section 2.05 of this Indenture, as promptly as
possible but in any event at least fifteen days prior to the applicable date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights or warrants, or,
if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution or rights are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected to
become effective or occur, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.
SECTION 15.11. Simultaneous Adjustments. In the event that
this Article 15 requires adjustments to the Conversion Rate under more than one
of Sections 15.05(a), 15.05(b), 15.05(c) or 15.05(d), and the record dates for
the distributions giving rise to such adjustments shall occur on the same date,
then such adjustments shall be made by applying, first, the provisions of
Section 15.05(c), second, the provisions of Section 15.05(d), third the
provisions of Section 15.05(a) and, fourth, the provisions of Section 15.05(b).
SECTION 15.12 Notice to Holders of Notes; Waiver. Except as
otherwise expressly provided herein, where this Indenture provides for notice
to holders of Notes of any event, such notice shall be sufficiently given to
holders of Notes if given in writing and mailed, first-class postage prepaid,
to each holder of a Note affected by such event, at the address of such holder
as it appears in the register, not earlier than the earliest date and not later
than the latest date prescribed for the giving of such notice.
In any case where notice to holders of Notes is given by mail,
neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular holder of a Note shall affect the sufficiency of such
notice with respect to other holders of Notes. In case by reason of the
suspension of regular mail service or by reason of any other cause it shall be
impracticable to give such notice by mail, then such notification to holders of
Notes as shall be made
100.
<PAGE> 107
with the approval of the Trustee shall constitute a sufficient notification to
such holders for every purpose hereunder.
Where this Indenture provides for notice in any manner such
notice may be waived in writing by the person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 15.13 Successive Adjustments. After an adjustment to
the Conversion Rate under this Article 15, any subsequent event requiring an
adjustment under this Article 15 shall cause an adjustment to the Conversion
Rate as so adjusted.
SECTION 15.14 Company Determination Final. Any determination
that the Company or the Board of Directors must make pursuant to Section 15.03,
15.05, 15.06, 15.11 or 15.12 is conclusive.
SECTION 15.15 General Considerations. Whenever successive
adjustments to the Conversion Rate are called for pursuant to this Article
Fifteen, such adjustments shall be made to the Current Market Price as may be
necessary or appropriate to effectuate the intent of this Article and to avoid
unjust or inequitable results as determined in good faith by the Board of
Directors.
ARTICLE SIXTEEN
REDEMPTION OF NOTES AT OPTION OF HOLDERS
SECTION 16.01. Option to Elect Redemption Upon a Fundamental
Change. (a) If a Fundamental Change shall occur at any time prior to March 15,
2001, each holder of Notes shall have the right, at such holder's option, to
require the Company to redeem any or all of such holder's Notes on the date
(the "Fundamental Change Redemption Date") (or if such date is not a Business
Day, the next succeeding Business Day) that is 45 days after the date of the
Company's notice of such Fundamental Change. Any redemption of such holder's
Notes in part shall be in the amount of $1,000 principal amount at maturity or
any multiple thereof. Any such redemption of Notes shall be made at a price
(the "Fundamental Change Redemption Price") equal to the Issue Price plus
accrued Original Issue Discount to the date of redemption with respect to such
Notes, provided that if the Applicable Price with respect to a Fundamental
Change is less than the Reference
101.
<PAGE> 108
Market Price, the applicable price with respect to any such redemption of Notes
shall be equal to the foregoing price multiplied by the fraction obtained by
dividing the Applicable Price by the Reference Market Price. In each case, the
Company shall also pay accrued interest, if any, on such Notes to the
Fundamental Change Redemption Date; provided that if such Fundamental Change
Redemption Date is between a March 1 and the next succeeding March 15 or
between a September 1 and the next succeeding September 15, then the interest
payable on such date shall be paid to the holder of record of the Note on the
next preceding March 15 or September 15. The Company shall mail to all holders
of record of the Notes a notice of the occurrence of a Fundamental Change and
of the redemption right arising as a result thereof on or before the 10th day
after the occurrence of such Fundamental Change. The Company shall promptly
furnish the Trustee a copy of such notice.
(b) For a Note to be so redeemed at the option of the holder,
the Company must receive at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York, such Note with
the form entitled "Option to Elect Redemption Upon a Fundamental Change" on the
reverse thereof (a "Fundamental Change Redemption Notice") duly completed,
together with such Notes duly endorsed for transfer, on or before the 30th day
after the date of such notice (or if such 30th day is not a business day, the
immediately preceding business day). All questions as to the validity,
eligibility (including time of receipt), withdrawal and acceptance of any Note
for redemption shall be determined by the Company, whose determination shall be
final and binding.
A Fundamental Change Redemption Notice may be withdrawn by
means of a written notice of withdrawal delivered to the office of the Trustee
at any time prior to the close of business on the Fundamental Change Redemption
Date to which it relates specifying:
(1) the certificate number of the Note in respect of which
such notice of withdrawal is being submitted,
(2) the principal amount at maturity of the Note with respect
to which such notice of withdrawal is being submitted, and
(3) the principal amount at maturity, if any, of such Note
which remains subject to the original Fundamental Change Redemption
Notice and which has been or will be delivered for redemption by the
Company.
102.
<PAGE> 109
SECTION 16.02. Deposit of Funds for Redemption. On or prior
to the date any Note is required to be paid pursuant to Section 16.02, the
Company will deposit with the Trustee or with one or more paying agents (or, if
the Company is acting as its own paying agent, set aside, segregate and hold in
trust as provided in Section 5.04) an amount of money sufficient to redeem on
the applicable Fundamental Change Redemption Date all the Notes to be repaid on
such date at the appropriate Redemption Price, together with accrued interest
to the date fixed for redemption.
ARTICLE SEVENTEEN
MISCELLANEOUS PROVISIONS
SECTION 17.01. Provisions Binding on Company's Successors.
All the covenants, stipulations, promises and agreements in this Indenture
contained by the Company shall bind its successors and assigns whether so
expressed or not.
SECTION 17.02. Official Acts by Successor Corporation. Any
act or proceeding by any provision of this Indenture authorized or required to
be done or performed by any board, committee or officer of the Company shall
and may be done and performed with like force and effect by the like board,
committee or officer of any corporation that shall at the time be the lawful
sole successor of the Company.
SECTION 17.03. Addresses for Notices, etc. Any notice or
demand which by any provision of this Indenture is required or permitted to be
given or served by the Trustee or by the holders of Notes on the Company may be
given or served by being deposited postage prepaid by registered or certified
mail in a post office letter box addressed (until another address is filed by
the Company with the Trustee) to:
Cypress Semiconductor Corporation
3901 North First Street
San Jose, California 95134
Attention: Chief Financial Officer
Telephone Number: (408) 943-2600
Any notice, direction, request or demand hereunder to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all purposes, if given
or made in writing at the Principal Office of the Trustee, which office is, at
the date as of which this Indenture is dated, located at:
103.
<PAGE> 110
The First National Bank of Boston
Blue Hills Office Park
150 Royall Street
Canton, MA 02021
Attn: Corporate Trust Division
Mail Stop 45-02-15
(Cypress Semiconductor Corporation
3.15% Convertible Subordinated Notes due 2001)
Telephone Number: (617) 575-3145
SECTION 17.04. Governing Law. This Indenture and each Note
shall be deemed to be a contract made under the laws of New York, and for all
purposes shall be construed in accordance with the laws of New York.
SECTION 17.05. Evidence of Compliance with Conditions
Precedent; Certificates to Trustee. Upon any application or demand by the
Company to the Trustee to take any action under any of the provisions of this
Indenture, if requested by the Trustee, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 17.06. Legal Holidays. In any case where the date of
maturity of interest on or principal of the Notes or the date fixed for
redemption or repayment of any Note is not a Business Day ("a Legal Holiday"),
then payment of such interest on or principal of the Notes need not be made on
such date but may be made on the next succeeding day not a Legal Holiday with
the same force and effect as if made on the date of maturity or the date fixed
for redemption or repayment and no interest shall accrue for the period from
and after such date.
SECTION 17.07. No Security Interest Created. Nothing in this
Indenture or in the Notes, expressed or implied, shall be construed to
constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in any jurisdiction
where property of the Company or its subsidiaries is located.
104.
<PAGE> 111
SECTION 17.08. Benefits of Indenture. Nothing in this
Indenture or in the Notes, express or implied, shall give to any person, other
than the parties hereto, any paying agent, any Note registrar and their
successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 17.09. Table of Contents, Headings, etc. The table of
contents and the titles and headings of the articles and sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
SECTION 17.10. Execution in Counterparts. This Indenture may
be executed in any number of counterparts, each of which shall be an original,
but such counterparts shall together constitute but one and the same
instrument.
The First National Bank of Boston hereby accepts the trusts in
this Indenture declared and provided, upon the terms and conditions hereinabove
set forth.
105.
<PAGE> 112
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly signed, and their respective corporate seals to be
hereunto affixed and attested, all as of the date first written above.
CYPRESS SEMICONDUCTOR CORPORATION
By: _______________________________
T.J. Rodgers, President and
Chief Executive Officer
Attest:
____________________________
Title: Secretary
[Seal]
THE FIRST NATIONAL BANK OF BOSTON
By: ______________________________
Attest:
____________________________
Title: Account Manager
<PAGE> 1
SUBLEASE OF THE LAND
AND LEASE OF THE IMPROVEMENTS
By and Between
SUMITOMO BANK LEASING AND FINANCE, INC.,
A DELAWARE CORPORATION
as Landlord
and
CYPRESS SEMICONDUCTOR (MINNESOTA) INC.,
A DELAWARE CORPORATION
as Tenant
for
Premises located in
Bloomington, Minnesota
THIS LEASE IS NOT INTENDED TO CONSTITUTE A TRUE LEASE
FOR INCOME TAX PURPOSES. SEE SECTION 19.2
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1
BASIC LEASE PROVISIONS
1.1 Date of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Ground Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Rent Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Ground Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 Addresses for Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 Wire Transfer Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 Interim Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
DEFINITIONS
2.1 Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Calculation Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Capitalized Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Capitalized Funding Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Commitment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 Commitment Component . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.12 Construction Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Construction Period Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Custodial Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.16 Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.17 Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.18 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.19 Guaranteed Residual Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 Interim Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.22 Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.23 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.24 Lease Inception Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.25 Lease Investment Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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2.26 Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.27 LIBOR Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.28 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.29 Official Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.30 Permitted Title Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.31 Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.32 Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.33 Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.34 Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.35 Rent Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.36 Rent Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.37 Required Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.38 SBLF Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.39 SBNYTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.40 Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.41 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.42 Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.43 Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3
DEMISE
3.1 Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4
TERM
4.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 5
CONSTRUCTION OF IMPROVEMENTS
5.1 Tenant's Rights to Construct Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Title to and Nature of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6
FUNDING
6.1 Request for Construction Funding: Landlord's Obligation to Fund . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Exhibit Reflecting Rent Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 7
RENT
7.1 Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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7.3 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 Delinquent Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 8
TAXES
8.1 Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.2 Personal Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Right to Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 9
INSURANCE
9.1 Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.2 Builders' Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.3 All-Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.4 General Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.5 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.6 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 10
USE
10.1 Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.2 Contest of Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 11
UTILITIES AND SERVICES
11.1 Services to the Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 12
MAINTENANCE AND REPAIRS; SURRENDER OF THE PREMISES
12.1 Tenant Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 Surrender of the Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 13
LIENS
ARTICLE 14
ASSIGNMENT BY LANDLORD
14.1 Further Mortgages or Encumbrances by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.2 Landlord's Right to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.3 Transfer of Funds and Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 15
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ASSIGNMENT AND SUBLEASING
15.1 Right to Assign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.2 Right to Sublet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.3 Mortgage by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 16
EMINENT DOMAIN
16.1 Total or Substantial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
16.2 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
16.3 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
16.4 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
16.5 Notice and Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 17
DAMAGE OR DESTRUCTION
17.1 Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
17.2 Termination of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
17.3 Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 18
DEFAULT
18.1 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
18.2 Contest by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18.3 Landlord's Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
18.4 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
18.5 Effect of Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
18.6 Landlord Cure Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 19
MISCELLANEOUS
19.1 Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
19.2 Form of Transaction: Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
19.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19.4 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19.5 Entire Agreement: Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19.7 Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19.8 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.11 Time Is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.12 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.13 Limitations on Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.14 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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19.15 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
19.16 As-Is Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
19.17 Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
19.18 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
19.19 Tenant's Wavier of Demand for Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
19.20 Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 20
INDEMNIFICATION
20.1 Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
20.2 Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
20.3 Construction Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
20.4 General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 21
COVENANTS OF LANDLORD
21.1 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
21.2 Land Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
21.3 Transfer of Property Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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SUBLEASE OF THE LAND AND LEASE OF THE IMPROVEMENTS
THIS SUBLEASE OF THE LAND AND LEASE OF THE IMPROVEMENTS ("Lease") by
and between SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation
("Landlord"), and CYPRESS SEMICONDUCTOR (MINNESOTA) INC. a Delaware corporation
("Tenant"), is entered into as of the date set forth in Article 1 and shall be
effective and binding upon the parties hereto as of such date. Capitalized
terms used in this Lease shall have the definitions set forth in Article 2 or
in the text of this Lease.
In consideration of the Base Rent reserved herein, and the terms,
covenants and conditions set forth below, Landlord and Tenant hereby agree as
follows:
ARTICLE 1
BASIC LEASE PROVISIONS
1.1 DATE OF LEASE: December 29, 1994.
1.2 LANDLORD: Sumitomo Bank Leasing and Finance,
Inc., a Delaware corporation
1.3 TENANT: Cypress Semiconductor (Minnesota)
Inc., a Delaware corporation.
1.4 LAND: A leasehold interest in that certain
tract of land located in the City of
Bloomington, Hennepin County,
Minnesota, as more particularly
described on Exhibit A attached
hereto, arising under that certain
Ground Lease of even date herewith
between Tenant, as Ground Lessor,
and Landlord, as Ground Lessee (the
"Ground Lease"), together with all
easements, rights of way,
appurtenances and other rights and
benefits belonging or pertaining to
such Land. Landlord makes no
representations as to the accuracy
of the description of the Land or
the leasehold interest.
1.5 GROUND LESSOR: Cypress Semiconductor (Minnesota)
Inc., a Delaware corporation.
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1.6 GUARANTOR: Cypress Semiconductor Corporation, a
Delaware corporation.
1.7 PREMISES: The Land and the Improvements which
Tenant may construct, as agent for
Landlord, on the Land pursuant to
the terms of that certain
Construction Management Agreement of
even date herewith between Landlord
and Tenant.
1.8 TERM: The term of this Lease ("Term")
shall commence on the Date of Lease
set forth in Section 1.1 above and
shall expire on December 29, 2004
("Expiration Date"). The Term shall
cease upon, and shall not refer to
any period of time after,
termination of this Lease (whether
pursuant to the terms of the Lease,
by operation of law, or otherwise).
1.9 RENT COMMENCEMENT DATE: The rent commencement date ("Rent
Commencement Date") shall be the
fifteenth (15th) day of the second
full calendar month which commences
immediately following the earlier to
occur of the following:
(1) July 31, 1995; or
(2) The first (1st) business day
following the date upon which all of
the following have occurred: (i)
the Building and all other
Improvements that Tenant intends to
cause to be constructed with
Advances made by Landlord pursuant
to the Construction Management
Agreement have been substantially
completed; (ii) valid notices of
completion have been recorded with
respect thereto; and (iii) all
necessary governmental approvals
(including permanent certificates of
occupancy) have been issued as may
be necessary to occupy all portions
of the Building for the conduct of
Tenant's business therein.
1.10 BASE RENT: As described in Section 2.3.
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<PAGE> 9
1.11 GROUND RENT: Any payment made to Ground Lessor
under the Ground Lease or otherwise
by the Lessee thereunder.
1.12 ADDRESSES FOR NOTICES:
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LANDLORD: TENANT:
<S> <C>
Sumitomo Bank Leasing and Finance, Inc. Cypress Semiconductor (Minnesota) Inc.
277 Park Avenue 2401 E. 86th
New York, NY 10172 Bloomington, MN 55425
Attention: Chief Credit Officer Attention: Mr. Jim Weir, Vice President,
Finance
With a copy to: With a copy to:
Landels, Ripley & Diamond Cypress Semiconductor
Hills Plaza 3901 North First Street
350 Steuart Street San Jose, CA 95134
San Francisco, CA 94105-1250 Attention: Mr. Kirk Johnson, Corporate
Attention: Bruce W. Hyman, Esq. Controller
and and
Sumitomo Bank of New York Trust Wilson, Sonsini, Goodrich & Rosati
Company 650 Page Mill Road
277 Park Avenue Palo Alto, CA 94304
New York, NY 10172 Attention: Debra Summers, Esq.
Attention: Corporate Trust Department
</TABLE>
1.13 WIRE TRANSFER INSTRUCTIONS:
Morgan Guaranty Trust Company of New York
ABA#021000238
For credit to The Sumitomo Bank, Limited A/C #631-28-256
Further credit to Sumitomo Bank Leasing and Finance, Inc.
A/C No. 283572
1.14 INTERIM PERIOD: Interim Period shall be the period commencing on the
Date of Lease and ending on the day before the
Construction Period Expiration Date.
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This Article 1 is intended to supplement and/or summarize the
provisions set forth in the balance of this Lease. If there is any conflict
between any provisions contained in this Article 1 and the balance of this
Lease, the balance of this Lease shall control.
ARTICLE 2
DEFINITIONS
For purposes of this Lease, the following defined terms shall have the
meanings set forth in this Article 2.
2.1 ADDITIONAL RENT. "Additional Rent" shall mean any amounts
other than Base Rent payable by Tenant to Landlord or to other Entities on
Landlord's behalf as required under this Lease.
2.2 ADVANCE. "Advance" shall mean any payment by Landlord
pursuant to Tenant's written request for (i) any costs relating to construction
of the Improvements, whether funded under the Construction Management Agreement
or paid directly by Landlord, including, without limitation, transaction costs
(including title charges and professional fees and expenses), construction
costs, architectural, engineering and other professional fees, arrangement
fees, appraisal fees, inspection, testing and permitting fees, fees and costs
for review of plans and any changes thereto, travel expense for inspections,
insurance and any other soft costs relating to the Improvements; (ii) the items
and/or amounts described in Exhibit B; (iii) Real Estate Taxes; (iv) the Base
Rent paid by Landlord as lessee under the Ground Lease during the term thereof;
(v) a reasonable and customary fee relating to the construction of the
Improvements and the processing of Draw Requests (equal to $2000 per annum,
prorated based on the number of months of the period over which such services
are rendered, payable to SBNYTC), (vi) custodian fees related to the Collateral
as set forth in the Custodial Agreement, and (vii) any other payment described
herein or in the Construction Management Agreement as an Advance.
2.3 BASE RENT. "Base Rent" shall mean, as of a Rent Payment
Date, that annual amount equal to the product obtained by multiplying the Lease
Investment Balance (at the time of the relevant calculation) by the sum of the
LIBOR Rate plus 47 basis points, which annual amount is then prorated for the
Calculation Period in question on the basis of a 360 day year and the actual
number of days elapsed.
2.4 BUILDING. "Building" shall mean the building and related
improvements to be constructed on the Land that shall become part of the
Improvements, which shall be a clean-room facility.
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2.5 CALCULATION PERIOD. "Calculation Period" shall mean the
period from and including the 15th day of each month during the Interim Period
through the 14th day of the following month; provided that the first
Calculation Period shall be the period from the Date of Lease through the 14th
day of the following month and the last Calculation Period shall be the period
from and including the 15th day of the month prior to the month in which the
Construction Period Expiration Date occurs through the day immediately
preceding the Construction Period Expiration Date.
2.6 CAPITALIZED AMOUNT. "Capitalized Amount" shall mean that
amount, determined as of the close of each Calculation Period during the Term
and added to the Lease Investment Balance as of such date, equal to the sum of
Capitalized Funding Costs plus the Commitment Component accrued for the
Calculation Period in question. Landlord shall notify Tenant of the
Capitalized Amount for each Calculation Period and the basis for the
determination thereof; and if Tenant fails to object to such determination
within five (5) business days of Landlord's notice thereof, Tenant shall be
deemed to have approved such determination.
2.7 CAPITALIZED FUNDING COSTS. "Capitalized Funding Costs"
shall mean, for each Calculation Period during the Interim Period, that annual
amount equal to the product obtained by multiplying the Lease Investment
Balance outstanding from time to time during the Calculation Period in question
by the sum of the LIBOR Rate plus 47 basis points, which annual amount is then
prorated for the Calculation Period in question on the basis of a 360 day year
and the actual number of days in such Calculation Period. The LIBOR Rate to be
used with respect to the determination of Capitalized Funding Costs during the
Interim Period shall be the one (1) month LIBOR Rate.
2.8 CITY. "City" shall mean the City of Bloomington, Minnesota.
2.9 COLLATERAL. "Collateral" shall have the meaning set forth
in Section 19.15.
2.10 COMMITMENT AMOUNT. "Commitment Amount" shall mean NINETEEN
MILLION and no/100 Dollars ($19,000,000.00).
2.11 COMMITMENT COMPONENT. "Commitment Component" shall mean,
for each Calculation Period during the Interim Period, that annual amount equal
to the product obtained by multiplying the unused Commitment Amount outstanding
from time to time during the Calculation Period in question by .25%, which
annual amount is then prorated for the Calculation Period in question on the
basis of a 360 day year and the actual number of days in such Calculation
Period. Portions of the Commitment Amount shall be deemed to be used (i) as of
the date of each Advance by Landlord during the Interim Period, on which date
each such Advance shall be added to and become part of the Lease Investment
Balance, and (ii) as of the date at the close of each Calculation Period on
which the
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<PAGE> 12
Capitalized Amount for such Calculation Period is added to and becomes part of
the Lease Investment Balance.
For purposes of calculating the Lease Investment Balance and any other
obligations under this Lease, the Commitment Component shall only accrue during
the Interim Period and shall cease to accrue following the Construction Period
Expiration Date.
2.12 CONSTRUCTION MANAGEMENT AGREEMENT. "Construction Management
Agreement" shall mean that certain Construction Management Agreement of even
date herewith between Landlord and Tenant regarding the construction of the
Improvements.
2.13 CONSTRUCTION PERIOD EXPIRATION DATE. "Construction Period
Expiration Date" shall mean the fifteenth (15th) day of the month immediately
preceding the month in which the Rent Commencement Date occurs.
2.14 CONTRACTOR. "Contractor" shall mean any construction
manager or general contractor hired to construct any portion of the
Improvements, which contractor shall be selected by the Construction Manager in
its capacity as agent for Landlord under the Construction Management Agreement,
and shall be subject to Landlord's approval, which shall not be unreasonably
withheld or delayed.
2.15 CUSTODIAL AGREEMENT. "Custodial Agreement" shall mean that
certain Institutional Custodial Agreement of even date herewith executed by and
between Landlord and Morgan Stanley & Company, Inc.
2.16 DEFAULT RATE. "Default Rate" means with respect to the
Lease Investment Balance, the one (1) month LIBOR Rate plus 247 basis points.
Notwithstanding the foregoing, in the event that the foregoing Default Rate
shall be in violation of any usury or similar law, then the Default Rate shall
be reduced to the extent necessary to cause the Default Rate to comply with any
usury or similar law.
2.17 ENTITY. "Entity" shall mean any person, corporation,
partnership (general or limited), joint venture, association, limited liability
company, joint stock company, trust or other business entity or organization.
2.18 EVENT OF DEFAULT. "Event of Default" shall have the meaning
set forth in Section 18.1.
2.19 GUARANTEED RESIDUAL VALUE: "Guaranteed Residual Value"
shall bear amount, which the parties hereto agree is eighty one and ninety six
one hundredths percent (81.96%) of the Lease Investment Balance at such date.
These calculations will be performed in accordance with the provisions of
Statement of Financial Accounting Standards Number 13.
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<PAGE> 13
2.20 IMPROVEMENTS. "Improvements" shall mean any and all
improvements which Tenant shall, as construction agent for Landlord, erect,
construct or situate upon the Land or any part thereof during the Term using
funding provided by or through Landlord in an amount not to exceed NINETEEN
MILLION and No/100 Dollars ($19,000,000.00) under and pursuant to the terms of
the Construction Management Agreement.
2.21 INTERIM PERIOD: "Interim Period" shall have the meaning
set forth in the Basic Lease Provisions.
2.22 INITIAL ADVANCE. Initial Advance shall mean the amounts
described in Exhibit B pertaining to execution of the Ground Lease and this
Lease, and such other amounts as are set forth in Tenant's Draw Request.
2.23 LAND. "Land" shall have the meaning set forth in the Basic
Lease Provisions.
2.24 LEASE INCEPTION DATE. "Lease Inception Date" shall mean the
Date of Lease.
2.25 LEASE INVESTMENT BALANCE. "Lease Investment Balance" shall
mean, at the time in question, the aggregate amount of all Advances made by
Landlord plus any outstanding Capitalized Amount not yet added to the Lease
Investment Balance (as described in Section 2.6 above), reduced by the
following: (1) the aggregate of all amounts received by Landlord pursuant to
the provisions of Article 16 (Eminent Domain), Article 17 (Damage or
Destruction), Article 18 (Landlord's Remedies) and/or the Purchase Agreement;
and (2) the aggregate of all amounts received by Landlord in respect of this
Lease or the Improvements or any related agreement (including, without
limitation, the Agreement of Guaranty, Purchase Agreement and the Pledge
Agreement) that are not otherwise applied to reduce the Lease Investment
Balance and which constitute a repayment or reduction of the amounts placed at
risk by the Landlord (whether through realization upon the Collateral or
otherwise) excluding for purposes of this clause amounts paid as rent
hereunder, reimbursement for expenses, fees and similar items incurred by
Landlord and payable by Tenant to Landlord under the Transaction Documents.
2.26 LEGAL REQUIREMENTS. "Legal Requirements" shall mean all
statutes, codes, laws, acts, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, permits, licenses, authorizations, directions
and requirements of all federal, state, county, municipal and other
governments, departments, commissions, boards, courts, authorities,
7
<PAGE> 14
officials and officers, which now or at any time hereafter are applicable to
this Lease or applicable to and enforceable against the Premises, the
Improvements or any part thereof, as applicable.
2.27 LIBOR RATE. "LIBOR Rate" shall mean, for each Borrowing
Period as defined below, the annualized rate determined by The Sumitomo Bank,
Limited as the rate that would be offered to The Sumitomo Bank, Limited's San
Francisco or New York office for U.S. dollar deposits in the London Interbank
Market as quoted for the mid-morning average LIBOR Rate published by Reuters
Monitoring Systems for the particular Borrowing Period (rounded upwards, if
necessary, to the next higher 1/16th of 1%) for deposits by The Sumitomo Bank,
Limited of immediately available dollars in the London Interbank Market on the
day two (2) Business Days preceding the first day of the term of that Borrowing
Period. In the event the Reuters quote is not available, the British Banker's
Association's Interest Settlement Rate should be used. "Borrowing Period"
shall mean 1, 3, 6, 9 or 12 months; (i) as selected by Tenant from time to time
during the Interim Period as provided in Section 2.7 above, and (ii) as
selected by Tenant from time to time during the balance of the Term at least
two (2) business days prior to the end of the then current Borrowing Period
(provided that, if Tenant fails to so select a Borrowing Period prior to the
end of the then current Borrowing Period, a Borrowing Period of one (1) month
shall be deemed to have been selected by Tenant); provided, however, that (X)
during the Interim Period there shall not be more than one (1) LIBOR Rate in
effect at any time, and (Y) from and after the Construction Period Expiration
Date, there shall not be more than three (3) LIBOR Rates in effect at any time.
Landlord and Tenant acknowledge that more than one LIBOR Rate may be in effect
at any time during the Term with respect to portions of the outstanding Lease
Investment Balance as designated by Tenant at the time that a particular
Borrowing Period is designated, and the calculation of monthly Capitalized
Funding Costs or Base Rent, as the case may be, shall be based upon the LIBOR
Rates applicable to the portions of the Lease Investment Balance so designated.
2.28 NOTICE. "Notice" shall mean a written advice, request,
demand or notification required or permitted by this Lease, as more
particularly provided in Section 19.3.
2.29 OFFICIAL RECORDS. "Official Records" shall mean the
official records of Hennepin County, Minnesota.
2.30 PERMITTED TITLE EXCEPTIONS. "Permitted Title Exceptions"
shall mean the following: (1) the exceptions set forth in Exhibit C; (2) any
exceptions created or caused by Tenant or to which Tenant consents in writing;
(3) taxes and assessments not yet due and payable other than Landlord's Taxes;
(4) the SBLF Mortgage; (5) all title defects, liens, encumbrances, deeds of
trust, mortgages, rights-of-way, and restrictive covenants and conditions
affecting the Land unless any of the foregoing arise as a result of
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Landlord's actions or with Landlord's written consent (unless such actions
taken or consent given by Landlord are requested in writing by Tenant); and (6)
this Lease.
2.31 PLEDGE AGREEMENT. "Pledge Agreement" shall mean that
certain Pledge Agreement of even date herewith executed by and between Tenant
and Landlord.
2.32 PREMISES. "Premises" shall have the meaning set forth in
the Basic Lease Provisions.
2.33 PURCHASE AGREEMENT. "Purchase Agreement" shall mean that
certain Purchase Agreement of even date herewith executed by and between Tenant
and Landlord.
2.34 REAL ESTATE TAXES. "Real Estate Taxes" shall have the
meaning set forth in Section 8.1(b).
2.35 RENT COMMENCEMENT DATE. "Rent Commencement Date" shall have
the meaning set forth in the Basic Lease Provisions.
2.36 RENT PAYMENT DATE. "Rent Payment Date" shall have the
meaning set forth in Section 7.1.
2.37 REQUIRED PERMITS. "Required Permits" shall mean each and
every building and development permit including, without limitation, demolition
permits, site permits and addenda thereto (including, without limitation,
foundation permits and structural permits), temporary and final occupancy
permits and any other governmental or quasi-governmental approvals which must
be issued by any governmental authority, department, commission, board,
official or officer as a condition precedent to construction and occupancy of
any Improvements.
2.38 SBLF MORTGAGE. "SBLF Mortgage" shall mean that certain
mortgage executed by Tenant in favor of Landlord of even date herewith.
2.39 SBNYTC. "SBNYTC" shall mean Sumitomo Bank of New York Trust
Company.
2.40 TAKING. "Taking" shall have the meaning set forth in
Section 16.1.
2.41 TERM. "Term" shall have the meaning set forth in the Basic
Lease Provisions.
2.42 TERMINOLOGY. All personal pronouns used in this Lease shall
include all other genders. The singular shall include the plural and the
plural shall include the singular. Titles of Articles, Sections and
Subsections in this Lease are for convenience
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only and neither limit nor amplify the provisions of this Lease, and all
references in this Lease to Articles, Sections or Subsections shall refer to
the corresponding Article, Section or Subsection of this Lease unless specific
reference is made to the articles, sections or other subdivisions of another
document or instrument. The word "days" or "business days" as used herein
shall mean business days (i.e., excluding holidays when banks in Minnesota, New
York, San Francisco and London (with respect to payment of Advances, payment of
Basic Rent and the determination of the LIBOR Rate) are generally closed for
business and weekends) unless otherwise expressly stated. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time,
applied on a basis consistent with the most recent audited consolidated
financial statements of the Tenant and its consolidated subsidiaries delivered
to Landlord.
2.43 TRANSACTION DOCUMENTS. "Transaction Documents" are the
Ground Lease, this Lease, the Pledge Agreement, the Construction Management
Agreement, the Purchase Agreement, and the Agreement of Guaranty executed by
Landlord, Tenant, and Guarantor, concurrently herewith.
ARTICLE 3
DEMISE
3.1 PREMISES. Subject to the terms, covenants and conditions
contained herein, Landlord hereby subleases the Land and leases the
Improvements to Tenant, and Tenant hereby leases from Landlord, the Land and
Improvements, together with all rights, privileges, easements and appurtenances
relating to the Land and Improvements. Tenant agrees that it shall use the
Premises in accordance with all of the terms and conditions of the Ground Lease
and shall comply with all terms and conditions of the Ground Lease applicable
to tenant thereunder.
ARTICLE 4
TERM
4.1 TERM. The Term of this Lease is specified in Article 1.
4.2 HOLDING OVER. If Tenant remains in possession of the
Premises after the expiration of the Term without executing a new lease, such
holding over shall be construed as a tenancy from month-to-month, subject to
all terms, covenants and conditions herein contained, and the Base Rent shall
be calculated based upon the Default Rate and shall be required to be paid by
Tenant during such holding over in the same manner as during the Term.
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ARTICLE 5
CONSTRUCTION OF IMPROVEMENTS
5.1 TENANT'S RIGHTS TO CONSTRUCT IMPROVEMENTS. All future
Improvements to be constructed on the Premises shall be constructed in
accordance with the terms and conditions of the Construction Management
Agreement. Tenant shall have the right, in accordance with the terms of the
Construction Management Agreement, to require Landlord to pay Advances for the
construction of any future work of improvement on the Premises by Tenant during
the Term, the funding of which by Landlord shall not exceed the aggregate
amount of NINETEEN MILLION and No/100 Dollars ($19,000,000.00).
5.2 TITLE TO AND NATURE OF IMPROVEMENTS. Subject to the
provisions of this Lease and the rights of the ground lessor under the Ground
Lease, Tenant agrees that any and all Improvements of whatever nature at any
time constructed, placed or maintained upon any part of the Land shall be and
remain the property of Landlord.
ARTICLE 6
FUNDING
6.1 REQUEST FOR CONSTRUCTION FUNDING: LANDLORD'S OBLIGATION TO
FUND. During the Interim Period, Tenant shall request Landlord to provide
Advances for the construction of Improvements in accordance with the
Construction Management Agreement and under the terms and conditions of this
Lease. Each such request shall be in writing and shall generally describe the
nature of the Advance. Landlord shall fund Advances requested by Tenant in
accordance with the terms of the Construction Management Agreement. Landlord
shall have no obligation to make any further Advances on or after the
Construction Period Expiration Date.
6.2 EXHIBIT REFLECTING RENT COMMENCEMENT DATE. Within thirty
(30) days after the Rent Commencement Date, Landlord and Tenant shall execute
the "Rent Commencement Date Memorandum" in the form attached hereto as Exhibit
D.
ARTICLE 7
RENT
7.1 BASE RENT. Commencing upon the Rent Commencement Date and
continuing thereafter throughout the Term, Tenant shall pay Base Rent to
Landlord, or at such other place as Landlord may from time to time instruct.
Tenant shall pay Base Rent by wire transfer. Landlord shall supply Tenant with
such bank account information as Tenant shall require to enable payment by wire
transfer of Federal funds to the account described in Section 1.13. Rental
payments shall be payable monthly in arrears on the fifteenth (15th) day of
each successive month, except that the last installment of Base Rent
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shall be payable on the last day of the Term (each such date shall be a "Rent
Payment Date"). No sooner than thirty (30) days or later than ten (10) days
prior to the due date for any installment of Base Rent hereunder, Landlord
shall deliver to Tenant a Notice indicating the exact dollar amount of the Base
Rent that is due on such due date ("Invoice"). If Landlord fails to send the
Invoice, Tenant shall pay the amount shown on the previous month's Invoice.
7.2 PRORATION. If the Term expires or is otherwise terminated
on other than the fifteenth (15th) day of a calendar month, then Base Rent
shall be prorated for the period from the immediately preceding Rent Payment
Date until the termination date on the basis of actual days elapsed and a three
hundred sixty (360) day year.
7.3 NO ABATEMENT OF RENT. Except as a consequence of a
reduction in the Lease Investment Balance or the terms of Sections 16.1 and
16.2 (Taking) Tenant shall not be entitled to any abatement, diminution,
reduction, setoff or postponement of Base Rent as a consequence of any
inconvenience to, interruption of, cessation of or loss of Tenant's use or
enjoyment of the Premises or as a result of any reason whatsoever.
7.4 DELINQUENT RENT. Any Base Rent not paid on the due date
shall accrue interest at the Default Rate from the date such Base Rent was
originally due until the date such Base Rent is paid. All interest accrued on
past due Base Rent shall be due and payable to Landlord at the time the Base
Rent is paid, or upon demand by Landlord, if earlier.
7.5 ADDITIONAL RENT. Tenant agrees to pay all Additional Rent
when it becomes due and payable under this Lease.
ARTICLE 8
TAXES
8.1 REAL ESTATE TAXES.
(a) Tenant shall pay, during the Term of this Lease,
directly to the appropriate taxing authority all Real Estate Taxes (as defined
below). If the Term expires or otherwise terminates at any time other than the
beginning or end of a taxable year, Tenant's obligation to pay Real Estate
Taxes shall be prorated on the basis of a 365-day year, so as to include only
that portion of the taxable year which is a part of the Term.
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(b) Except to the extent that Real Estate Tax bills and
statements are sent directly to Tenant by the taxing authority, upon receipt by
Landlord of the tax bills or statements, Landlord will use reasonable efforts
to promptly advise Tenant in writing of all Real Estate Taxes and shall deliver
copies of all applicable tax bills or statements to Tenant. Tenant shall pay
directly to the taxing authority all Real Estate Taxes prior to the later of
(i) thirty (30) days after receipt by Tenant from Landlord of a copy of such
bills and statements referred to above, or (ii) five (5) business days prior to
delinquency. As used herein, the term "Real Estate Taxes" shall mean any and
all taxes, governmental fees and similar charges or assessments levied or
assessed against the Improvements and/or the Land including, without
limitation, ad valorem taxes and special assessments applicable to real
property; provided, however, that Real Estate Taxes shall not include any
Landlord Taxes (as defined below). Real Estate Taxes shall also include any
and all documentary, transfer, sales, mortgage, recording or similar taxes
imposed on Landlord or Tenant in connection with any sale of the Premises to a
third party in accordance with this Lease following an Event of Default by
Tenant or in a transaction to which Tenant is a party. As used herein, the
term "Landlord's Taxes" shall mean any and all franchise, gains, gift,
succession, excess profits, gross receipts, revenue, estate, rental, income or
similar taxes or taxes in lieu thereof imposed upon Landlord or any party other
than Tenant (or an affiliate thereof) and any withholding tax imposed as a
collection device for, in lieu of, or otherwise related to any of the foregoing
without regard to whether such tax is required to be collected by Tenant and
without regard to whether Tenant would be liable for such withholding tax in
the event it failed to so withhold. For purposes of the foregoing, an income
tax shall include, without limitation, any tax imposed under the United States
Internal Revenue Code or Minnesota Chapter 290A, as well as any tax which could
qualify as an "income tax" under United States Treasury Regulation Section
1.901-2 (except to the extent any such statute or regulation is subsequently
modified to include a tax or other governmental charge of a materially
different type and nature from the taxes currently described therein) and any
income tax which may be payable under the laws of any jurisdiction either now
or in the future. Real Estate Taxes for any given tax year shall exclude
assessment installments that are not due and payable during such tax year.
8.2 PERSONAL PROPERTY TAXES. Tenant shall pay directly to the
appropriate taxing authorities prior to delinquency any and all taxes and
assessments levied or assessed during the Term upon or against Tenant's
furniture, equipment, trade fixtures and any other personal property in the
Premises.
8.3 RIGHT TO CONTEST. Tenant shall not be required to pay any
Real Estate Taxes or any other taxes for which Tenant is liable hereunder
(including, without limitation, any taxes for which Tenant is required to
indemnify Landlord under Section 20.1) (including penalties and interest), so
long as (i) Tenant shall contest the same or the validity thereof by
appropriate legal proceedings in such a manner to prevent the tax sale of any
portion of the Premises and (ii) the position to be taken by Tenant pursuant to
such contest would have a realistic possibility of success if litigated. For
purposes of
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this Lease, Tenant may conclusively establish that a position to be taken in a
contest would have a realistic possibility of success if litigated by providing
to Landlord a letter from counsel stating an opinion to such effect. In the
event of any such contest, Tenant shall, within thirty (30) days after the
final determination thereof, pay and discharge the amounts determined to be due
in accordance therewith and with the provisions of this Lease, together with
any penalties, fines, interest, costs and expenses that may have accrued
thereon or that may have resulted from Tenant's contest. Tenant also shall have
a right to contest any taxes for which it is liable hereunder, but with regard
to which the position to be taken pursuant to such contest would not have a
realistic possibility of success if litigated, provided that Tenant pays such
taxes on or prior to the date upon which such taxes are asserted to be due by
the relevant governmental authority. Notwithstanding the foregoing provisions
of this Section 8.3, Tenant shall have an unconditional right to contest
(without prior payment) any taxes imposed by law upon Tenant rather than upon
Landlord. Tenant's decision to pay any taxes prior to contesting its or
another party's underlying liability therefore shall not be deemed to imply or
suggest that the position to be taken in such contest would not have a
realistic possibility of success if litigated. Landlord shall cooperate fully
with Tenant in connection with the exercise of Tenant's right of contest
contained herein, and in the event that applicable law shall require that
Landlord, rather than Tenant, pursue legal proceedings for such contest,
Landlord will initiate and pursue such contest upon Tenant's request and in
accordance with Tenant's instructions (including, without limitation, Tenant's
instructions as to the selection of legal counsel and matters of strategy or
settlement); provided, however, that Landlord shall not be subject to any
liability for the payment of any costs or expenses in connection with any such
contest or proceedings, and Tenant will indemnify and save harmless Landlord
from any such costs and expenses (including, without limitation, reasonable
attorneys' fees, costs of court and appraisal costs), reimbursing Landlord
therefor upon demand (or paying such costs and expenses directly when due, all
as directed by Landlord). Tenant shall be entitled to any refund of any taxes
and penalties or interest from any governmental authority to the extent the
refund represents monies paid to the governmental authority by Tenant or paid
by Landlord and reimbursed by Tenant.
8.4 ADDITIONAL CHARGES. All payments made by Tenant under this
Lease shall be made free and clear of, and without reduction or withholding for
or on account of, any present or future taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed pursuant to any Legal Requirement, excluding,
however, any Landlord's Taxes (all such nonexcluded taxes, levies, imposts,
deductions, charges or withholdings being hereinafter called "Additional
Charges"). Tenant shall be responsible for the payment of any such Additional
Charges; and if any such Additional Charges are required to be withheld from
any amounts payable to Landlord hereunder, then the amounts so payable to
Landlord shall be increased by an amount ("Additional Amount") necessary to
yield to Landlord (after payment of all Additional Charges) the Base Rent and
other amounts payable hereunder at the rates or in the amounts specified in
this Lease. Whenever any Additional Charges are required to be
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withheld by Tenant, such Additional Charges shall be deducted or withheld by
Tenant, and shall be paid by Tenant to the appropriate governmental authority
in accordance with applicable Legal Requirements. As promptly as possible
thereafter, Tenant shall send to Landlord for its own account a copy of an
original official receipt (or other evidence of payment) received by Tenant
showing payment thereof. If Tenant is required to pay Landlord any Additional
Amount, Landlord shall use its best efforts (consistent with its internal
policy and legal and regulatory restrictions) to change its jurisdiction if the
making of such a change would avoid the need for, or reduce to the greatest
extent possible the amount of, any such Additional Amount which may thereafter
accrue and would not, in the reasonable judgment of Landlord be otherwise
disadvantageous to Landlord. If Landlord subsequently receives a refund of any
Additional Amounts, or if such Additional Amounts result in a net benefit to
Landlord, the amount of such refund or net benefit shall be paid to Tenant
within 30 days of the receipt of such refund or net benefit; provided, however,
that the payment to Tenant shall not exceed the Additional Amount to which the
refund or net benefit relates. The agreements in this Section 8.4 shall
survive the termination of this Lease with respect to any Additional Charges
that become due during the Term.
ARTICLE 9
INSURANCE
9.1 LIABILITY INSURANCE. At all times during the Term, Tenant
shall obtain at Tenant's sole cost and expense a policy or policies of
comprehensive general liability insurance on an "occurrence" basis against
claims for "personal injury" liability, including bodily injury, death or
property damage liability. The liability insurance policy shall contain
coverage limits no less than the following: (1) Three Million Dollars
($3,000,000) per person; (2) Five Million Dollars ($5,000,000) per incident;
and (3) One Million Dollars ($1,000,000) for property damage.
9.2 BUILDERS' RISK INSURANCE. With respect to any Improvements
which may be under construction and not yet covered by insurance under the
terms of Section 9.3, Tenant shall maintain or cause to be maintained a policy
or policies of builders' risk insurance in an amount equal to the value upon
completion of the work (exclusive of land, foundation, excavation, grading,
landscaping, architectural and development fees and other items customarily
excluded from such coverage), insuring against the risks customarily insured
against under such insurance, including fire, vandalism, malicious mischief,
sprinkler leakage, lightning, and windstorm.
9.3 ALL-RISK INSURANCE. With respect to any completed
Improvements or any other improvements now or hereafter situated on the Land,
prior to the termination of the builders' risk insurance required by Section
9.2, and at all times thereafter, Tenant shall, at Tenant's sole cost and
expense, obtain and maintain, or cause to be obtained and maintained, (a) a
policy or policies of all-risk insurance covering the Improvements,
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providing coverage against loss or damage by fire, vandalism, malicious
mischief, sprinkler leakage, lightning, windstorm, and other insurable perils,
as, under good insurance practice, from time to time are insured against under
all-risk coverage for properties of similar character, age and location in an
amount or amounts not less than one hundred percent (100%) of the then actual
replacement cost (exclusive of land, foundation, excavations, grading,
landscaping, architectural and development fees and other items customarily
excluded from such coverage and without any deduction for depreciation); (b)
standard earthquake coverage, with a deductible not to exceed ten percent (10%)
of the insured amount; and (c) standard flood coverage, if the Premises are
located in a flood zone. Provided, however Tenant may elect not to obtain
earthquake insurance, in which case Tenant shall covenant to pay the cost of
repairing damage to the Improvements caused by an earthquake.
9.4 GENERAL REQUIREMENTS. The insurance required under this
Article 9 may be furnished under a "primary" policy and an "umbrella" policy or
policies. Landlord shall be named as an additional insured under Tenant's
policy of insurance required under Section 9.1; and such policies shall contain
an endorsement for cross-liability coverage. Tenant shall furnish Landlord
with certificates from Tenant's insurers with respect to the insurance required
to be carried hereunder on or before the date such insurance is required to be
carried. The certificates shall state that such insurance is in full force and
effect and that coverage will not be reduced in any amount or otherwise limited
or cancelled without thirty (30) days' prior written notice to Landlord.
Renewal certificates shall be furnished to Landlord not less than twenty (20)
days prior to the expiration of each such policy. Any blanket insurance policy
or policies that insure Tenant against the risks and for the amounts herein
specified shall be deemed to satisfy the obligation of Tenant hereunder,
provided that any such policy of blanket insurance shall specify the amount of
the total insurance allocated to the risks required to be insured hereunder and
such allocated amount meets the requirements of this Article 9. All insurance
required by this Article 9 shall be with an insurance company licensed to do
business in the State of Minnesota with a general policyholder's rating, as
rated by the most current available "Bests" Insurance Reports, and no less than
A/III and non-contributing.
9.5 WAIVER OF SUBROGATION. Notwithstanding anything to the
contrary contained herein, to the extent permitted by law and so long as any
insurance coverage maintained by Tenant is not diminished by reason thereof,
Tenant hereby (a) releases and waives any rights it may have against Landlord
and its officers, agents and employees on account of any loss or damages
occasioned to Tenant, its property or the Premises, and arising from any risk
covered by any fire and extended coverage insurance maintained by Tenant,
whether or not due to the negligence of Landlord, its agents, employees,
contractors, licensees, invitees or other persons, and (b) waives on behalf of
any insurer providing such insurance to Tenant any right of subrogation that
any such insurer may have or acquire against Landlord or such persons by virtue
of payment of any loss under
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such insurance. Tenant shall use its commercially reasonable efforts to cause
its insurance policies to contain a waiver of subrogation clauses in accordance
with the foregoing.
9.6 INDEMNITY. Tenant shall protect, defend, indemnify, hold
and save Landlord harmless from and against any and all losses, costs,
liabilities or damages (including reasonable attorneys' fees and disbursements
and court costs) arising by reason of: (i) any and all injury or death of
persons or damage to property against which Tenant is obligated to maintain
insurance for the benefit of Landlord pursuant to this Article 9; (ii) the
failure to obtain the waiver of subrogation clause required by Section 9.5
hereof where such clause could have been obtained through the exercise of
Tenant's commercially reasonable efforts; or (iii) the invalidation of such
insurance policy required to be obtained by Tenant hereunder by Tenant's
insurer; provided this subsection (iii) shall not apply to the extent Landlord
actually receives insurance for the aforesaid losses, costs, liabilities or
damages (including reasonable attorneys' fees and disbursements and court costs
but excluding costs, fees or premiums paid by Landlord in connection with such
insurance). Tenant's duty to indemnify Landlord under this Section 9.6 shall
survive the expiration or earlier termination of this Lease with respect to
events occurring during the Term.
ARTICLE 10
USE
10.1 USE.
(a) PERMITTED. Tenant may use the Premises for any
purpose permitted under the Ground Lease.
(b) ENVIRONMENTAL COMPLIANCE.
1) DEFINED TERMS. The term "Applicable
Environmental Laws" shall mean any applicable laws, regulations or ordinances
pertaining to health or the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986 or
otherwise (as amended, hereinafter called "CERCLA"), the Resource Conservation
and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Disposal Act Amendments of 1980, the Hazardous and Solid Waste
Amendments of 1984 or otherwise (as amended, hereinafter called "RCRA"), and
Minnesota Environmental Response and Liability Act, Minnesota Statutes Section
115B.01 et seq. The terms "hazardous substance" and "release" as used in this
Lease shall have the meanings specified in CERCLA, and the terms "solid waste"
and "disposal" (or "disposed") shall have the meanings specified in RCRA;
provided, in the event either CERCLA or RCRA is amended or superseded by other
laws so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment or other
laws: and, provided further, to the extent that the laws
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of the State of Minnesota establish a meaning for "hazardous substance",
"release", "solid waste", or "disposal" which is broader than that specified in
either CERCLA or RCRA, such broader meaning shall apply.
2) TENANT'S COVENANTS. Tenant will not cause or
permit the Premises to be in violation of, or do anything or permit anything to
be done which subjects Landlord, Tenant or the Premises to any remedial
obligations under or which creates a claim or cause of action against the
Landlord, the Premises or any claim or action against Tenant under, any
Applicable Environmental Laws, including, without limitation, CERCLA, RCRA, and
Minnesota Environmental Response and Liability Act, Minnesota Statutes Section
115B.01 et seq., assuming disclosure to the applicable governmental authorities
of all relevant facts, conditions and circumstances, if any, pertaining to the
Premises and Tenant will promptly notify Landlord in writing of any such
existing, pending or threatened investigation, claim or inquiry of which Tenant
has knowledge by any governmental authority in connection with any Applicable
Environmental Laws. Tenant shall obtain any permits, licenses or similar
authorizations to construct, occupy, operate or use any Improvements, fixtures
and equipment at any time located on the Premises by reason of any Applicable
Environmental Laws. Tenant will not use the Premises in a manner which will
result in the unlawful disposal or other unlawful release of any hazardous
substance or solid waste on or to the Premises and covenants and agrees to keep
or cause the Premises to be kept free of any unlawful hazardous substance,
unlawful solid waste or unlawful environmental contaminants (including, without
limitation, friable asbestos and any substance containing asbestos deemed
hazardous and unlawful by any Applicable Environmental Law) and to remove the
unlawful amounts of the same (or if removal is prohibited by law, to take
whatever action is required by law) promptly upon discovery at Tenant's sole
expense. Tenant shall promptly notify Landlord in writing of any unlawful
disposal or other unlawful release of any hazardous substance, environmental
contaminants or solid wastes on or to the Premises or the Improvements. In the
event Tenant fails to comply with or perform any of the foregoing covenants and
obligations, after thirty (30) days' prior written Notice to Tenant, Landlord
may, but shall be under no obligation to, cause the Premises to be freed from
the unlawful hazardous substance, unlawful solid waste or unlawful
environmental contaminants as required, and to the extent required, by
applicable laws (or if removal is prohibited by law, to take whatever action is
required by law) and the reasonable cost of the removal or such other action
shall be a demand obligation owing by Tenant to Landlord pursuant to this
Lease. Notwithstanding anything to the contrary in this Section 10.1(b)(2),
Landlord shall have no right to cause the removal of such materials and no
Event of Default (or default) shall be deemed to have occurred under this
Sublease so long as Tenant both: (1) is diligently and in good faith
proceeding to comply with Tenant's obligation to remove the unlawful amounts of
such materials; and (2) has the financial ability to so comply. Subject to the
foregoing, Tenant grants to Landlord and Landlord's agents and employees access
to the Premises, and the license to remove the unlawful hazardous substance,
unlawful solid waste or unlawful environmental contaminants (or if removal is
prohibited by law, to take whatever action
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is required by law); and except for Landlord's willful misconduct or gross
negligence, agrees to indemnify and save Landlord harmless from all reasonable
costs and expenses involved and from all claims (including consequential
damages) asserted or proven against Landlord by any party in connection
therewith. Upon Landlord's reasonable request for "good cause" (defined
below), at any time and from time to time during the Term, Tenant will provide
at Tenant's sole expense an inspection or audit of the Premises from an
engineering or consulting firm approved by Landlord, indicating the presence or
absence of any hazardous substance, solid waste or environmental contaminants
located on the Premises. If Tenant fails to provide same after sixty (60)
days' notice, Landlord may order same, and Tenant grants to Landlord and
Landlord's employees and agents access to the Premises and a license to
undertake any testing reasonably required to obtain such inspection or audit.
The reasonable cost of obtaining such inspection or audit and any expenses
incurred by Landlord in connection therewith, shall be a demand obligation
owing by Tenant to Landlord pursuant to this Lease. For purposes of this
Section 10.1(b)(2), "good cause" shall mean that Landlord shall have reasonable
grounds to believe that an unlawful release or unlawful disposal of hazardous
substances or solid wastes has occurred on the Premises.
(c) COMPLIANCE WITH LEGAL REQUIREMENTS. Tenant shall at
all-times comply with all material Legal Requirements applicable to the Land or
any improvements (including the Improvements) now or hereafter situated on the
Land and/or the use thereof.
10.2 CONTEST OF LEGAL REQUIREMENTS. Tenant shall have the right
at its sole cost and expense to contest the validity of any Legal Requirements
applicable to the Premises or the use thereof by appropriate proceedings
diligently conducted in good faith; and upon the request of Tenant and at
Tenant's sole cost and expense, Landlord will join and cooperate with Tenant in
such proceedings applicable to the Premises. Subject to Section 8.3, any other
provision of this Lease to the contrary notwithstanding, Tenant's right to
contest Legal Requirements must be exercised in such a manner as to avoid any
exposure of the Premises or any part thereof to foreclosure or execution sale
or exposure of Landlord to civil or criminal penalties arising from Tenant's
non-compliance with such Legal Requirements. Tenant shall defend and indemnify
Landlord against, and hold Landlord harmless from, any and all liability, loss,
cost, damage, injury or expense (including, without limitation, attorneys' fees
and costs) which Landlord may sustain or suffer by reason of Tenant's failure
or delay in complying with, or Tenant's contest of, any such Legal Requirements
(or Landlord's contest, if requested in writing by Tenant), and Tenant's duty
to indemnify Landlord under this Section 10.2 shall survive the expiration or
earlier termination of this Lease.
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ARTICLE 11
UTILITIES AND SERVICES
11.1 SERVICES TO THE PREMISES. At Tenant's sole cost and
expense, Tenant shall make its own arrangements for the provision of all
utilities and services to be provided to or consumed on the Premises,
including, without limitation, air conditioning and ventilation, service
contracts, heating, electric power, telephone, water (both domestic and fire
protection), sanitary sewer, storm drain, natural gas and janitorial services,
including for the installation, maintenance and repair of service lines and
meters to measure Tenant's consumption of such utilities.
ARTICLE 12
MAINTENANCE AND REPAIRS; SURRENDER OF THE PREMISES
12.1 TENANT OBLIGATIONS. Landlord shall have no obligation to
maintain the Premises or the Improvements. Tenant shall at all times and at
Tenant's sole cost and expense maintain the Premises and Improvements in good
repair, normal wear and tear and casualty excepted.
12.2 SURRENDER OF THE PREMISES. Upon the expiration or earlier
termination of the Term, Tenant shall surrender the Premises to Landlord in its
then "AS-IS" condition, including, without limitation, any condition resulting
from: (i) wear and tear; (ii) obsolescence and damage by fire or other
casualty, act of God or the elements (subject to the terms of Article 17);
(iii) damage that is caused by Landlord, its agents, employees or contractors
(except Construction Manager); and (iv) any improvements, alterations,
additions, repairs, replacements, or decorations in, to or of the Premises or
on the Land which are not Improvements but which Tenant may elect to remain on
the Land or the Premises. Title to all improvements, furniture, furnishings,
fixtures, trade fixtures and personal property of Tenant which have not been
funded by Landlord pursuant to the terms of Article 6 and located in or upon
the Premises or the Land, whether or not affixed to the realty, shall be and
remain in Tenant, and at any time during the Term of this Lease, the same may
be removed by Tenant, or, at Tenant's abandonment or written election,
surrendered with the Premises, in which event title to such surrendered
property shall, if Landlord so elects in Landlord's sole discretion, be deemed
transferred to Landlord. Any of such property that is not removed from the
Premises or the Improvements on or prior to the expiration or earlier
termination of this Lease shall be considered abandoned and Landlord may deal
with it as Landlord elects. If Tenant remains in possession of the Premises or
any part thereof after termination of the Term, Landlord shall have the
immediate right of re-entry and may, at its option, remove all persons and
property from the Premises and such property may be removed and stored in a
public warehouse or elsewhere at the cost of, and for the account of Tenant,
all without service of notice to resort to legal process to remove Tenant
through summary proceedings and without being
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guilty of trespass, or becoming liable for any loss or damage which may be
occasioned thereby.
ARTICLE 13
LIENS
13.1 TENANT'S RESPONSIBILITY FOR LIENS. Except for claims that
Tenant is contesting in good faith in such manner as to avoid any exposure of
the Premises or any part thereof to foreclosure or execution sale and those
liens which are created by or through Landlord which are not permitted liens
hereunder, Tenant shall promptly pay and discharge all claims for work or labor
done, supplies furnished or services rendered to the Premises, and shall keep
the Premises free and clear of all mechanics' and materialmen's liens in
connection therewith.
ARTICLE 14
ASSIGNMENT BY LANDLORD
14.1 FURTHER MORTGAGES OR ENCUMBRANCES BY LANDLORD. Except for
the SBLF Mortgage (which is hereby approved by Tenant), Landlord shall not
cause or create any mortgages, deeds of trust, encumbrances or exception to
exist with respect to the Premises at any time.
14.2 LANDLORD'S RIGHT TO SELL. Landlord may not transfer all or
any portion of its right, title and interest in the Premises; provided, however
that nothing contained in this Lease shall be deemed in any way to limit,
restrict or otherwise affect the right of Landlord at any time and from time to
time to sell or transfer all but not less than all of its right, title and
estate in the Premises and the Transaction Documents to: (1) a Landlord
Affiliate; or (2) if an Event of Default at the time of such sale or transfer,
to any Entity. Any sale or transfer by Landlord whatsoever shall by its
express terms recognize and confirm the right of possession of Tenant to the
Premises and all rights of Tenant under the Transaction Documents and Tenant's
other rights arising out of this Lease and the Transaction Documents shall not
be affected or disturbed in any way by any such sale, transfer, assignment or
conveyance (except for any disturbance resulting from a foreclosure sale
conducted pursuant to the laws of the State of Minnesota at which independent
third party bids were permitted pursuant to the SBLF Mortgage).
14.3 TRANSFER OF FUNDS AND PROPERTY. At each time Landlord
sells, assigns, transfers or conveys the entire right, title and estate of
Landlord in the Premises and in this Lease, Landlord shall turn over to the
transferee any funds or other property then held by Landlord under this Lease
and thereupon all the liabilities and obligations on the part of the Landlord
under this Lease arising after the effective date of such sale, assignment,
transfer or conveyance and assumed by the transferee shall terminate as to the
transferor and be binding upon the transferee.
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ARTICLE 15
ASSIGNMENT AND SUBLEASING
15.1 RIGHT TO ASSIGN.
(a) TENANT'S RIGHT. Provided that Tenant is not in
default under this Lease or if Tenant is in default, provided that Tenant cures
the default in connection with the assignment, Tenant shall have the right, at
any time and from time to time during the Term, to assign all or any portion of
its right, title and estate in the Premises and in this Lease without approval
by Landlord. Any such assignee, immediate or remote, shall have the same right
of assignment. Any such assignment shall be evidenced by a written instrument,
properly executed and acknowledged by all parties thereto and, at Tenant's
election, duly recorded in the Official Records, wherein and whereby the
assignee assumes all of the obligations of Tenant under this Lease.
Notwithstanding any such assignment and assumption or any sublease permitted
under Section 15.2 hereof, Tenant shall remain primarily liable for all
obligations and liabilities on the part of Tenant theretofore or thereafter
arising under this Lease.
(b) NOTICE. Tenant shall, promptly after execution of
each assignment, notify Landlord of the name and mailing address of the
assignee and shall, on demand, permit Landlord to examine and copy the
assignment agreement.
15.2 RIGHT TO SUBLET.
(a) TENANT'S RIGHT. Tenant shall have the right, at any
time and from time to time during the Term, to sublet all or any portion of the
Premises and to extend, modify or renew any sublease without the approval of
Landlord.
(b) NOTICE. Tenant shall, promptly after execution of
each sublease, notify Landlord of the name and mailing address of the subtenant
and shall, on demand, permit Landlord to examine and copy the sublease.
(c) NON-DISTURBANCE AGREEMENT. Upon Tenant's request,
Landlord shall enter into a "landlord agreement" with any subtenant of Tenant.
Such agreement shall provide that Landlord shall recognize the sublease and not
disturb the subtenant's possession thereunder so long as such subtenant shall
not be in default under its sublease. Tenant shall immediately reimburse
Landlord on demand for all reasonable out-of-pocket costs and expenses incurred
by Landlord in complying with Landlord's obligations under this Section
15.2(c).
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15.3 MORTGAGE BY TENANT. Tenant shall not have the right to
mortgage, pledge or otherwise encumber all or any portion of the right, title
and estate of Tenant in the Premises or in this Lease, without the consent of
Landlord.
ARTICLE 16
EMINENT DOMAIN
16.1 TOTAL OR SUBSTANTIAL TAKING. If title or access is taken
for any public or quasi-public use, or under any statute or by right of
condemnation or eminent domain, or by sale in lieu thereof (a "Taking") with
respect to all of the Premises, or if title to so much of the Premises or
access thereto is Taken, or if the Premises or access thereto is damaged,
blocked or impaired by the Taking, so that, in Tenant's reasonable discretion,
the Premises or access thereto, even after a reasonable amount of
reconstruction thereof, will no longer be suitable for construction of
Improvements for the conduct of Tenant's (and/or Tenant's subtenants')
business, then in any such event, this Lease shall terminate on the date of
such Taking.
16.2 PARTIAL TAKING. If any part of the Premises, or access
thereto, shall be Taken, and the Premises or the remaining part thereof and
access thereto will be, in Tenant's reasonable discretion, suitable for
construction of Improvements for the conduct of Tenant's (and/or Tenant's
subtenants') business in a manner consistent with the conduct of such business
prior to such Taking, all of the terms, covenants and conditions of this Lease
shall continue, except that Base Rent shall be adjusted to reflect the
decreased Lease Investment Balance remaining after application thereto of the
award made to Landlord for such Taking.
16.3 TEMPORARY TAKING. If the whole or any part of the Premises
is Taken for temporary use or occupancy, this Lease shall not terminate by
reason thereof and Tenant shall continue to pay, in the manner and at the times
herein specified, the full amount of the Base Rent payable by Tenant hereunder,
and, except only to the extent that Tenant may be prevented from so doing by
reason of such Taking, Tenant shall continue to perform and observe all of the
other terms, covenants and conditions hereof on the part of Tenant to be
performed and observed, as though the Taking had not occurred. In the event of
any such temporary Taking, Tenant shall be entitled to receive the entire
amount of the award made for the Taking, whether paid by way of damages, rent
or otherwise. If the temporary Taking is for a term in excess of thirty (30)
days, then the Taking shall be treated as a permanent Taking and be governed by
Sections 16.1 or 16.2, as applicable.
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16.4 DAMAGES. The compensation attributable to the taking of the
Premises (in each case the compensation or value shall be determined as of the
date of the Taking) awarded or paid upon any Taking (other than a temporary
Taking, which shall be governed by Section 16.3), whether awarded to Landlord,
Tenant, or both of them, shall be held by Landlord to be applied against the
Lease Investment Balance, including all accrued and unpaid Base Rent and
Additional Rent. Any compensation in excess of the Lease Investment Balance
including any Additional Rent then due and any additional sums payable
hereunder shall be the property of Tenant.
16.5 NOTICE AND EXECUTION. Immediately upon service of process
upon Landlord or Tenant in connection with any Taking relating to the Premises
or any portion thereof or access thereto, each party shall give the other
Notice thereof. Each party agrees to execute and deliver to the other all
instruments that may be required to effectuate the provisions of this Article
16. Tenant reserves the right to appear in and to contest any proceedings in
connection with any such Taking. Tenant shall immediately reimburse Landlord
on demand for all reasonable out-of-pocket costs and expenses incurred by
Landlord in complying with Landlord's obligations under this Section 16.5.
ARTICLE 17
DAMAGE OR DESTRUCTION
17.1 CASUALTY. If any of the improvements now or hereafter
situated on the Land (including the Improvements) are damaged or destroyed by
fire or other casualty, except as provided to the contrary in Section 17.2,
this Lease shall continue in full force and effect without any abatement or
reduction in Base Rent, and Tenant, at Tenant's election, shall either (a)
restore such improvements substantially to their condition prior to the damage
or destruction, or such other condition as Tenant shall elect, subject to
Landlord's approval in accordance with the terms of Section 12 of the
Construction Management Agreement, which shall not be unreasonably withheld, or
(b) not restore such improvements, but perform, or cause to be performed, at
Tenant's sole cost and expense, any work or service required by any Legal
Requirement for the protection of persons or property from any risk, or for the
abatement of any nuisance, created by or arising from the casualty or the
damage or destruction caused thereby.
17.2 TERMINATION OF LEASE. In the case of: (a) any damage or
casualty of the Building, which in the good faith judgment of Tenant's Board of
Directors would render the Building either unsuitable or uneconomic for
restoration or continued use by Tenant; (b) the damage or destruction of all or
substantially all (as determined in good faith by Tenant's Board of Directors)
of the Building; or (c) the damage or destruction of the Building where
restoration cannot (as determined in good faith by Tenant's Board of Directors)
reasonably be completed either within 365 days or prior to the expiration of
the Term, then Tenant may elect to terminate this Lease in which case Tenant
shall perform its obligations under the Purchase Agreement.
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17.3 INSURANCE PROCEEDS. In the event of any fire or other
casualty, the proceeds of any insurance policies maintained by Tenant pursuant
to Section 9.2 or 9.3 shall be held, applied and dealt with as follows:
(a) Any proceeds (per occurrence) of such policies
attributable to the Improvements below the amount of Two Hundred Fifty Thousand
Dollars ($250,000) or any proceeds directly attributable to improvements
constructed on the Property by Tenant solely with its own funds shall be paid
directly to Tenant and applied and used as Tenant may direct in its sole
discretion for any construction, restoration or reconstruction purposes in
connection with any improvements located on the Land which were destroyed,
damaged or affected by such casualty. Any portion of such proceeds which
Tenant does not want to use (subject to the terms of Section 17.3(c)) for any
construction, restoration or reconstruction shall be paid as follows (the order
of payment as set forth below shall be the "Distribution Formula"): (1) to
Landlord (but only to the extent of the then-existing Lease Investment
Balance); and (2) with any remaining excess to be paid to Tenant.
(b) Any proceeds (per occurrence) of such policies
attributable to the Improvements greater than Two Hundred Fifty Thousand
Dollars ($250,000) shall be paid to an escrow agent ("Escrow Agent") mutually
agreeable to the parties (but such escrow agent shall not be a party which is
related to or affiliated with either of the parties to this Lease, but shall be
bound by the terms of this Article 17). Such proceeds shall be invested by the
Escrow Agent as Tenant may direct (provided, however, that such proceeds may
not be invested in any securities or any debt obligations issued by Tenant or
Guarantor). Such proceeds shall be paid by the Escrow Agent to Tenant (or to
third parties as Tenant may direct), as Tenant may direct from time to time as
restoration, construction or rebuilding progresses to pay the cost of any
restoration, construction or rebuilding which Tenant elects to take place on
the Land or any Improvements located upon the Land, so long as Landlord
reasonably determines that the following conditions are satisfied at the time
of such request for payment by Tenant: (i) the sum requested has been paid or
is then due and payable or will become due and payable within thirty (30) days;
(ii) Tenant has the financial ability (taking into account the insurance
proceeds held by the Escrow Agent) to complete the restoration, construction or
rebuilding which Tenant has elected to perform; (iii) Landlord has approved the
plans, if any, relating to the restoration of Improvements (which approval
shall not be unreasonably withheld or delayed); and (iv) in Landlord's
reasonable judgment, such restoration work which Tenant desires to perform in
connection with the Improvements can be completed prior to the expiration of
the Term. Landlord shall promptly upon request instruct the Escrow Agent to
make the payments requested by Tenant unless one of the four (4) conditions
described above is not satisfied at the time of such request. Any excess
insurance proceeds existing after either Tenant's completion of the
restoration, construction or rebuilding which Tenant elects to perform or
Tenant's failure to comply with the funding condition described in subitems
(i), (ii) and (iv) immediately above in this Section 17.3(b), shall be paid
pursuant to the Distribution Formula.
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(c) If either: (1) Tenant has not delivered written
notice to Landlord within ninety (90) days after reaching final written
settlement with all insurance companies regarding the amount of proceeds to be
paid for the casualty in question, pursuant to which notice Tenant elects to
either exercise some or all of its termination rights under Section 17.2 and/or
to fully or partially repair or restore pursuant to Section 17.1; or (2)
Landlord reasonably believes that Tenant has abandoned reconstruction or
restoration work which Tenant may have elected to perform (and Tenant shall
have failed to diligently recommence reconstruction or restoration work which
Tenant is then able to perform within thirty (30) days after Tenant's receipt
from Landlord of a Notice of Landlord's belief of Tenant's abandonment of the
reconstruction or restoration work); then, in either case, the proceeds
attributable to the Improvements shall be paid pursuant to the Distribution
Formula.
(d) Any insurance proceeds paid to Landlord under this
Article 17 shall reduce the Lease Investment Balance by a like amount.
ARTICLE 18
DEFAULT
18.1 DEFAULT. Each of the following events shall constitute an
event of default ("Event of Default") by Tenant:
(a) FAILURE TO PAY BASE RENT. Tenant's failure to pay
any Base Rent within ten (10) days after the due date.
(b) FAILURE TO PAY ADDITIONAL RENT. Tenant's failure to
pay any Additional Rent which is due to Landlord within ten (10) days after the
due date under this Lease (which due date shall be the date of Tenant's receipt
of Notice from Landlord that such Additional Rent is due).
(c) FAILURE TO CARRY INSURANCE. Tenant's failure to
carry any policy of insurance required by Article 9.
(d) INSOLVENCY. Subject to Section 18.2, the occurrence
of: (i) an assignment by Tenant or Guarantor for the benefit of creditors
generally; or (ii) the filing of a voluntary or involuntary petition by or
against Tenant or Guarantor under any present or future applicable federal,
state or other statute or law having for its purpose the adjudication of Tenant
or Guarantor as a bankrupt; (iii) the appointment of a receiver, liquidator or
trustee for all or a substantial portion of the Premises by reason of the
insolvency or alleged insolvency of Tenant or Guarantor; or (iv) the taking of
possession by any department of city, county, state or federal government, or
any officer thereof duly authorized, of all or a substantial portion of the
Premises by reason of the insolvency or alleged insolvency of Tenant or
Guarantor; and Tenant's or Guarantor's failure to timely
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give any Notice it is permitted to give pursuant to Section 18.2 (or, in the
event Tenant or Guarantor gives timely Notice and pursues a contest under
Section 18.2, Tenant's or Guarantor's failure to finally prevail in the
contest).
(e) FAILURE TO REPLENISH UNDER PLEDGE AGREEMENT. Tenant's
failure to replenish the collateral under the Pledge Agreement (as defined in
Section 2.31) after the notice and cure periods provided in the Pledge
Agreement.
(f) BREACH OF CONSTRUCTION MANAGEMENT AGREEMENT. A
material breach by Tenant of its obligations under the Construction Management
Agreement.
(g) BREACH OF FINANCIAL COVENANTS. Guarantor's failure
to comply with the financial covenants set forth in paragraph 7 of the
Agreement of Guaranty executed by Guarantor of even date herewith or
Guarantor's failure to comply with any other of the terms and conditions of
such Agreement of Guaranty.
(h) BREACH OF PURCHASE AGREEMENT. A breach by Tenant of
any of its obligations under the Purchase Agreement.
(I) NON MONETARY DEFAULT. Tenant shall fail to cause any
representation or warranty of Tenant contained herein that is false or
misleading in any material respect when made, to be made true and not
misleading, or Tenant shall fail to comply with any term, provision or covenant
of this Lease (other than as described in the other clauses of this Section
18.1), and in either case shall not cure such failure prior to the earlier of
(A) thirty (30) days after written notice thereof is sent to Tenant or (B) the
date any writ or order is issued for the levy or sale of any property owned by
Landlord (including the leased Premises) because of such failure or any
criminal action is threatened or instituted against Landlord or any of its
directors, officers or employees because of such failure; provided, however,
that so long as no writ or order is issued and no such criminal action is
threatened or instituted, if such failure is susceptible of cure but cannot
with reasonable diligence be cured within such thirty day period, and if Tenant
shall promptly have commenced to cure the same and shall thereafter prosecute
the curing thereof with reasonable diligence, the period within which such
failure may be cured shall be extended for such further period (not to exceed
an additional sixty days beyond the initial thirty days cure period) as shall
be reasonably necessary for the curing thereof.
18.2 CONTEST BY TENANT. If upon the filing of any involuntary
petition of the type described in Section 18.1(d) or upon the appointment of a
receiver, other than a receiver appointed in any voluntary proceeding referred
to in Section 18.1(d), or the taking of possession of all or a substantial
portion of the Premises by any department of the city, county, state or federal
government, or any officer thereof duly authorized, by reason of the alleged
insolvency of Tenant without the consent or over the objection of Tenant,
should Tenant desire to contest the same in good faith, Tenant shall, within
ninety (90)
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days after the filing of the petition or after the appointment or taking of
possession, give Notice to Landlord that Tenant proposes to make the contest,
and the same shall not constitute an Event of Default so long as Tenant shall
prosecute the proceedings with due diligence and no part of the Premises shall
be exposed to sale by reason of the continuance of the contest.
18.3 LANDLORD'S REMEDIES. Upon the occurrence and during the
continuation of an Event of Default, Landlord may elect to:
(a) CONTINUE LEASE. In connection with an Event of
Default, Landlord shall have the right to enforce, by suit or otherwise, all
other covenants and conditions hereof to be performed or complied with by
Tenant and to exercise all other remedies permitted by the law of the State of
Minnesota or any amendments thereof. Upon application by Landlord, a receiver
may be appointed to take possession of the Premises and exercise all rights
granted to Landlord as set forth in this Section 18.3; and/or
(b) TERMINATE LEASE. In connection with an Event of
Default, Landlord may terminate this Lease, by giving Tenant Notice thereof, at
any time after the occurrence of such Event of Default and whether or not
Landlord has also exercised any right under Section 18.3(c). In such event
Tenant shall be obligated to perform its obligations under the Purchase
Agreement. Landlord shall also have its other remedies at law or under any
other of the Transaction Documents (including without limitation its rights
under the SBLF Mortgage, Pledge Agreement, Purchase Agreement and Chapter 566
of Minnesota Statutes), provided, however, that Tenant's obligations under the
Purchase Agreement shall survive any termination of this Lease up through the
date of foreclosure sale under the SBLF Mortgage; and/or
(C) TERMINATE TENANT'S RIGHT TO POSSESSION. In connection
with an Event of Default, Landlord shall have the right to terminate Tenant's
right to possession only without cancelling, terminating or releasing Tenant's
continued liability for all amounts due and obligations of Tenant hereunder.
Notwithstanding the fact that initially Landlord elects to terminate Tenant's
right to possession only, Landlord shall have the continuing right to cancel
and terminate this Lease by giving three (3) days written notice to Tenant of
such further election, and shall have the right to pursue any remedy at law or
in equity that may be available to Landlord. In the event Landlord elects to
terminate Tenant's right to possession only, Landlord may, at Landlord's
option, enter in the Premises and take and hold possession thereof, without
such entry into possession terminating this Lease, constituting an acceptance
of surrender, or releasing Tenant in whole or in part from Tenant's obligation
to pay all amounts hereunder for the full stated Term. Upon such reentry,
Landlord may remove all persons and property from the Premises and such
property may be removed and stored in a public warehouse or elsewhere at the
cost of and for the account of Tenant, without becoming liable for any loss or
damage which may be occasioned thereby. Such reentry may be conducted in any
lawful manner. Whether or
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not Landlord re-enters the Premises, upon election by Landlord to terminate
Tenant's right to possession, Tenant shall be liable to Landlord for all other
covenants and conditions hereof to be performed by Tenant.
18.4 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term, covenant or condition of this Lease or to
exercise any right or remedy consequent upon a breach thereof and no acceptance
of full or partial Rent during the continuance of any breach shall constitute a
waiver of any such breach or of the term, covenant, or condition. No term,
covenant or condition of this Lease to be performed or complied with by Tenant
or Landlord, and no breach thereof, shall be waived, terminated, altered or
modified except by a written instrument executed by Landlord and Tenant. No
waiver of any breach shall affect or alter this Lease, but each and every term,
covenant, and condition of this Lease shall continue in full force and effect
with respect to any other then existing subsequent breach thereof.
18.5 EFFECT OF ASSIGNMENT. Notwithstanding an Entity's prior
assignment or transfer of its interest as Tenant under this Lease, so long as
Landlord has been given Notice of such assignment pursuant to Sections 15.1 and
20.3, Landlord shall give such Entity copies of all Notices required by this
Article 18 in connection with any Event of Default, and such Entity shall have
the period granted hereunder to Tenant to cure such Event of Default, unless
such Entity shall have been released from all obligations arising under this
Lease. Landlord may not assert any rights against such Entity in the absence of
such Notice and opportunity to cure, so long as Landlord has been given Notice
of such assignment pursuant to Sections 15.1 and 19.3.
18.6 LANDLORD CURE RIGHT. If Tenant fails to perform any
covenant or agreement to be performed by Tenant under this Lease, and if the
failure or default continues for thirty (30) days after Notice to Tenant
(except for emergencies and except for payment of any lien or encumbrance
threatening the imminent sale of the Premises or any portion thereof, in which
case payment or cure may be made as soon as necessary to minimize the damage to
person or property caused by such emergency or to prevent any such sale),
Landlord may, but shall have no obligation to, pay the same and cure such
default on behalf of and at the expense of Tenant and do all reasonably
necessary work and make all reasonably necessary payments in connection
therewith including, but not limited to, the payment of reasonable attorneys'
fees and disbursements incurred by Landlord. Notwithstanding the foregoing,
Landlord shall have no right to cure any such failure to perform by Tenant so
long as Tenant: (1) is diligently and in good faith attempting to cure such
matter and prosecuting such cure to completion; (2) has the financial ability
to so comply; and (3) commenced cure of such matter within thirty (30) days
after Tenant's receipt of Notice thereof from Landlord. Failure by Tenant to
comply with the above shall allow Landlord to commence in a reasonable and
customary manner and in good faith to attempt to cure such matter. Upon
demand, Tenant shall reimburse
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Landlord for the reasonable amount so paid, together with interest at the
Default Rate from the date incurred until the date repaid.
ARTICLE 19
MISCELLANEOUS
19.1 RELATIONSHIP. Neither this Lease nor any agreements or
transactions contemplated hereby shall in any respect be interpreted, deemed or
construed as constituting Landlord and Tenant as partners or joint venturers,
one with the other, or as creating any partnership, joint venture, association
or, except as set forth in Section 19.2 below, any other relationship other
than that of landlord and tenant: and, except as set forth in Section 19.2
below, both Landlord and Tenant agree not to make any contrary assertion,
contention, claim or counterclaim in any action, suit or other legal proceeding
involving either Landlord or Tenant or the subject matter of this Lease.
19.2 FORM OF TRANSACTION: CERTAIN TAX MATTERS.
(a) Landlord and Tenant hereby agree and declare that the
transactions contemplated by this Lease taken together with the Purchase
Agreement are intended to constitute, both as to matters of form and substance:
(i) an operating lease for financial
accounting purposes, and
(ii) a financing arrangement (and not a "true
lease") for purposes of Federal, state and local income, property or other
forms of tax.
Accordingly, and notwithstanding any other provision of this Lease to the
contrary, Landlord and Tenant agree and declare that (A) the transactions
contemplated hereby are intended to have a dual, rather than single, form and
(B) all references in this Lease to the "Lease" of the Premises which fail to
reference such dual form do so as a matter of convenience only and do not
reflect the intent of Landlord and Tenant as to the true form of such
arrangements.
(b) Landlord and Tenant agree that, in accordance with
their intentions and the substance of the transactions contemplated hereby,
Tenant (and not Landlord) shall be treated as the owner of the Premises for
Federal, state, local income and property tax purposes and this Lease shall be
treated as a financing arrangement. Tenant shall be entitled to take any
deduction, credit allowance or other reporting, filing or other tax position
consistent with such characterizations. Landlord shall not file any Federal,
state or local income tax returns, reports or other statements in a manner
which is inconsistent with the foregoing provisions of this Section 19.2.
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(c) Tenant acknowledges that it has retained accounting, tax
and legal advisors to assist it in structuring this Lease and Tenant is not
relying on any representations of Landlord regarding the proper treatment of
this transaction for accounting, income tax or any other Purpose.
19.3 NOTICES. Each Notice shall be in writing and shall be sent
by personal delivery, overnight courier (charges prepaid or billed to the
sender) or by the deposit of such with the United States Postal Service, or any
official successor thereto, designated as registered or certified mail, return
receipt requested, bearing adequate postage and in each case addressed as
provided in the Basic Lease Provisions. Each Notice shall be effective upon
being personally delivered or actually received. The time period in which a
response to any such Notice must be given or any action taken with respect
thereto shall commence to run from the date of personal delivery or receipt of
the Notice by the addressee thereof, as reflected on the return receipt of the
Notice. Rejection or other refusal to accept shall be deemed to be receipt of
the Notice sent. By giving to the other party at least thirty (30) days' prior
Notice thereof, either party to this Lease shall have the right from time to
time during the Term of this Lease to change the address(es) thereof and to
specify as the address(es) thereof any other address(es) within the continental
United States of America.
19.4 SEVERABILITY OF PROVISIONS. If any term, covenant or
condition of this Lease shall be invalid or unenforceable, the remainder of
this Lease, or the application of such term, covenant or condition to Entities
or circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby.
19.5 ENTIRE AGREEMENT: AMENDMENT. This Lease and the documents
referred to herein constitute the entire agreement of Landlord and Tenant with
respect to the subject matter hereof. Neither this Lease nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
19.6 SUCCESSORS AND ASSIGNS. Subject to Articles 14 and 15, this
Lease shall inure to the benefit of and be binding upon Landlord and Tenant and
their respective heirs, executors, legal representatives, successors and
assigns. Whenever in this Lease a reference to any Entity is made, such
reference shall be deemed to include a reference to the heirs, executors, legal
representatives, successors and assigns of such Entity.
19.7 COMMISSIONS. Landlord and Tenant each represent and warrant
that except for Lund Financial Corporation, neither has dealt with any broker
in connection with this transaction and that no real estate broker, salesperson
or finder has the right to claim a real estate brokerage, salesperson's
commission or finder's fee by reason of contact between the parties brought
about by such broker, salesperson or finder. Each party shall hold and save
the other harmless of and from any and all loss, cost, damage,
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injury or expense arising out of or in any way related to claims for real
estate broker's or salesperson's commissions or fees based upon allegations
made by the claimant that it is entitled to such a fee from the indemnified
party arising out of contact with the indemnifying party or alleged
introductions of the indemnifying party to the indemnified party.
19.8 ATTORNEYS' FEES. In the event any action is brought by
Landlord or Tenant against the other to enforce or for the breach of any of the
terms, covenants or conditions contained in this Lease, the prevailing party
shall be entitled to recover reasonable attorneys' fees to be fixed by the
court, together with costs of suit therein incurred. Tenant shall pay the
reasonable attorneys' fees incurred by Landlord for the review and negotiation
of this Lease.
19.9 GOVERNING LAW. This Lease and the obligations of the
parties hereunder shall be governed by and interpreted, construed and enforced
in accordance with the laws of the State of Minnesota.
19.10 COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall comprise but a single instrument.
19.11 TIME IS OF THE ESSENCE. Time is of the essence of this
Lease, and of each provision hereof.
19.12 NO THIRD PARTY BENEFICIARIES. This Lease is entered into by
Landlord and Tenant for the sole benefit of Landlord and Tenant. There are no
third party beneficiaries to this Lease.
19.13 LIMITATIONS ON RECOURSE. The obligations of Tenant and
Landlord under this Lease shall be without recourse to any partner, officer,
trustee, beneficiary, shareholder, director or employee of Tenant or Landlord.
Except for the gross negligence or willful misconduct of Landlord, or for
breach of Landlord's obligation to fund pursuant to Article 6 above, Landlord's
liability to Tenant for any default by Landlord under this Lease: (1) shall be
limited to Landlord's equity in the Premises; and (2) shall extend to any
actual damages of Tenant, but shall not extend to any foreseeable and
unforeseeable consequential damages.
19.14 ESTOPPEL CERTIFICATES. Within thirty (30) days after
request therefor by either party, the non-requesting party shall deliver, in
recordable form, a certificate to any proposed mortgagee, purchaser, sublessee
or assignee and to the requesting party, certifying (if such be the case) that
this Lease is in full force and effect, the date of Tenant's most recent
payment of Rent, that, to the best of its knowledge, the non-requesting party
has no defenses or offsets outstanding, or stating those claimed, and
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any other information reasonably requested. Failure to deliver said statement
in time shall be conclusive upon the non-requesting party that: (a) this Lease
is in full force and effect, without modification except as may be represented
by the requesting party; (b) there are no uncured defaults in the requesting
party's performance and the non-requesting party has no right of offset,
counterclaim or deduction against the non-requesting party's obligations
hereunder; (c) no more than one month's Base Rent has been paid in advance; and
(d) any other matters reasonably requested in such certificate.
19.15 COLLATERAL. The parties acknowledge that Tenant has pledged
certain collateral ("Collateral") to Landlord to secure Tenant's obligations
pursuant to the Pledge Agreement. If Landlord applies any of the Collateral to
satisfy an obligation hereunder, such application shall be deemed to reduce the
Lease Investment Balance under this Lease on a dollar-for-dollar basis. Tenant
shall have no claims, rights or causes of action against Landlord arising from
any application of the Collateral in accordance with the Pledge Agreement to
satisfy any obligation under this Lease.
19.16 AS-IS LEASE. Landlord makes no representations or
warranties concerning the condition, suitability or any other matters relating
to the Premises, and Tenant hereby acknowledges that Tenant leases the Premises
from Landlord on an "as is" basis.
19.17 NET LEASE. Except for Landlord's Taxes or as otherwise
provided in this Lease, Tenant agrees that this Lease is an absolute net Lease,
and the Base Rent called for hereunder shall be paid as required net of all
expenses associated with the Premises, including without limitation, Real
Estate Taxes and insurance premiums for the insurance required to be carried
hereunder, and all other reasonable and customary costs and expenses incurred
by Landlord in connection with the Premises or this Lease, all of which shall
be paid or reimbursed by Tenant unless otherwise specifically provided herein.
Tenant agrees to reimburse Landlord, within five (5) business days following
receipt of any written demand therefor, for all reasonable and customary fees,
late charges, title endorsements, custodian fees related to the Collateral and
other costs and expenses charged to Landlord which accrue during any period
unless such expenses are capitalized and added to the Lease Investment Balance.
19.18 REPRESENTATIONS AND WARRANTIES. Tenant and Landlord each
hereby represents and warrants to the other that: (i) such party has the full
right and authority to enter into this Lease, consummate the sale, transfers
and assignments contemplated herein and otherwise perform its obligations under
this Lease; (ii) the person or persons signatory to this Lease and any document
executed pursuant hereto on behalf of such party have full power and authority
to bind such party; and (iii) the execution and delivery of this Lease and the
performance of such party's obligations hereunder do not and shall not result
in the violation of its organizational documents or any material contract or
agreement to which such party may be a party.
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19.19 TENANT'S WAVIER OF DEMAND FOR POSSESSION. Tenant waives any
demand for possession of the Premises and any demand for payment of Base Rent
and notice of intent to re-enter the Premises, or of intent to terminate this
Lease, and waives any and every other notice or demand prescribed by any
applicable statutes or laws.
19.20 FINANCIAL REPORTING. Tenant shall provide to Landlord: (1)
annually, within one ninety (90) days after the end of each of Tenant's fiscal
years during the Term, an annual financial statement of Tenant which may be
unaudited; and (2) quarterly, within forty-five (45) days after the end of each
of Tenant's fiscal quarters during the Term, quarterly financial statements of
Tenant which may be unaudited.
ARTICLE 20
INDEMNIFICATION
20.1 TAX INDEMNITY. Notwithstanding anything in Article 8 to the
contrary, Tenant shall protect and defend Landlord from and against all
criminal prosecution regarding and shall indemnify and hold Landlord harmless
from and against any and all loses, costs, liabilities or damages (including
reasonable attorneys' fees and disbursements and court costs) arising by reason
of:
(a) Any and all U.S. Federal, state or local income taxes
imposed upon Landlord in consequence of Landlord being treated as the owner or
lessor of the Premises (or any part thereof) for such tax purposes; provided
Landlord has fully complied with Section 19.2;
(b) Any and all taxes imposed upon Tenant (except to the
extent of Landlord's Taxes or to the extent that such taxes are imposed upon
Tenant as a result of Landlord's failure to comply with its obligations under
this Lease);
(c) Any and all taxes required to be withheld from payments
made by Tenant to a third party not related to or affiliated with Landlord;
(d) Any and all Real Estate Taxes;
(e) Any and all taxes other than Landlord's Taxes owed by
Landlord as a result of payment made by Tenant to Landlord pursuant to Tenant's
indemnity obligations under this Section 20.1; and
(f) Any and all costs, liabilities or damages (including
reasonable attorneys' fees) incurred by Landlord in obtaining indemnification
payments from Tenant under the provisions of this Section 20.1.
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Tenant's obligation to reimburse or indemnify Landlord for any taxes,
governmental fees, penalties, interest or other supplemental tax charges under
this Lease shall be reduced by the value of any related or offsetting tax
benefits derived or realized by Landlord. Tenant's duty to indemnify Landlord
under this Section 20.1 shall apply only to taxes arising during the Term
(whether or not due and payable at the conclusion of the Term), but shall
otherwise survive the expiration or earlier termination of this Lease.
20.2 ENVIRONMENTAL INDEMNITY. Tenant agrees to indemnify and
hold Landlord harmless from and against, and to reimburse Landlord with respect
to, any and all claims, demands, causes of action, losses, damages,
liabilities, costs and expenses (including attorneys' fees and court costs),
fines and/or penalties of any and every kind or character, known or unknown,
fixed or contingent, asserted or potentially asserted against or incurred by
Landlord at any time and from time to time by reason of, in connection with or
arising out of (A) the failure of Tenant to perform any obligation herein
required to be performed by Tenant regarding Applicable Environmental Laws, (B)
any violation of any Applicable Environmental Law by Tenant or with respect to
the Premises or any disposal or other release by Tenant or with respect to the
Premises of any hazardous substance, environmental contaminants or solid waste
on or to the Premises, whether or not resulting in a violation of any
Applicable Environmental Law, (C) any act, omission, event or circumstance by
Tenant or with respect to the Premises which constitutes or has constituted
violation of any Applicable Environmental Law with respect to the Premises,
regardless of whether the act, omission, event or circumstance constituted a
violation of any Applicable Environmental Law at the time of its existence or
occurrence, and (D) except to the extent of Landlord's gross negligence or
willful misconduct, any and all claims or proceedings (whether brought by
private party or governmental agencies) for bodily injury, property damage,
abatement or remediation, environmental damage or impairment or any other
injury or damage resulting from or relating to any hazardous or toxic substance
or contaminated material located upon or migrating into, from or through the
Premises or the Improvements (whether or not the release of such materials was
caused by Tenant, a subtenant, a prior owner of the Premises or any other
Entity) which Landlord may incur. Tenant's duty to indemnify Landlord under
this Section 20.2 shall survive the expiration or earlier termination of the
Lease with respect to events occurring during or prior to the Term or after the
Term while Landlord has record title to and Tenant is occupying the Premises,
but shall not apply to an event or circumstance first occurring after the date
the Premises is sold by non-judicial foreclosure or the date a deed in lieu of
foreclosure is recorded.
20.3 CONSTRUCTION INDEMNIFICATION. Tenant will defend, protect,
indemnify and save harmless Landlord from and against all liabilities,
obligations, claims, damages, causes of action, costs and expenses, imposed
upon or incurred by Landlord by reason of the occurrence or existence of any of
the following during the Term, except to the extent caused by the willful
misconduct, gross negligence, or willful breach of contract of
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Landlord or its agents: (1) any accident, injury to or death of persons or
loss of or damage to property occurring on or about the Premises or
Improvements; (2) performance of any labor or services or the furnishing of any
materials or other property in respect of the Premises or the Improvements; (3)
the negligence or willful misconduct on the part of Tenant or any of its
agents, invitees, employees or contractors or any other persons entering onto
the Premises or the Improvements at the request, behest or with the permission
of Tenant; (4) the use or occupancy of the Improvements; (5) the use of the
Land; or (6) any breach by the "Owner" under the contracts entered into by
Tenant as Landlord's agent pursuant to the terms of the Construction Management
Agreement if such breach is caused by Tenant's actions or omissions or because
of Tenant's failure to discharge its duties under the Construction Management
Agreement. Tenant's duty to indemnify Landlord under this Section 20.3 shall
survive the expiration or earlier termination of this Lease with respect to
events occurring during the Term or after the Term while Landlord has record
title to and Tenant is occupying the Premises.
20.4 GENERAL INDEMNITY. Except to the extent of Landlord's gross
negligence or willful misconduct, Tenant shall defend, indemnify, and hold
Landlord harmless from and against any and all losses, costs, expenses,
liabilities, claims, causes of action and damages of all kinds that may result
to Landlord, including reasonable attorneys' fees and disbursements incurred by
Landlord, arising because of any failure by Tenant to perform any of its
obligations under this Lease. Tenant's duty to indemnify Landlord under this
Lease shall survive the expiration or earlier termination of this Lease.
ARTICLE 21
COVENANTS OF LANDLORD
21.1 TITLE. In the event Tenant so requests in writing (and so
long as either Tenant agrees to indemnify Landlord to Landlord's satisfaction
from any liabilities or obligations in connection therewith, or Landlord does
not incur any liabilities or obligations in connection therewith), Landlord
shall execute all documents, instruments and agreements reasonably requested by
Tenant in order to accomplish any of the following in the manner reasonably
requested by Tenant and within the time parameters reasonably requested by
Tenant: (1) remove exceptions to title to or affecting the Premises; (2)
create exceptions to title (including, without limitation, easements and rights
of way) to or affecting the Premises; or (3) modify any then-existing exception
to title. Tenant shall promptly reimburse Landlord for, or at Landlord's
request, pay directly in advance, all reasonable costs, expenses and other
amounts incurred or required to be expended by Landlord in order to comply with
Tenant's requests made in accordance with the preceding sentence, and the
failure of Tenant to reimburse or pay any such amounts shall result in the
suspension of Landlord's obligations under such sentence with respect to that
particular request until the amounts required to be paid by Tenant under this
sentence have been paid. Landlord acknowledges that it is critical to Tenant's
ability to construct
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improvements on the Premises to have the ability and flexibility to accomplish
the foregoing, and that the parties therefore agree that Landlord shall not be
entitled to withhold Landlord's consent to any of the foregoing requests by
Tenant, except as set forth in the preceding sentence.
21.2 LAND USE. Except where requested by Tenant pursuant to this
Section 21.2, Landlord shall not cause or give its written consent to any land
use or zoning change affecting the Premises or any changes of street grade. In
the event Tenant so requests in writing (and so long as either Tenant agrees to
indemnify Landlord from any liabilities or obligations in connection therewith,
or Landlord does not incur any liabilities or obligations in connection
therewith), Landlord shall execute all documents, instruments and agreements
reasonably requested by Tenant in order to accomplish any of the following in
the manner reasonably requested by Tenant and within the time parameters
reasonably requested by Tenant: (1) cause a change in any land use restriction
or law affecting the Premises; (2) cause a change in the zoning affecting the
Premises; or (3) cause a change in the street grade with respect to any street
in the vicinity of the Premises. Tenant shall promptly reimburse Landlord for,
or at Landlord's request, pay directly in advance, all reasonable costs,
expenses and other amounts incurred or required to be expended by Landlord in
order to comply with Tenant's requests made in accordance with the preceding
sentence, and the failure of Tenant to reimburse or pay any such amounts shall
result in the suspension of Landlord's obligations under such sentence with
respect to that particular request until the amounts required to be paid by
Tenant under this sentence have been paid.
21.3 TRANSFER OF PROPERTY INTERESTS. Except as requested by
Tenant pursuant to this Lease, Landlord shall not transfer to any third party
any rights inuring to or benefits associated with the Premises (including,
without limitation, zoning rights, development rights, air space rights,
mineral, oil, gas or water rights). Nothing in this Section shall limit
Landlord's rights pursuant to Section 14.2; provided that any purchaser of
Landlord's interest in the Premises shall be bound by the terms of this Lease,
including without limitation the terms of this Section 21.3).
[Signatures begin on next page.]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Lease
as of the day and year first above written.
TENANT: CYPRESS SEMICONDUCTOR
(MINNESOTA) INC., a Delaware
corporation
By /s/ EMMANUEL HERNANDEZ
---------------------------
Name Emmanuel Hernandez
---------------------------
Its Authorized Representative
---------------------------
(Signatures Continued On Next Page)
38
<PAGE> 45
LANDLORD: SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware corporation
By /s/ WILLIAM M. GINN
---------------------------
Name William M. Ginn
---------------------------
Its President
---------------------------
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<PAGE> 46
Exhibit A
DESCRIPTION OF THE LAND
The land referred to is situated in the State of Minnesota, County of Hennepin,
and is described as follows:
Lot 1, Block 1, Cypress Addition, Hennepin County, Minnesota
<PAGE> 47
Exhibit B
CLOSING COSTS AND FEES TO BE INCLUDED IN INITIAL ADVANCE
The following items shall be included in the definition of the Initial
Advance under Section 2.22 of the Lease:
<TABLE>
<S> <C> <C>
1. Fees to Landels, Ripley & Diamond $ 55,000.00
2. Amount Shown on the Initial
Draw Request $4,840,100.30
3. SBLF Arrangement Fee $ 117,500.00
4. Lund Financial $ 135,000.00
5. FATCO Closing Costs $ 40,000.00
6. Sumitomo Local Counsel $ 5,700.00
7. Cypress Counsel Fees $ 49,999.99
-------------
TOTAL $5,243,300.29
</TABLE>
<PAGE> 48
Exhibit C
PERMITTED TITLE EXCEPTIONS
1. Taxes and Assessments not yet due and payable.
2. Ingress, egress and roadway easements over Lot 1, Block 1, River Ridge
2nd Addition for the benefit of Outlot A, River Ridge 2nd Addition
(which has been replatted as River Ridge 4th Addition and River Bluff
Townhomes) as contained in Document Number 4990457, Document Number
4990472, and as amended by Document Number 5754560.
3. Covenants contained in deed dated April 23, 1985, filed May 3, 1985,
as Document Number 4990457.
4. Emergency Fire Access easement in favor of the City of Bloomington as
contained in Document Number 4990457 and Document Number 4990456.
(The City of Bloomington did not join in Agreement, Document Number
5754560, which purports to amend this easement.) Ordinance No. 91-55,
Document Number 5819129 purports to vacate this easement.
5. Fire access easements in favor of the City of Bloomington as contained
in Document Numbers 5754560 and 5819130.
6. Restrictive covenants contained in deed dated May 24, 1985, filed May
24, 1985 as Document Number 4997105.
7. Restrictive covenants contained in document dated May 29, 1985, filed
June 21, 1985 as Document Number 5006214. Resolution 94-32 purports
to release the interest of the City of Bloomington in the declaration
of covenants and restrictions contained in Document Number 5006214 as
shown by Document Number 6307995.
8. Covenants contained in Agreement dated February 19, 1991, filed March
1, 1991, as Document Number 5754560.
9. Utility easement over the Easterly 30 feet of the most Westerly 80
feet of Outlot A, River Bluff Townhomes as contained in Document
Numbers 5026786 and 5140785, and as amended by Document Number
5754560, and as restated in Agreement, Document Number 6324883.
10. Ponding easement and covenants and restrictions as contained in
Ponding Easement Agreement filed August 11, 1994, as Document Number
6324883.
11. Ingress and egress easement as contained in Document Number 4528286.
<PAGE> 49
12. Development Agreement between Port Authority of the City of
Bloomington and VTC, Inc.,dated April 26, 1985, filed June 3, 1987, as
Document Number 5275756.
13. Restrictions contained in Easement dated July 29, 1991, filed August
20, 1991, as Document Number 5819130.
14. Sanitary sewer line over the subject premises as disclosed by survey
dated April 20, 1994, prepared by Sunde Land Surveying, Inc.
15. Underground gas and storm sewer lines over the subject premises as
disclosed by survey dated April 20, 1994, prepared by Sunde Land
Surveying, Inc.
16. Encroachment of bituminous surface over the subject premises as
disclosed by survey dated April 20, 1994, prepared by Sunde Land
Surveying, Inc.
17. Aboriginal rights and right of access arising by reason of the
existence on the subject premises of Indian burial mounds numbered one
through nine, as shown on survey dated December 21, 1990, by Harry S.
Johnson Companies, Inc.
18. Drainage and utility easements as shown on the recorded plat of
Cypress Addition.
19. Unrecorded Access Easement executed by Cypress Semiconductor
(Minnesota) Inc.
20. Unrecorded Parking Easement executed by Cypress Semiconductor
(Minnesota) Inc.
21. Unrecorded Sanitary Sewer Easement executed by Cypress Semiconductor
(Minnesota) Inc.
22. Unrecorded Watermain Easement executed by Cypress Semiconductor
(Minnesota) Inc.
23. Unrecorded Storm Sewer Easement executed by Cypress Semiconductor
(Minnesota) Inc.
24. Unrecorded Electric Easement executed by Cypress Semiconductor
(Minnesota) Inc.
25. Unrecorded Gas Easement executed by Cypress Semiconductor (Minnesota)
Inc.
26. Unrecorded Telephone Easement executed by Cypress Semiconductor
(Minnesota) Inc.
27. Ground Lease by and between Cypress Semiconductor (Minnesota) Inc. and
Sumitomo Bank Leasing and Finance.
1
<PAGE> 50
Exhibit D
RENT COMMENCEMENT DATE MEMORANDUM
THIS RENT COMMENCEMENT DATE MEMORANDUM ("Memorandum") is entered into
this ____ day of __________, 199__, by and between SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware corporation ("Landlord"), and CYPRESS SEMICONDUCTOR
(MINNESOTA) INC., a Delaware corporation ("Tenant") concerning that certain
Sublease ("Lease") between Landlord and Tenant dated December ___, 1994. Any
capitalized terms not defined in this Memorandum shall have their meaning as
defined in the Lease.
1. Pursuant to Section 6.2 of the Lease, Landlord and Tenant
are required to enter into this Memorandum within thirty (30) days after the
Rent Commencement Date for the Premises.
2. Landlord and Tenant agree the that Rent Commencement Date
for the Premises is __________, 199__.
3. The dollar value of the Guaranteed Residual Value (defined
in Section 2.19 of the Lease) for the Premises is $__________.
IN WITNESS WHEREOF, the parties have executed this Memorandum as of
the date and year first above written.
TENANT: CYPRESS SEMICONDUCTOR
(MINNESOTA) INC., a Delaware
corporation
By
------------------------------
Name
------------------------------
Its
------------------------------
(signatures continued on next page)
2
<PAGE> 51
LANDLORD: SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware corporation
By
------------------------------
Name
------------------------------
Its
------------------------------
By
------------------------------
Name
------------------------------
Its
------------------------------
3
<PAGE> 52
Exhibit E
FORM OF OFFICERS' CERTIFICATE
The undersigned, ____________________ of CYPRESS SEMICONDUCTOR (MINNESOTA)
INC., a Delaware corporation hereby certifies that as of the date hereof the
lease dated ______________, 1994 by and between SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware corporation, as Landlord and CYPRESS SEMICONDUCTOR
(MINNESOTA) INC., a Delaware corporation, as Tenant is in full force and
effect, and Tenant is not in default thereunder.
Date:
---------------------- -------------------------
4
<PAGE> 53
PLEDGE AGREEMENT
This Pledge Agreement ("Agreement") is made and entered into this 29th
day of December, 1994 by and between CYPRESS SEMICONDUCTOR (MINNESOTA) INC., a
Delaware corporation ("Cypress") and SUMITOMO BANK LEASING AND FINANCE, INC., a
Delaware corporation ("Secured Party").
RECITALS
1. Concurrently herewith Secured Party has entered into that
certain ground lease dated of even date herewith ("Ground Lease") with Cypress
for the lease of the land described in Exhibit A hereto (the "Land") for the
sole purpose of leasing the Land and constructing a building thereon
("Improvements") for lease to Cypress.
2. Concurrently herewith Secured Party has subleased the Land and
leased the Improvements to be constructed thereon to Cypress pursuant to a
sublease of the land and lease of the Improvements of even date herewith (the
"Sublease"). Under the terms of the construction management agreement executed
by Cypress and Secured Party of even date herewith (the "Construction
Agreement"), the Improvements will be constructed by Cypress as agent for
Secured Party and Secured Party will finance the construction of the
Improvements.
3. Secured Party has requested and Cypress has agreed to grant a
security interest in favor of Secured Party in the Collateral described
hereinafter owned by Cypress as security for the performance of all of the
obligations of Cypress under the Sublease.
4. This Agreement, the Ground Lease, Sublease, Construction
Agreement, purchase agreement executed by and between Cypress and Secured Party
of even date herewith (the "Purchase Agreement") and any and all documents
executed in connection therewith are collectively referred to herein as the
"Transaction Documents."
AGREEMENT
1. Recitals. The foregoing recitals are true and correct and by
this reference are incorporated herein.
<PAGE> 54
2. Definitions.
a. "Approved Custodian" means Morgan Stanley & Company,
Inc. and any other Custodian selected by Cypress and
approved by Secured Party in writing, such approval
not to be unreasonably withheld.
b. "business day" means any calendar day other than a
Saturday or Sunday during which banks are not
authorized or required by law to be closed in San
Francisco, California, Minneapolis, Minnesota, and
New York, New York.
c. "Collateral" means subject to Paragraphs 9, 18, and
19 hereof:
i) the Collateral Securities; and
ii) the Deposits (as defined below).
d. "Collateral Fund" means the Collateral and all
proceeds from the Collateral.
e. "Collateral Securities" means, at any time, all of
Cypress's right, title and interest in and to or in
respect of all Securities which are owned by Cypress
and which are transferred to or to the order of the
Secured Party as collateral security from time to
time under this Agreement. For the purpose of this
definition, Securities shall be, or be deemed to be,
delivered to or to the order of Secured Party if they
(or, as the case may be, the certificates or other
documents of, or evidencing title or the right to
title for which) have been transferred to or held in
Secured Party's or an Approved Custodian's name on
the records of the depository or other appropriate
institution and the Approved Custodian has marked its
books and records with respect to the Collateral
Securities and the Account that such are held for
Secured Party as pledgee from Cypress.
f. "depositary" means the institution or institutions on
whose books and records the ownership interest in
Securities of the United States of America
constituting Collateral hereunder are duly recorded
under the laws of the United States of America.
-2-
<PAGE> 55
g. "Deposits" means each and every sum of US Dollars
from time to time deposited with Approved Custodian,
as custodian for Secured Party, as pledgee, which is
designated "Cash Collateral Account" re Cypress
Semiconductor (Minnesota) Inc., and includes all
renewals and extensions thereof and all interest
accruing thereon including all proceeds of
Securities.
h. "Landlord's Taxes" is defined in the Sublease.
i. "Securities" means, subject to the terms of Paragraph
9, 18, and 19 hereof, general obligation debt
securities issued and backed by the full faith and
credit of the United States of America, and subject
to the terms of this Pledge, includes:
i) all allotments, accretions, offers, rights,
benefits and advantages whatsoever at any
time accruing, offered or arising in respect
of or incidental to the same or in respect of
or incidental to any securities, rights,
moneys or other property previously accruing,
offered or arising as mentioned in this
sub-clause (i); and
ii) all proceeds of sale, dividends, interest and
other distributions or income hereafter paid
or payable or made in respect of the same or
the securities, rights, moneys or other
property falling within sub-clause (i) above
or deriving from any investment of any such
dividends, interest and other distributions
or income; also includes (without
limitation):
a) Obligations of the United States of
America having a maturity of not
more than one (1) year from the date
of issue and commonly known as
"treasury bills";
b) Obligations of the United States of
America having a maturity greater
than one year, but no more than ten
(10) years, from the date of issue
and commonly known as "treasury
notes";
c) Obligations of the United States of
America having a maturity date in
excess
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of ten (10) years from the date of
issue and commonly known as
"treasury bonds";
d) U.S. Treasury Securities converted
by the Department of the Treasury
into Separate Trading of Registered
Interest and Principal of Securities
("STRIPS");
e) Obligations of Federal agencies of
the government of the United States
of America which are backed as to
payment of interest and principal by
the full faith and credit of the
United States of America; and
f) Repurchase Agreements of government
securities described in sections (a)
through (e) above with dealers
approved by Secured Party, provided
that Sumitomo Bank Securities, Inc.
and Goldman Sachs & Co. are hereby
approved by Secured Party.
3. Pledge. Cypress hereby grants, pledges, conveys, transfers
and assigns to Secured Party as security for the Secured Obligations (as
defined in Paragraph 4 below), a first priority security interest in and to the
Collateral, all increases in profits therefrom, all substitutions therefor and
additions thereto, and in all proceeds thereof.
4. Security For Obligations. This Agreement secures and the
Collateral is security for the payment in full when due of all sums due and
owing under the Transaction Documents and for the performance of all of the
obligations of Cypress under the Transaction Documents, whether for interest,
fees, expenses or otherwise (collectively, the "Secured Obligations"), but the
Secured Obligations, to the extent evidenced by the Transaction Documents,
shall not in any event exceed the "Lease Investment Balance" plus any and all
accrued and unpaid "Base Rent" and "Additional Rent" as such terms are defined
in the Sublease.
5. Enforceability of Lien. Cypress has entered into this
Agreement in order to encumber the Collateral as security for the Secured
Obligations.
Cypress irrevocably waives any and all conditions precedent or subsequent to
the creation of the security interest herein and agrees that:
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<PAGE> 57
(i) it has no defense to the enforcement of any remedy or right provided
for herein;
(ii) the security interest created hereby shall at all times be and remain
a valid first priority security interest over the Collateral in favor
of Secured Party for the Secured Obligations without regard to any act
or omission of Secured Party either past, present or future;
(iii) Secured Party would not enter into the Ground Lease or Sublease
without Cypress entering into this Agreement, and the Ground Lease and
Sublease are of utmost importance to Cypress in that they will enable
Cypress to Sublease from Secured Party the Land and the Improvements,
which is of material benefit to Cypress; and
(iv) this Agreement, any supplemental agreements executed by Cypress
pursuant to Paragraph 7(b) hereof, and all other Transaction Documents,
shall be the whole and entire agreement between the parties with
respect to the Collateral.
6. Representations and Warranties. Cypress represents and
warrants to Secured Party that Cypress is, and on the dates on which Collateral
is delivered to or to the benefit of Secured Party, it will be the beneficial
owner of the Collateral free and clear of any mortgage, charge, pledge, lien or
other encumbrance (other than the security interest hereby created) or any
option or other third party right.
7. Affirmative Covenants by Cypress. Cypress hereby covenants
with Secured Party that during the continuance of this Agreement and until such
time as the Secured Obligations are paid in full in accordance with the terms
of the Purchase Agreement and other Transaction Documents, it will at all
times:
(a) deliver to the Approved Custodian or its successor and permit
the Approved Custodian during the continuance of this security
to hold and retain the Collateral in the name of Secured
Party, as pledgee in accordance with the custodial agreement
by and among Cypress, Secured Party and Approved Custodian of
even date herewith;
(b) deliver such documents, including supplemental pledge
agreements, as Secured Party may from time to time reasonably
require to protect its security interest in and to the
Collateral including the perfection of Secured Party's
interest in the Collateral (duly
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<PAGE> 58
executed by or signed on behalf of the registered holder) or
upon the occurrence and during the continuation of an Event of
Default (as defined in the Sublease) or vesting or enabling
Secured Party to vest the same in itself or its nominees or in
any purchaser to the extent that Secured Party may at any time
without prior notice to Cypress (but with notice within five
(5) days thereafter) present them for registration (it being
understood that any and all Collateral described in any such
supplemental pledge agreement shall also be deemed to be
Collateral herein for all purposes);
(c) forthwith inform Secured Party of any material claim or notice
relating to the Collateral received from any person and of all
matters relevant thereto;
(d) ensure that all bonds in the Collateral Fund shall be
Securities;
(e) ensure that the market value of the Collateral initially
deposited with the Approved Custodian shall be in an amount
equal to the required maintenance of security levels as
described in Paragraph 9 below (the "Security Level"). For
the purposes of determining the value of the Collateral Fund
at any time, (i) any part of the Collateral denominated in a
currency other than US Dollars shall be notionally converted
into US Dollars at the spot rate or rates of exchange quoted
at that time by the Approved Custodian for the purchase of US
Dollars with such other currency and (ii) Securities shall be
valued with reference to the closing market price on the
relevant valuation date and will be taken from a recognized
pricing service or market maker for such Securities; and
(f) ensure that the remaining term to Maturity of any Securities
shall be three (3) years or less.
8. Negative Covenants by Cypress. Cypress hereby covenants with
Secured Party that during the continuance of this Pledge and until such time as
the Secured Obligations are paid in full or Cypress purchases the Improvements
in accordance with the terms of the Purchase Agreement, it will at all times:
(a) not (without the prior written consent of Secured Party);
(i) in the case of Collateral in registered form, permit
any person other than Approved Custodian
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<PAGE> 59
(or any of its customary depositories) to be
registered as holder thereof or of any part thereof;
or
(ii) create or permit to subsist any mortgage, charge,
pledge, lien or encumbrance (other than in favor of
Secured Party) on or over the Collateral or any part
thereof or any interest therein;
(b) not do or cause or permit to be done anything which in any way
would depreciate, jeopardize or otherwise prejudice the value
to Secured Party of the Collateral (provided that Cypress
shall be entitled, pursuant to the provisions of Paragraphs 9,
18 and 19 hereof, to cause Approved Custodian to alter the
composition of the Securities comprising the Collateral and to
make withdrawals from the Collateral Fund and to remit the
proceeds thereof to Cypress).
9. Maintenance of Security Levels, Terms of Securities. The
Approved Custodian shall review daily and report daily to Secured Party and
Cypress the market value of the Collateral. In the event the market value of
the Collateral Fund drops to less than 102% of the Lease Investment Balance,
then Cypress shall deposit additional Collateral in the Collateral Fund, as
appropriate, within two (2) business days after receipt of written notice from
Secured Party or an Approved Custodian so as to restore the value of the
Collateral to 102% of the Lease Investment Balance. Notwithstanding anything
to the contrary in the Transaction Documents, if the coverage as to the
Collateral Fund exceeds 102% of the outstanding Lease Investment Balance,
Cypress shall, provided no Event of Default (as defined in the Sublease) (or an
event with the passage of time or giving notice, would constitute an Event of
Default) under the Sublease shall then be in effect and continuing, be entitled
to the release of such excess Collateral so long as 102% coverage of the
outstanding Lease Investment Balance is maintained on the date of such release.
Any reasonable costs incurred by the Approved Custodian in the course of acting
as agent for Secured Party and Cypress shall be paid by Cypress as provided in
the Custody Agreement.
10. Remedies upon Default. If any Event of Default shall have
occurred and be continuing under the Sublease, then:
(a) Approved Custodian on behalf of Secured Party may,
subject to Paragraph 10(c), exercise in respect of the Collateral in the
Collateral Fund, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights
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and remedies of a secured party in default under the Uniform Commercial Code
(the "Code") in effect in the State of California at that time, and the
Approved Custodian may also, without notice except as specified below, sell so
much of the Collateral in the Collateral Fund or any part thereof in one or
more packages at public or, to the extent allowed by applicable law, private
sale, at any exchange, broker's board or at any of the Approved Custodian's
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Approved Custodian may deem commercially reasonable.
Secured party shall concurrently deliver to Cypress a copy of any communication
between Secured Party and Approved Custodian. Cypress agrees that, to the
extent notice of sale shall be required by law, at least two (2) business days'
notice to Cypress of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
If the Collateral is sold the proceeds shall be applied as provided in Section
10(b), below. The Approved Custodian shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The Approved
Custodian may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Secured Party agrees that it will realize upon the Collateral only by selling
it in the recognized secondary market by either the Approved Custodian or
another national brokerage firm.
(b) Any cash held by the Approved Custodian as Collateral
and all cash proceeds received by the Approved Custodian in respect of any sale
of, collection from, or other realization upon all or any part of, the
Collateral shall be applied by the Approved Custodian:
First, to the payment of the costs and expenses (other than Landlord's
Taxes, as defined in the Sublease) reasonably incurred by an Approved Custodian
in connection with any sale of Collateral, including reasonable compensation to
the Approved Custodian and its agents and counsel, and all reasonable expenses,
liabilities and advances made or incurred by the Approved Custodian in
connection therewith;
Next, to the Secured Party to the extent of the Secured Obligations
(applied in such order as Secured Party shall determine); and
Finally, after payment in full of all Secured Obligations, to Cypress,
or its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same or as a court of competent
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jurisdiction may direct, of any surplus then remaining from such proceeds.
(c) Nothing contained in this Agreement shall limit Secured
Party's access to the Collateral in the Collateral Fund in accordance with this
Agreement, provided that in no event shall the Secured Party realize an
aggregate amount from the Collateral Fund in excess of the Lease Investment
Balance plus accrued and unpaid Base Rent and Additional Rent.
11. Expenses. Cypress will upon demand pay to the Approved
Custodian the amount of any and all reasonable expenses other than Landlord's
Taxes, including the reasonable fees and expenses of its counsel and of any
experts and agents, which the Approved Custodian or the Secured Party may
reasonably incur in connection with (i) the administration of this Agreement,
including fees associated with the determination of the value of the Collateral
at any time, (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Approved Custodian or the Secured Party
hereunder or pursuant to law or equity, or (iv) the failure by Cypress to
perform or observe any of the provisions hereof.
12. Security Interest Absolute. To the fullest extent allowed by
law, all rights of the Secured Party hereunder, and all obligations of Cypress
hereunder, shall be absolute and unconditional irrespective of:
i) any lack of validity or enforceability of the
Sublease, Ground Lease or any other agreement or instrument relating
thereto;
ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Secured
Obligations, or any other amendment or waiver of or any consent to any
departure from the Sublease or any other document executed in
connection with the Sublease;
iii) any exchange, release or non-perfection of any
other Collateral, or any release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the Secured
Obligations; or
iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Cypress or a
pledgor.
13. Amendments, Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by
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Cypress herefrom, shall in any event be effective unless the same shall be in
writing and signed by the Secured Party and Cypress, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
14. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and mailed, sent by overnight
courier service or delivered, addressed as set forth below, or at such other
address as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Paragraph. All such
notices and other communications shall, when mailed, sent by overnight courier
service or delivered shall be effective when deposited in the mails or
delivered to the overnight courier service, respectively, addressed as
aforesaid and, when delivered be effective when received.
(a) If to Cypress:
Cypress Semiconductor (Minnesota) Inc.
2401 E. 86th
Bloomington, MN 55425
Attn: Mr. Jim Weir, Vice President, Finance
With copies to:
Cypress Semiconductor
3901 North First Street
San Jose, CA 95134
Attn: Mr. Kirk Johnson, Corporate Controller
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn: Debra Summers, Esq.
(b) If to Secured Party:
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, New York 10172
Attn: Chief Credit Officer
With a copy to:
Landels, Ripley & Diamond
350 Steuart Street
San Francisco, CA 94105-1250
Attention: Bruce W. Hyman, Esq.
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<PAGE> 63
15. Continuing Security Interest; Transfer of Sublease. This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until payment in full of the Secured
Obligations, (ii) be binding upon Secured Party, Cypress, and their successors
and assigns, and (iii) inure, together with the rights and remedies of the
Secured Party and Cypress hereunder, to the benefit of the Secured Party,
Cypress, and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii) Secured Party may assign
or otherwise transfer the Sublease, to any other person or entity in accordance
with the Sublease, and such other person or entity shall thereupon become
vested with all the benefits in respect thereof granted to it herein or
otherwise. Upon the payment in full of the Secured Obligations, Cypress shall
be entitled to the return, upon its request and at its expense, of such of the
Collateral as shall not have been previously sold or otherwise applied pursuant
to the terms hereof and Secured Party shall execute any and all appropriate
documents necessary to reregister the excess Collateral in the name of Cypress.
16. Governing Law: Terms. This agreement shall be governed by, and
construed in accordance with, the laws of the State of California, without
regard to the provisions thereof relating to conflict of laws, except as
required by mandatory provisions of law and to the extent of the validity or
perfection of the security interest hereunder, or the remedies hereunder, in
respect of any Collateral, are governed by the law of a jurisdiction other than
California. Unless otherwise defined herein terms defined in Articles 8 and 9
of the Code in the State of California are used herein as therein defined.
17. Waiver of Jury Trial. CYPRESS AND SECURED PARTY WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS, UNDER THIS AGREEMENT OR UNDER THE OTHER DOCUMENTS EXECUTED BY CYPRESS IN
CONNECTION WITH THE SUBLEASE OR RELATIVE TO EACH OF THE FOREGOING.
18. Collateral Transactions. So long as no Event of Default under
the Transaction Documents has occurred and is continuing, and so long as all
requirements for the perfection of Secured Party's security interest are
satisfied, Cypress shall be entitled to request and Secured Party shall
instruct the Approved Custodian to carry out buy and sell orders of the
Securities and to thereby change the composition of the Collateral; provided
that all conditions contained in Paragraphs 7 and 8 are satisfied. If Secured
Party shall refuse to implement any instructions received from Cypress, it
shall so notify Cypress within two (2) business days after its receipt of
Cypress's instructions.
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<PAGE> 64
19. Withdrawal of Collateral. Secured Party shall, provided that
all terms and conditions of this Agreement are satisfied, instruct the Approved
Custodian to effect any withdrawal from the Collateral Fund requested by
Cypress, and promptly remit the proceeds thereof to Cypress following receipt
from the Approved Custodian, provided that such withdrawal does not result in
the market value of the amount of Collateral Fund being less than the required
Security Level set forth in Paragraph 9 above, as determined reasonably and in
good faith by Secured Party in accordance with the terms of this Agreement. If
Secured Party refuses to so instruct the Approved Custodian to make such
withdrawal (in whole or in part), then Secured Party shall notify Cypress of
such refusal no later than two (2) business days after receipt of Cypress's
withdrawal notice.
20. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall comprise but a single instrument.
IN WITNESS WHEREOF, Cypress and Secured Party have caused this
Agreement to be duly executed and delivered by its officers thereunto duly
authorized as of the date first above written.
CYPRESS
CYPRESS SEMICONDUCTOR
(MINNESOTA) INC., a Delaware
corporation
By: /s/ EMMANUEL HERNANDEZ
--------------------------------
Name: Emmanuel Hernandez
--------------------------------
Its: Authorized Representative
--------------------------------
[Signatures continued on next page.]
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<PAGE> 65
Secured Party
SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware
corporation
By: /s/ WILLIAM M. GINN
--------------------------------
Name: William M. Ginn
--------------------------------
Its: President
--------------------------------
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<PAGE> 66
EXHIBIT A
LEGAL DESCRIPTION
The land referred to is situated in the State of Minnesota, County of Hennepin,
and is described as follows:
Lot 1, Block 1, Cypress Addition, Hennepin County, Minnesota
<PAGE> 67
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "AGREEMENT") is made as of September 1,
1994, by CYPRESS SEMICONDUCTOR CORPORATION, a Delaware corporation ("CYPRESS"),
and BNP LEASING CORPORATION, a Delaware corporation ("BNP").
R E C I T A L S
A. BNP is acquiring the land described in Exhibit A attached
hereto and the improvements and certain fixtures located thereon and is leasing
the same to Cypress pursuant to that certain Lease Agreement (as from time to
time supplemented, amended or restated, the "LEASE") between Cypress and BNP
dated as of the date hereof. (The land described in Exhibit A and any and all
other real or personal property from time to time covered by the Lease and
included within the "LEASED PROPERTY" as defined therein are hereinafter
collectively referred to as the "PROPERTY".)
B. BNP is also concurrently herewith receiving a separate
environmental indemnity from Cypress pursuant to an Environmental Indemnity
Agreement (as from time to time supplemented, amended or restated, the
"Environmental Indemnity") between Cypress and BNP dated as of the date hereof.
C. Cypress has agreed to purchase or cause the purchase of the
Property, on and subject to the terms and conditions set out herein.
NOW, THEREFORE, in consideration of the above recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Definitions. As used herein, the terms "Cypress", "BNP",
"Property", "Lease" and "Environmental Indemnity" shall have the meanings
indicated above; terms with initial capitals defined in the Lease and used but
not defined herein shall have the meanings assigned to them in the Lease; and
the terms listed immediately below shall have the following meanings:
(a) Applicable Purchaser. "Applicable Purchaser" means
any third party designated by Cypress to purchase the interest of BNP in the
Property as provided in Paragraph 2 (a) (ii) below.
(b) Closing Deadline. "Closing Deadline" means September
1, 1999, or if September 1, 1999 is not a Business Day, then the next following
Business Day.
(c) Designated Payment Date. "Designated Payment Date"
means the earlier of the following:
(i) the Closing Deadline; or
<PAGE> 68
(ii) any Business Day designated by BNP in a
written notice given by BNP to Cypress when an Event of Default by Cypress has
occurred and is continuing, provided the Business Day so designated by BNP is
no earlier than thirty (30) days after the date of such notice; or
(iii) any Business Day designated by Cypress in a
written irrevocable and unconditional notice given by Cypress to BNP; provided,
the Business Day so designated by Cypress must be no earlier than sixty (60)
days after the date of such notice, unless an Event of Default has occurred and
is continuing on the date of such notice, in which case the Business Date so
designated must be no earlier than fifteen (15) days after the date of such
notice and no later than thirty (30) days after the date of such notice.
If BNP send a notice to Cypress pursuant to the preceding clause (ii) properly
designating a Designated Payment Date, and Cypress sends a notice to BNP
pursuant to the preceding clause (iii) properly designating a different
Designated Payment Date, the earlier of the two dates so designated shall be
the "Designated Payment Date" hereunder regardless of which notice was first
sent.
(d) Fair Market Value. "Fair Market Value" means the
fair market value of the Property on or about the Designated Payment Date
(calculated under the assumptions, whether or not then accurate, that Cypress
has maintained the property in compliance with the Lease and all Applicable
Laws [including Environmental Laws]; that Cypress has repaired and restored the
property after any damage following fire or other casualty to the extent
required by the Lease; that Cypress has restored the remainder of the property
after any partial taking by eminent domain to the extent required by the Lease;
that cypress has completed any contests of and paid any taxes due [other than
Excluded Taxes] or other amounts secured by or allegedly secured by a lien
against the property other than Landlord's Liens; and that Cypress has cured
any title defects affecting the Property other than Landlord's Liens, all in
accordance with the standards and requirements of the Lease as though the Lease
were continuing in force) as determined by an independent MAI appraiser
selected by BNP, which appraiser must have five (5) years or more experience
appraising similar properties in northern California.
(e) Purchase Price. "Purchase Price" means an amount
equal to Stipulated Loss Value outstanding on the Designated Payment Date, plus
all costs and expenses (including appraisal costs, Attorneys' Fees, and any
Breakage Costs incurred by BNP if the Designated Payment Date does not fall on
a Base Rental Date) incurred by BNP in connection with any sale of the Property
by BNP hereunder or in connection with collecting sales proceeds due hereunder.
2
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(f) Remarketing Notice. "Remarketing Notice" shall have
the meaning assigned to it in Paragraph 2 (b) (1) below.
(g) Required Documents. "Required Documents" means the
grant deed and other documents that BNP must tender pursuant to Paragraph 3
below.
(h) Shortage Amount. "Shortage Amount" means any amount
payable to BNP by Cypress, rather than by the Applicable Purchaser, pursuant to
clause 2 (a) (ii) below.
2. Cypress's Elections and Obligations on the Designated Payment
Date.
(a) Choices. On the Designated Payment Date Cypress
shall have the right and the obligation to either:
(i) purchase BNP's interest in the property and
in Escrowed Proceeds, if any, for a net cash price equal to the Purchase Price;
or
(ii) cause the Applicable Purchaser to purchase
BNP's interest in the property and in Escrowed proceeds, if any, for a net cash
price not less than the lesser of (a) the Fair Market Value of the property or
(b) fifteen (15%) of Stipulated Loss Value outstanding immediately prior to the
purchase. If, however, the Fair Market Value is less than fifteen (15%) of
Stipulated Loss Value, BNP may elect to keep the Property and any Escrowed
Proceeds rather than sell to the Applicable Purchaser, in which case BNP's
retention of the Property shall be subject to Paragraph 2 (f) below and Cypress
shall pay BNP an amount equal to (A) eighty-five percent (85%) of Stipulated
Loss Value, less (B) any Escrowed proceeds then held and to be retained by BNP.
Unless BNP elects to keep the property pursuant to the preceding sentence, in
addition to causing the purchase of the property by the Applicable purchaser
Cypress must make a supplemental payment to BNP on the Designated Payment Date
equal to the excess (if any) of (1) the Purchase Price over (2) the cash
proceeds of the sale actually paid to BNP by the Applicable Purchaser for BNP's
interest in the property and in Escrowed proceeds, if any (after deduction of
all costs and expenses, [including appraisal costs and Attorneys' Fees, as
defined in the Lease] incurred in connection with any sale of the property by
BNP hereunder or in connection with collecting sales proceeds due hereunder)
(the "NET CASH PROCEEDS"). However, provided no Event of Default has occurred
and is continuing under the Lease, and provided further than neither Cypress
nor any Applicable Purchaser has failed to pay any amount required to be paid
by this Agreement on the date such amount first became due, any supplemental
payment required by the preceding sentence shall not exceed eighty-five percent
(85%) of Stipulated Loss Value on the Designated Payment Date. Any
supplemental
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payment payable to BNP by Cypress, rather than by the Applicable Purchaser,
pursuant to this clause (ii) is hereinafter referred to as the "SHORTAGE
AMOUNT." If the Net Cash proceeds actually paid by the Applicable purchaser to
BNP exceeds the Purchase Price and all other sums that are then due from
Cypress to BNP under this Agreement, the Lease, the Pledge Agreement and the
Custodial Agreement, Cypress shall be entitled to such excess.
(b) Election by Cypress. Cypress shall have the right to
elect whether it will satisfy the obligations set out in clause (i) or (ii) of
the preceding Paragraph 2 (a); provided, however, that the following conditions
are satisfied:
(i) To give BNP the opportunity to have the Fair
Market Value determined by an appraiser before the Designated Payment Date,
Cypress must, unless Cypress agrees that Fair Market Value will not be less
than fifteen percent (15%) of Stipulated Loss Value on the Designated Payment
Date, provide BNP with a Remarketing Notice. "Remarketing Notice" means a
notice given by Cypress to BNP no earlier than one hundred eighty (180) days
before the Designated Payment Date and no later than ninety (90) days before
the Designated Payment Date, specifying that Cypress does not agree that the
Fair Market Value is equal to or greater than fifteen percent (15%) of the
Stipulated Loss Value. No Remarketing Notice will be required unless cypress
does not agree that Fair Market Value will equal or exceed fifteen percent
(15%) of Stipulated Loss Value on the Designated Payment Date. But if for any
reason (including but not limited to any acceleration of the Designated Payment
Date pursuant to clauses (ii) or (iii) of the definition of Designated Payment
Date above) Cypress fails to provide a Remarketing Notice within the time
periods specified in the definition of Remarketing Notice above, Fair Market
Value shall, for purposes of this Agreement, be deemed to be no less than
fifteen percent (15%) of Stipulated Loss Value on the Designated Payment Date.
(ii) To give BNP the opportunity to prepare the
Required Documents before the Designated Payment Date, Cypress must, if it is
to elect to satisfy the obligations set forth in clause (ii) of Paragraph 2
(a), irrevocably specify an Applicable Purchaser in notice to BNP given at
least seven (7) days prior to the Designated Payment Date. If for any reason
Cypress fails to so specify an Applicable Purchaser, Cypress shall be deemed to
have irrevocably elected to satisfy the obligations set forth in clause (i) of
Paragraph 2 (a).
(c) Termination of Cypress's Option To Purchase. Without
limiting BNP's right to require Cypress to satisfy the obligations imposed by
Paragraph 2 (a), Cypress shall have no further option hereunder to purchase the
property if either:
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(i) Cypress shall have elected to satisfy its
obligations under clause (ii) of Paragraph 2 (a) on the Designated Payment Date
and BNP shall have elected to keep the property in accordance with clause (ii)
of Paragraph 2 (a); or
(ii) Cypress shall have failed on the Designated
Payment Date to make or cause to be made all payments to BNP required by this
Agreement or by the Lease and such failure shall have continued beyond the
thirty (30) day period for tender specified in the next sentence.
If BNP does not receive all payments due under the Lease and all
payments required hereunder on the Designated Payment Date, Cypress may
nonetheless tender to BNP the full Purchase Price and all amounts then due
under the Lease, together with interest on the total Purchase Price computed at
the Default Rate from the Designated Payment Date to the date of tender, and if
presented with such a tender within thirty (30) days after the Designated
Payment Date, BNP must accept it and promptly thereafter deliver any Escrowed
Proceeds and a deed and all other Required documents.
(d) Payment to BNP. All amounts payable under the
preceding Paragraphs 2 (a) or 2 (c) by Cypress and, if applicable, by the
Applicable Purchaser must be paid directly to BNP, and no payment on behalf of
or for the account of BNP to any other party shall be effective for the
purposes of this Agreement. In addition to the payments required under
Paragraphs 2 (a) hereunder, on the Designated Payment Date Cypress must pay all
amounts then due to BNP under the Lease. BNP will remit any excess amounts due
Cypress pursuant to the last sentence of clause (ii) of Paragraph 2 (a)
promptly after BNP's receipt of the same.
(e) Effect of Options on Subsequent Title Encumbrances.
it is the intent of BNP and cypress that any conveyance of the property to
Cypress or any Applicable Purchaser pursuant to this Agreement shall cut off
and terminate any interest in the property claimed by, through or under BNP
(but not any unsatisfied obligations to BNP under the Lease, the Environmental
Indemnity or this Agreement), including but not limited to any claim by
Participants, any leasehold or other interests conveyed by BNP in the ordinary
course of BNP's business and any other Landlord's Liens. Anyone accepting or
taking any interest in the property by or through BNP after the date of this
Agreement shall acquire such interest subject to the rights and options granted
Cypress hereby. further, Cypress and any Applicable Purchaser shall be
entitled to pay any payment required by this Agreement for the purchase of the
Property directly to BNP notwithstanding any actual or attempted prior
conveyance or assignment by BNP, voluntary or otherwise, of any right or
interest in this Agreement or the property; neither Cypress nor any Applicable
Purchaser shall be responsible for the proper distribution or application by
BNP of any such payments to
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BNP; and any such payment to BNP shall discharge the obligation of Cypress to
cause such payment to be made to all persons claiming an interest in such
payment.
(f) Restrictions Applicable If BNP Retains the Property.
Without limiting BNP's right to require Cypress to satisfy the obligations
imposed by Paragraph 2 (a), BNP shall not itself lease the Property or occupy
it for use in its own business after the Designated Payment Date, but rather
shall offer the property for sale to third parties, if both of the following
conditions (the "USE RESTRICTION CONDITIONS") are satisfied:
(i) Cypress shall have elected to satisfy its
obligations under clause (ii) of Paragraph 2 (a) on the Designated Payment Date
and BNP shall have elected to keep the property in accordance with clause (ii)
of Paragraph 2 (a); and
(ii) Cypress shall have cured any failure to make
or cause to be made all payments to BNP required on the Designated Payment Date
by this Agreement or by the Lease within the thirty (30) days described in
Paragraph 2 (c) (ii).
If, but only if, the Use Restriction Conditions are satisfied, BNP
shall pay to Cypress the excess, if any, of:
(1) the sum of (a) all sales, condemnation and insurance
proceeds ACTUALLY RECEIVED by BNP from any sale after
the Designated Payment Date of any interest in, or
because of any subsequent taking or damage to, the
property, plus (b) any Escrowed proceeds retained by
BNP; over
(2) the sum of (i) all costs incurred by BNP of
collecting the proceeds described in the preceding
part 1, plus (ii) all ad valorem taxes, insurance
premiums and other costs of every kind incurred by
BNP with respect to the ownership, operation or
maintenance of the property after the Designated
Payment Date, plus (iii) fifteen percent (15%) of the
Stipulated Loss Value used to compute the Shortage
Amount under Paragraph 2 (a) (ii) above, plus (iv)
interest computed at the Default Rate on costs and
other amounts described in the preceding clauses (i),
(ii) and (iii) from the date incurred (in the case of
costs described in clauses (i) and (ii)) or from the
Designated Payment Date (in the case of the amount
described in clause (iii)) until repaid to BNP by
proceeds described in the preceding part 1.
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However, nothing herein contained shall be construed to require BNP,
or to imply a duty on BNP's part, to incur any expense or to exercise
any diligence (A) to sell the property, or (B) to collect or maximize
the excess proceeds described in the preceding sentence, or (C) to
maintain or insure the property. Without limiting the foregoing, if
BNP retains the property BNP shall be entitled, even if the Use
Restriction Conditions are satisfied, to determine in its sole and
absolute discretion how and for what price (which need not equal or
exceed Fair Market Value) and upon what terms the Property should be
sold and how and upon what terms to settle any claim for insurance or
condemnation proceeds concerning the property.
3. Terms of Conveyance Upon Purchase. Immediately after receipt
of all payments to BNP required pursuant to the preceding Paragraph 2, BNP
must, unless it is to keep the property as permitted by Paragraph 2 (a) (ii):
(A) deliver Escrowed Proceeds, if any, and (B) convey the interest in the
Property received by BNP pursuant to the Existing Contract (save and except any
interest in or any part of the property previously taken by eminent domain) by
grant deed to Cypress or the Applicable Purchaser, as the case may be, subject
to any encumbrances that do not constitute Landlord's Liens. However, such
conveyance shall not include the right to receive any payment then due BNP or
that may thereafter become due to BNP under the Lease, the Environmental
Indemnity or this Agreement because of any expense or liability incurred by BNP
resulting in whole or in part from events or circumstances occurring before
such conveyance. All costs of such purchase and conveyance of every kind
whatsoever, both foreseen and unforeseen, shall be the responsibility of the
Applicable purchaser or Cypress, and the form of grant deed used to accomplish
such conveyance shall be substantially in the form attached as Exhibit B. With
such grant deed, BNP shall also tender to Cypress or the Applicable Purchaser,
as the case may be, the Escrowed proceeds and the following documents, each
fully executed and, where appropriate, acknowledged on BNP's behalf by an
officer of BNP: (1) a Preliminary Change of Ownership Report in the form
attached as Exhibit C, (2) a Bill of Sale and Assignment of Contract Rights
and Intangible Assets in the form attached as Exhibit D, (3) an Acknowledgement
of Disclaimer of Representations and Warranties, in the form attached as
Exhibit E, which Cypress or the Applicable Purchaser must execute and return to
BNP, (5) a Documentary Transfer Tax Request in the form attached as Exhibit F,
(6) a Secretary's Certificate in the form attached as Exhibit G, (7) a letter
to the title insurance company insuring title to the Property in the form
attached as Exhibit H, (8) a certificate concerning tax withholding in the form
attached as Exhibit I, (9) an Assignment and Assumption of Grantor's rights
under Declaration of covenants, Conditions and Restrictions for Oakmeade - San
Jose in the form attached as Exhibit J, and (10) if
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applicable, an Indemnity for Landlord's Liens in the form attached hereto as
Exhibit K. The Indemnity for Landlord's Liens described in the preceding
sentence shall be required if, but only if, before the other Required Documents
are tendered by BNP in accordance with this Agreement, Cypress shall have
identified, provided a written list to BNP of, and been unable to obtain a
commitment for title insurance against, any title encumbrances that Cypress
believes in good faith may constitute Landlord's Liens and that, if valid,
would constitute Landlord's Liens. As such Indemnity will be completed by
attaching a list of such identified encumbrances as Annex B thereto.
4. Survival of Cypress's Obligations.
(a) Status of this Agreement. Except as expressly
provided herein, this Agreement shall not terminate, nor shall Cypress
or BNP or any of their successors or assigns have any right to
terminate this Agreement, nor shall Cypress be entitled to any
adjustment of the Purchase Price hereunder, nor shall the obligations
of Cypress and BNP be affected by reason of (i) any damage to or the
destruction of all or any part of the property from whatever cause,
(ii) the taking of or damage to the property or any portion thereof
under the power of eminent domain or otherwise for any reason, (iii)
the prohibition, limitation or restriction of Cypress's use of all or
any portion of the Property or any interference with such use by
governmental action or otherwise, (iv) any eviction of Cypress or any
party claiming under Cypress by paramount title or otherwise
(provided, if Cypress is wrongfully evicted by BNP or by any third
party exercising its rights under a Landlord's Lien, then cypress will
have the remedies described in the last sentence of this Paragraph),
(v) Cypress's prior acquisition or ownership of any interest in the
property, (vi) any default on the part of BNP under this Agreement,
the Lease or any other agreement to which BNP is a party, or (vii) any
other cause, whether similar or dissimilar to the foregoing, any
existing or future law to the contrary notwithstanding. It is the
intention of the parties hereto that the obligations of Cypress
hereunder (including Cypress' obligation to make payments under
Paragraph 2 and, if applicable, to cause the Applicable Purchaser to
make payments under Paragraph 2) shall be separate and independent of
the covenants and agreements of BNP. Accordingly, subject only to the
tender by BNP of Required Documents (if such tender is not excused
because of an election by BNP to keep the property under Paragraph 2
(a) (ii)) and of any Escrowed proceeds, the Purchase price and the
Shortage Amount, as the case may be under Paragraph 2, shall continue
to be payable in all events, and the obligations of Cypress hereunder
shall continue unaffected by any breach of this Agreement by BNP.
However, nothing in this subparagraph, nor the performance without
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objection by Cypress of its obligations hereunder, shall be construed
as a waiver by Cypress of any right Cypress may have at law or in
equity, following (A) any failure by BNP to tender any Escrowed
proceeds or a grant deed or any of the other Required Documents as
required by Paragraph 3 (if such tender is not excused because of an
election by BNP to keep the Property under Paragraph 2 (a) (ii)) upon
the tender by Cypress or the Applicable Purchaser of the payments
required by Paragraph 2 and of any other documents to be executed in
favor of BNP at the closing of the sale hereunder, or (B) any failure
by BNP to remove all Landlord's Liens before conveying the property
pursuant to this Agreement, (i) to recover monetary damages
proximately caused by such failure of BNP if BNP does not cure the
failure within thirty (30) days after Cypress demands a cure by
written notice to BNP, or (ii) to obtain a decree compelling specific
performance of BNP's obligations hereunder.
(b) Remedies Under the Lease and the Environmental
Indemnity. No repossession of or re-entering upon the property or
exercise of any other remedies available under or in connection with
the Lease (including any termination of the Lease by BNP because of an
Event of Default or any rejection of the Lease by Cypress in any
bankruptcy proceeding) or the Environmental Indemnity shall relieve
the parties of their liabilities and obligations hereunder, all of
which shall survive the exercise of remedies available under or in
connection with the Lease and Environmental Indemnity. The parties
acknowledge that the consideration for this Agreement is separate and
independent of the consideration for the Lease and the Environmental
Indemnity, and their obligations hereunder shall not be affected or
impaired by any event or circumstance that would excuse Cypress or BNP
from performance of an obligation under the Lease or the Environmental
Indemnity or the Pledge Agreement. provided, however, nothing in this
subparagraph 4 (b) shall be construed to impair, amend, modify, limit
or otherwise affect the definition of Designated Payment Date.
5. Remedies Cumulative. No right or remedy herein conferred upon
or reserved to BNP is intended to be exclusive of any other right or remedy BNP
has with respect to the property, and each and every right and remedy shall be
cumulative and in addition to any other right or remedy given hereunder or now
or hereafter existing at law or in equity or by statute. In addition to other
remedies available under this Agreement, either party shall be entitled, to the
extent permitted by applicable law, to a decree compelling performance of any
of the other party's agreements hereunder.
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6. No Implied Waiver. The failure of either party to this
Agreement to insist at any time upon the strict performance of any covenant or
agreement of the other party or to exercise any remedy contained in this
Agreement shall not be construed as a waiver or a relinquishment thereof for
the future. The waiver by either party of or redress for any violation of any
term, covenant, agreement or condition contained in this Agreement shall not
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of an original violation. No express
waiver by either party shall affect any condition other than the one specified
in such waiver and that one only for the time and in the manner specifically
stated. A receipt by BNP of any payment hereunder with knowledge of the breach
of this Agreement shall not be deemed a waiver of such breach, and no waiver by
either party of any provision of this Agreement shall be deemed to have been
made unless expressed in writing and signed by the waiving party.
7. Attorneys' Fees and Legal Expenses. If either party commences
any legal action or other proceeding to enforce any of the terms of this
Agreement or the documents and agreements referred to herein, or because of any
breach by the other party or dispute hereunder or thereunder, the successful or
prevailing party, shall be entitled to recover from the nonprevailing party all
Attorneys' Fees incurred in connection therewith, whether or not such
controversy, claim or dispute is prosecuted to a final judgment. Any such
Attorneys' Fees incurred by either party in enforcing a judgment in its favor
under this Agreement shall be recoverable separately from such judgment, and
the obligation for such Attorneys' Fees is intended to be severable from other
provisions of this Agreement and not to be merged into any such judgment.
8. Estoppel Certificate. Each party will, upon not less than
twenty (20) days' prior written request, execute, acknowledge and deliver to
the requesting party a written statement certifying that this Agreement is
unmodified and in full effect (or, if there have been modifications, that this
Agreement is in full effect as modified, and setting forth such modification)
and either stating that no default exists hereunder or specifying each such
default of which the signer may have knowledge. Any such statement may be
relied upon by any prospective purchaser or assignee with respect to the
property. Each party shall be required to provide such a certificate no more
frequently than once in any six month period; provided, however, that if a
party determines that there is a significant business reason for requiring a
current certificate, including, without limitation, the need to provide such a
certificate to a prospective purchaser or assignee, the other party shall
provide a certificate upon request whether or not a certificate has bee
provided within the prior six month period.
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9. Notices.
(a) All payments required to be made by Cypress or the
Applicable Purchaser to BNP hereunder shall be paid to BNP in immediately
available funds by wire transfer to:
Federal Reserve Bank of San Francisco
Account: Banque Nationale de Paris
ABA #: 121027234
Reference: Cypress.
or at such other place and in such other manner as BNP may designate in a
notice to Cypress (provided BNP will not unreasonably designate a method of
payment other than wire transfer). time is of the essence as to all payments
to BNP under this Agreement. Any payments required to be made by BNP to
Cypress pursuant to the last sentence of clause (ii) of Paragraph 2 (a) shall
be paid to Cypress in immediately available funds at the address of Cypress set
forth below or as Cypress may otherwise direct by written notice sent in
accordance herewith.
(b) All notices, demands and other communications to be
made hereunder to the parties hereto shall be in writing (at the addresses set
forth below) and shall be given by any of the following means: (A) personal
service, with proof of delivery or attempted delivery retained; (B) electronic
communication, whether by telex, telegram or telecopying (if confirmed in
writing sent by United States first class mail, return receipt requested); or
(C) registered or certified first class mail, return receipt requested. Such
addresses may be changed by notice to the other parties given in the same
manner as provided above. Any notice or other communication sent pursuant to
clause (A) or (C) hereof shall be deemed received (whether or not actually
received) upon first attempted delivery at the proper notice address on any
Business Day between 9:00 A.M. and 5:00 P.M., and any notice or other
communication sent pursuant to clause (B) hereof shall be deemed received upon
dispatch by electronic means.
Address of BNP:
BNP Leasing Corporation
717 North Harwood Street
Suite 2630
Dallas, Texas 75201
Attention: Lloyd Cox
Telecopy: (214) 969-0060
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With a copy to:
Banque Nationale de Paris, San Francisco
180 Montgomery Street
San Francisco, California 94104
Attention: Jennifer Cho
Telecopy: (415) 296-8954
And with a copy to:
Clint Shouse
Thompson & Knight, P.C.
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
Telecopy: (214) 969-1550
Address of Cypress:
Cypress Semiconductor Corporation
3901 North First Street
San Jose, California 95134
Attn: Chief financial Officer
Telecopy: (408) 943-2796
With a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Real Estate Department
Telecopy: (415) 493-6811
10. Severability. Each and every covenant and agreement of
Cypress contained in this Agreement is, and shall be construed to be, a
separate and independent covenant and agreement. If any term or provision of
this Agreement or the application thereof to any person or circumstances shall
to any extent be invalid and unenforceable, the remainder of this Agreement, or
the application of such term or provision to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby. Further, the obligations of Cypress hereunder, to the maximum extent
possible, shall be deemed to be separate, independent and in addition to, not
in lieu of, the obligations of Cypress under the Lease. In the event of any
inconsistency between the terms of this Agreement and the terms and provisions
of the Lease, the terms and provisions of this Agreement shall control.
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11. Entire Agreement. This Agreement and the documents and
agreements referred to herein set forth the entire agreement between the
parties concerning the subject matter hereof and no amendment or modification
of this Agreement shall be binding or valid unless expressed in a writing
executed by both parties hereto.
12. Paragraph Headings. The paragraph headings contained in this
Agreement are for convenience only and shall in no way enlarge or limit the
scope or meaning of the various and several paragraphs hereof.
13. Gender and Number. Within this Agreement, words of any gender
shall be held and construed to include any other gender and words in the
singular number shall be held and construed to include the plural, unless the
context otherwise requires.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
MADE UNDER AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REGARD TO CONFLICTS OR CHOICE OF LAWS.
15. Successors and Assigns. The terms, provisions, covenants and
conditions hereof shall be binding upon Cypress and BNP and their respective
permitted successors and assigns and shall inure to the benefit of Cypress and
BNP and all permitted transferees, mortgagees, successors and assignees of
Cypress and BNP with respect to the property; provided, that the rights of BNP
hereunder shall not pass to Cypress or any Applicable Purchaser or any
subsequent owner claiming through them. Prior to the Designated Payment Date
BNP may transfer, assign and convey, in whole or part, the Property and any and
all of its rights under this Agreement and the other Purchase Documents
(subject to the terms of this Agreement) by any conveyance that constitutes a
Permitted Transfer, but not otherwise. If BNP so sells or otherwise transfers
the Property and assigns its rights under this Agreement, the other Purchase
documents and the Lease pursuant to a Permitted Transfer, and if BNP's
successor in interest confirms its liability for the obligations imposed upon
BNP by this Agreement, the other Purchase documents and the Lease on and
subject to the express terms set out herein and therein, then BNP shall thereby
be released from any further obligations under this Agreement, the other
Purchase Documents and the Lease and Cypress agrees to look solely to each
successor in interest of BNP for performance of such obligations.
16. WAIVER OF JURY TRIAL. BNP AND Cypress EACH HEREBY WAIVES ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THE LEASE, THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE
RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended
to be all-encompassing of any and all disputes that may be filed in any court
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and that relate to the subject matter of this transaction, including without
limitation, contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. Cypress and BNP each acknowledge that this
waiver is a material inducement to enter into a business relationship, that
each has already relied on the waiver in entering into this Agreement and the
other documents referred to herein, and that each will continue to rely on the
waiver in their related future dealings. Cypress and BNP each further warrant
and represent that it has reviewed this waiver with its legal counsel, and that
it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LEASE, THIS
AGREEMENT OR THE ENVIRONMENTAL INDEMNITY. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court.
17. Tax Reporting. Reference is made to Paragraph 19 (k) of the
Lease, which explains that BNP and Cypress intend that the Lease and this
?Agreement shall have a form for income tax purposes which is different than
the form of the Lease and the Agreement for other purposes.
18. Security and Escrowed Proceeds. Cypress's obligations under
this Agreement are secured by the Pledge Agreement, reference to which is
hereby made for a description of the Collateral (as defined in the Pledge
Agreement) covered thereby and the rights and remedies provided to BNP thereby.
Although BNP shall be entitled to hold all Collateral as security for the full
and faithful performance by Cypress of Cypress's covenants and obligations
under this Agreement, the Collateral shall not be considered an advance payment
of the Purchase Price or any Shortage Amount or a measure of BNP's damages
should Cypress breach this Agreement. BNP shall be entitled to return any
Collateral not sold or used to satisfy the obligations secured by the Pledge
Agreement directly to Cypress notwithstanding any prior actual or attempted
conveyance or assignment by Cypress, voluntary or otherwise, of any right to
receive the same; neither BNP nor the custodian named in the Custodial
Agreement shall be responsible for the proper distribution or application by
Cypress of any such Collateral returned to Cypress; and any such return of
Collateral to Cypress shall discharge any obligation of BNP to deliver such
Collateral to all Persons claiming an interest in the Collateral. Further, BNP
shall be entitled to deliver any Escrowed Proceeds it holds on the Designated
Payment Date directly to Cypress or to any Applicable Purchaser purchasing
BNP's interest in the Property and the Escrowed proceeds pursuant to this
Agreement notwithstanding any prior actual or attempted conveyance or
assignment by Cypress,
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voluntary or otherwise, of any right to receive the same; BNP shall not be
responsible for the proper distribution or application by Cypress or any
Applicable Purchaser of any such Escrowed Proceeds paid over to Cypress or the
Applicable Purchaser; and any such payment of Escrowed Proceeds to Cypress or
an Applicable Purchaser shall discharge any obligation of BNP to deliver the
same to all Persons claiming an interest therein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"BNP"
BNP LEASING CORPORATION, a Delaware
corporation
By: /s/ LLOYD G. COX
-----------------------------------
Lloyd G. Cox, Vice President
"Cypress"
CYPRESS SEMICONDUCTOR CORPORATION, a
Delaware corporation
By: /s/ EMMANUEL HERNANDEZ
-----------------------------------
Name: Emmanuel Hernandez
----------------------------
Title: Chief Financial Officer
----------------------------
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GROUND LEASE
THIS GROUND LEASE ("Lease") is made and entered into as of the 29th day of
December, 1994, by and between CYPRESS SEMICONDUCTOR (MINNESOTA) INC., a
Delaware corporation ("Landlord") and SUMITOMO BANK LEASING AND FINANCE, INC., a
Delaware corporation ("Tenant").
ARTICLE I.
LEASED PREMISES
1.1 Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, that certain parcel of land ("Land") located in the City of
Bloomington, State of Minnesota, as more particularly described in Exhibit A
attached hereto and by this reference incorporated herein (the "Premises"), upon
and subject to the terms and provisions of this Lease.
ARTICLE II.
TERM
2.1 The term of this Lease ("Term") shall be for fifty (50) consecutive
years commencing on December 29, 1994 and expiring on December 29, 2044 (the
"Expiration Date").
<PAGE> 83
ARTICLE III.
USE/COMPLIANCE WITH LAW
3.1 The Premises shall be used solely for the purpose of constructing
certain Improvements on the Land upon such terms and conditions as agreed by
Landlord and its subtenant under the sublease executed by Landlord and Tenant of
even date herewith (the "Sublease") and for any other legal use.
ARTICLE IV.
RENTAL
4.1 On or before the execution of this Lease by Tenant, Tenant shall pay to
Landlord as rental for the Premises, the sum of One Dollar ($1.00) as Tenant's
"Base Rent" for the first ten (10) years of the Term of the Lease, payable at
the address set forth in Article 12 below. Effective as of December 29, 2004,
the Base Rent shall be increased to the then fair market rent for comparable
land located in a comparable section of Bloomington, Minnesota as of the
effective date of such increase in Base Rent, as Landlord and Tenant shall
agree.
ARTICLE V.
TAXES
5.1 All taxes other than Landlord's Taxes (as defined in the Sublease)
levied and assessed against the Premises shall be paid by Landlord, and Tenant
shall be indemnified and saved harmless by Landlord from and against payment of
the same.
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ARTICLE VI.
INSURANCE
6.1 Tenant shall have no obligation to carry any insurance covering the
Premises.
ARTICLE VII.
IMPROVEMENTS
7.1 All Improvements constructed on the Premises either prior to or during
the Term of this Lease shall be the property of Tenant during the Term hereof,
subject to the rights of the subtenant under the Sublease.
ARTICLE VIII.
REPAIRS AND MAINTENANCE
8.1 Tenant shall not be obligated to make any repairs to the Premises or to
maintain the Premises during the Term of this Lease.
ARTICLE IX.
ATTORNEYS' FEES
9.1 In the event that at any time during the Term of this Lease either
Landlord or Tenant shall institute any action or proceeding against the other
relating to the provisions of this Lease, or any default hereunder, then and in
that event, the unsuccessful party in such action or proceeding agrees to
reimburse the successful party herein for the reasonable expenses
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<PAGE> 85
of attorneys' fees and costs incurred therein by the successful party.
ARTICLE X.
SCOPE OF THE AGREEMENT
10.1 This Lease is and shall be considered to be the only agreement between
the parties hereto concerning the subject hereof. All negotiations and oral
agreements acceptable to both parties are included therein.
ARTICLE XI.
CAPTIONS AND TERMS
11.1 The captions of Articles of this Lease are for convenience only and
are not a part of this Lease and do not in any way limit or amplify the terms
and provisions of this Lease.
ARTICLE XII.
NOTICES AND PAYMENT OF RENT
12.1 Wherever in this Lease it shall be required or permitted that notice
or demand be given or served by either party to this Lease to or on the other,
such notice or demand shall be given or served and shall not be deemed to have
been duly given or served unless in writing and forwarded by private delivery
with acknowledged receipt, commercial overnight courier, or by certified or
registered mail, return receipt requested,
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<PAGE> 86
postage prepaid, addressed as follows:
To Landlord:
Cypress Semiconductor (Minnesota) Inc.
2401 E. 86th
Bloomington, MN 55425
Attn: Mr. Jim Weir, Vice President, Finance
With copies to:
Cypress Semiconductor
3901 North First Street
San Jose, CA 95134
Attn: Mr. Kirk Johnson, Corporate Controller
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn: Debra Summers, Esq.
To Tenant:
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, New York 10172
Attn: Chief Credit Officer
With a copy to:
Landels, Ripley & Diamond
350 Steuart Street
San Francisco, CA 94105-1250
Attention: Bruce W. Hyman, Esq.
All rental and other payments shall be paid by Tenant to Landlord at the address
above provided. Either party may change its address by written notice to the
other delivered in accordance with this Article 12.
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ARTICLE XIII.
OBLIGATIONS OF SUCCESSORS
13.1 The parties hereto agree that all the provisions hereof are to be
construed as covenants and agreements as though the words importing such
covenants and agreements were used in each separate paragraph hereof, and that
all of the provisions hereof shall bind and inure to the benefit of the parties
hereto, and their respective heirs, legal representatives, successors and
assigns.
ARTICLE XIV.
WAIVER OF DEMAND FOR POSSESSION
14.1 Tenant waives any demand for possession of the Premises and any demand
for payment of Base Rent and notice of inte nt to re-enter the Premises, or of
intent to terminate this Lease, and waives any and every other notice or de mand
prescribed by any applicable statutes or laws.
ARTICLE XV.
SURRENDER
15.1 Tenant covenants that it will vacate the Premises and surrender to
Landlord all improvements thereon immediately upon the expiration or sooner
termination of the Lease. If Tenant remains in possession of the Premises or any
part thereof after the termination of the Term, Landlord shall have the
immediate
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right of re-entry and may, at its option, remove all persons and property from
the Premises and such property may be removed and stored in a public warehouse
or elsewhere at the cost of, and for the account of Tenant, all without service
of notice to resort to legal process to remove Tenant through summary
proceedings and without being guilty of trespass, or becoming liable for any
loss or damage which may be occasioned thereby.
ARTICLE XVI.
HOLDING OVER
16.1 In the event Tenant remains in possession of the Premises after the
expiration of the Lease and without the execution of a new Lease and Landlord
accepts payment of Base Rent, Tenant shall be deemed to be occupying the
Premises as a Tenant from month to month, subject to all of the conditions,
provisions and obligations of this Lease insofar as the same can be applicable
to a month to month tenancy, provided, however, that the Base Rent required to
be paid by Tenant during any holdover period shall be in an amount equal to two
times the then current Base Rent, pro-rated on a monthly basis.
ARTICLE XVII.
MISCELLANEOUS
17.1 If any term or provision of this Lease or any application thereof
shall be invalid or unenforceable, the remainder of this Lease and any other
application of such term or
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provision shall not be affected thereby. Time is of the essence hereof. This
Lease shall be construed and enforced in accordance with the laws of the State
of Minnesota. This Lease may not be amended or modified in any respect
whatsoever except by an instrument in writing signed by the parties hereto.
[Signatures begin on next page.]
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IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as
of the day and year first above written.
LANDLORD:
CYPRESS SEMICONDUCTOR (MINNESOTA)
INC., a Delaware corporation
By: /s/ EMMANUEL HERNANDEZ
-----------------------------
Name: Emmanuel Hernandez
Its: Authorized Representative
[Signatures continued on next page.]
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TENANT:
SUMITOMO BANK LEASING AND FINANCE,
INC., a Delaware corporation
By:/s/ WILLIAM M. GINN
-------------------------------
Name:William M. Ginn
Its: President
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EXHIBIT A
The land referred to is situated in the State of Minnesota, County of Hennepin,
and is described as follows:
Lot 1, Block 1, Cypress Addition, Hennepin County, Minnesota
<PAGE> 93
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is made as of December 29, 1994,
by CYPRESS SEMICONDUCTOR (MINNESOTA) INC., a Delaware corporation ("Cypress"),
and SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation
("Sumitomo").
R E C I T A L S
A. Cypress, as agent for Sumitomo, is constructing certain improvements
(the "Improvements") on the land ("Land") described in Exhibit A
attached hereto in which Sumitomo owns a leasehold interest pursuant to that
certain Ground Lease executed by and between Sumitomo and Cypress of even date
herewith ("Ground Lease"). Sumitomo is leasing the Land and Improvements to
Cypress pursuant to that certain Sublease of the Land and Lease of the
Improvements (as from time to time supplemented, amended or restated, the
"Sublease") executed by and between Cypress and Sumitomo of even date herewith.
Cypress' fee interest in the Land, Sumitomo's leasehold interest in the Land,
Sumitomo's ownership interest in the Improvements, Cypress' subleasehold
interest in the Land and the Improvements and any and all other real or personal
property from time to time covered by the Ground Lease and/or the Sublease are
hereinafter collectively referred to as the "Premises").
B. Cypress has agreed to purchase or cause the purchase of the Premises, on
and subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the above recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Definitions. As used herein, the terms "Cypress", "Sumitomo",
"Premises" and "Sublease" shall have the meanings indicated above; those terms
with initial capitals defined in the Sublease and used but not defined herein
shall have the meanings assigned to them in the Sublease; and the terms listed
immediately below shall have the following meanings:
(a) Applicable Purchaser. "Applicable Purchaser" means any
third party designated by Cypress to purchase the interest of Sumitomo in the
Premises as provided in subparagraph 2(a)(ii) below who is not an
affiliate of Tenant within the meaning of Rule 405 under the Securities Act of
1933 as amended.
(b) Closing Deadline. "Closing Deadline" means December 29,
2004, or if December 29, 2004 is not a Business Day, then the next following
Business Day.
<PAGE> 94
(c) Designated Payment Date. "Designated Payment Date" means
the earlier of the following:
(i) the Closing Deadline; or
(ii) any Business Day designated by Sumitomo in a written notice
given by Sumitomo to Cypress if an Event of Default by Cypress has occurred and
is continuing, provided the Business Day so designated by Sumitomo must be no
earlier than thirty (30) days after the date of such notice; or
(iii) any Business Day designated by Cypress in a written
irrevocable and unconditional notice given by Cypress to Sumitomo; provided, the
Business Day so designated by Cypress must be no earlier than thirty (30) days
after the date of such notice.
If Sumitomo sends a notice to Cypress pursuant to subparagraph
1(c)(ii) above properly designating a Designated Payment Date, and Cypress
sends a notice to Sumitomo pursuant to subparagraph 1(c)(iii) above
properly designating a different Designated Payment Date, the earlier of the two
dates so designated shall be the Designated Payment Date hereunder regardless of
which notice was first sent.
(d) Fair Market Value. "Fair Market Value" means the fair
market value of the Premises on or about the Designated Payment Date (calculated
under the assumptions, whether or not then accurate, that (i) Cypress has
maintained the Premises in compliance with the Sublease and all applicable laws,
including without limitation, all federal and state environmental laws; (ii)
Cypress has repaired and restored the Premises after any damage following fire
or other casualty to the extent required by the Sublease; (iii) Cypress has
restored the remainder of the Premises after any partial taking by eminent
domain to the extent required by the Sublease; (iv) Cypress has completed any
contests of and paid any taxes due other than Landlord's Taxes, or other amounts
secured by or allegedly secured by a lien against the Premises (other than a
lien created by Sumitomo which is not a Permitted Title Exception) as required
by the Sublease; and (v) Cypress has cured any title defects (other than a
defect created by Sumitomo which is not a Permitted Title Exception under the
Sublease) affecting the Premises as required by and in accordance with the
standards and requirements of the Sublease as though the Sublease were
continuing in force) as determined by an independent MAI appraiser selected by
Sumitomo, which appraiser must have five (5) years or more experience appraising
similar properties in Hennepin County, Minnesota.
(e) Purchase Price. Purchase Price means an amount equal to
the sum of all accrued and unpaid Base Rent and Additional Rent under the
Sublease, the Lease Investment Balance, plus all costs and expenses (including
appraisal costs and attorneys' fees and costs) incurred by Sumitomo in
connection with any sale of the Premises by Sumitomo hereunder or in connection
with collection of sale proceeds due hereunder.
(f) Remarketing Notice. "Remarketing Notice" shall have the
meaning assigned to it in subparagraph 2(b)(1) below.
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(g) Required Documents. "Required Documents" means the limited
warranty deed and other documents that Sumitomo must tender pursuant to
<SU>paragraph 3<EU> below.
(h) Shortage Amount. "Shortage Amount" shall have the meaning
assigned to it in subparagraph 2(a)(ii) below.
2. Cypress' Elections and Obligations on the Designated Payment
Date.
(a) Choices. On the Designated Payment Date, Cypress shall
have the right and the obligation to either:
(i) purchase the Premises, including all fee and leasehold
interest therein and all unpaid insurance and condemnation and other proceeds
applicable to the Premises which have not been applied to reduce the Lease
Investment Balance, for a net cash price equal to the Purchase Price; or
(ii) cause the Applicable Purchaser to purchase the Premises
including all fee and leasehold interest therein and all unpaid insurance,
condemnation and other proceeds applicable to the Premises which have not been
applied to reduce the Lease Investment Balance, for a net cash price not less
than the lesser of (a) the Fair Market Value of the Premises or (b) eighteen and
four one hundredths percent (18.04%) of the Lease Investment Balance outstanding
immediately prior to the purchase. If, however, the Fair Market Value is less
than eighteen and four one hundredths percent (18.04%) of the Lease Investment
Balance, Sumitomo may elect to keep the Premises rather than sell to the
Applicable Purchaser, in which case Sumitomo's retention of the Premises shall
be subject to paragraph 2(f) below and Cypress shall pay Sumitomo an
amount equal to (A) eighty-one and ninety-six one hundredths percent (81.96%) of
the Lease Investment Balance. Unless Sumitomo elects to keep the Premises
pursuant to the preceding sentence, in addition to causing the purchase of the
Premises by the Applicable Purchaser, Cypress must make a supplemental payment
to Sumitomo on the Designated Payment Date equal to the excess (if any) of (1)
the Purchase Price over (2) the cash proceeds of the sale actually paid to
Sumitomo by the Applicable Purchaser for Sumitomo's interest in the Premises
(after deduction of all costs and expenses, including appraisal costs and
attorneys' fees and costs, incurred in connection with any sale of the Premises
by Sumitomo hereunder or in connection with collecting sales proceeds due
hereunder and not included in the definition of "Purchase Price") (the "Net Cash
Proceeds"). However, provided no Event of Default has occurred and is continuing
under the Sublease, and provided further that neither Cypress nor any Applicable
Purchaser has failed to pay any amount required to be paid by this Agreement on
the date such amount first became due, any supplemental payment required by the
preceding sentence shall not exceed eighty-one and ninety-six one hundredths
percent (81.96%) of the Lease Investment Balance on the Designated Payment Date.
Any supplemental payment payable to
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Sumitomo by Cypress, rather than by the Applicable Purchaser, pursuant to this
subparagraph 2(a)(ii) is hereinafter referred to as the "Shortage
Amount." If the Net Cash Proceeds actually paid by the Applicable Purchaser to
Sumitomo exceeds the Purchase Price and all other sums that are then due from
Cypress to Sumitomo under this Agreement, the Sublease, the Pledge Agreement,
the Custodial Agreement and any other of the Transaction Documents, Cypress
shall be entitled to such excess.
(b) Election by Cypress. Cypress shall have the right to elect
whether it will satisfy the obligations set forth in subparagraphs 2(a)(i)
or (ii) above; provided, however, that the following conditions are
satisfied:
(i) To give Sumitomo the opportunity to have the Fair Market
Value determined by an appraiser before the Designated Payment Date, Cypress
must, unless Cypress agrees that the Fair Market Value will not be less than
eighteen and four one hundredths percent (18.04%) of the Lease Investment
Balance on the Designated Payment Date, provide Sumitomo with a Remarketing
Notice. "Remarketing Notice" means a notice given by Cypress to Sumitomo no
earlier than one hundred eighty (180) days before the Designated Payment Date
and no later than ninety (90) days before the Designated Payment Date,
specifying that Cypress does not agree that the Fair Market Value is equal to or
greater than eighteen and four one hundredths percent (18.04%) of the Lease
Investment Balance. No Remarketing Notice will be required unless Cypress does
not agree that the Fair Market Value will equal or exceed eighteen and four one
hundredths percent (18.04%) of the Lease Investment Balance on the Designated
Payment Date. But if for any reason (including but not limited to any
acceleration of the Designated Payment Date pursuant to subparagraphs
1(c)(ii) or (iii) above) Cypress fails to provide a Remarketing Notice
within the time periods specified above, the Fair Market Value shall, for
purposes of this Agreement, be deemed to be no less than eighteen and four one
hundredths percent (18.04%) of the Lease Investment Balance on the Designated
Payment Date; and
(ii) To give Sumitomo the opportunity to prepare the Required
Documents before the Designated Payment Date, Cypress must, if it is to elect to
satisfy the obligations set forth in subparagraph 2(a)(ii) above,
irrevocably specify an Applicable Purchaser in a notice to Sumitomo given at
least seven (7) days prior to the Designated Payment Date. If for any reason
Cypress fails to so specify an Applicable Purchaser, or fails to satisfy the
obligations set forth in subparagraph 2(a)(ii) on or before the Designated
Payment Date, Cypress shall be deemed to have irrevocably elected to satisfy the
obligations set forth in subparagraph 2(a)(i) above.
(c) Termination of Cypress' Option to Purchase. Without
limiting Sumitomo's right to require Cypress to satisfy the obligations imposed
by paragraph 2(a) above, Cypress shall
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have no further option hereunder to purchase or cause an Applicable Purchaser to
purchase the Premises if either:
(i) Cypress shall have elected to satisfy its obligations under
subparagraph 2(a)(ii) above on the Designated Payment Date and Sumitomo shall
have elected to keep the Premises in accordance with subparagraph 2(a)(ii)
above; or
(ii) Cypress shall have failed on the Designated Payment Date to
make or cause to be made all payments to Sumitomo required by this Agreement or
by the Sublease and such failure shall have continued beyond the thirty (30) day
period for tender specified in the next sentence; or
(iii) the Premises has been sold pursuant to a foreclosure sale
in accordance with the terms of the SBLF Mortgage.
If Sumitomo does not receive all payments due under the Sublease and any
other Transaction Document including all payments required hereunder on the
Designated Payment Date, Cypress may nonetheless tender to Sumitomo the full
Purchase Price and all amounts then due under the Sublease, together with
interest on the total Purchase Price computed at the Default Rate from the
Designated Payment Date to the date of tender, and if presented with such a
tender within thirty (30) days after the Designated Payment Date, Sumitomo must
accept the tender and promptly thereafter deliver any escrowed proceeds, a
limited warranty deed and all other Required Documents.
(d) Payment to Sumitomo. All amounts payable by Cypress under
paragraph 2 above and, if applicable, by the Applicable Purchaser, must
be paid directly to Sumitomo and no payment on behalf of or for the account of
Sumitomo to any other party shall be effective for the purposes of this
Agreement.
In addition to the payments required under paragraph 2 above, Cypress
must pay on the Designated Payment Date all amounts then due to Sumitomo under
the Sublease and any other Transaction Documents. Sumitomo will remit any
excess amounts due Cypress pursuant to the last sentence of subparagraph
2(a)(ii) above promptly after Sumitomo's receipt of the same and
determination that such excess exists.
(e) Effect of Options on Subsequent Title Encumbrances. It is
the intent of Sumitomo and Cypress that any conveyance of the Premises to
Cypress or any Applicable Purchaser pursuant to this Agreement shall cut off and
terminate any interest in the Premises claimed by, through or under Sumitomo
(but not any unsatisfied obligations of Cypress and Cypress Semiconductor
Corporation, a Delaware corporation to Sumitomo under the Sublease or other
Transaction Documents). Anyone accepting or taking any interest in the Premises
by or through Sumitomo after the date of this Agreement shall acquire such
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interest subject to the rights and options granted Cypress hereby. Further,
Cypress and any Applicable Purchaser shall be entitled to pay any payments
required by this Agreement for the purchase of the Premises directly to Sumitomo
notwithstanding any actual or attempted prior conveyance or assignment by
Sumitomo, voluntary or otherwise, of any right or interest in this Agreement or
the Premises; neither Cypress nor any Applicable Purchaser shall be responsible
for the proper distribution or application by Sumitomo of any such payments to
Sumitomo; and any such payment to Sumitomo shall discharge the obligation of
Cypress to cause such payment to be made to all persons claiming an interest in
such payment through Sumitomo.
(f) Restrictions Applicable if Sumitomo Retains the Premises.
Without limiting Sumitomo's right to require Cypress to satisfy the obligations
imposed by paragraph 2(a) above and except in the case of a foreclosure
under the SBLF Deed of Trust, Sumitomo shall not itself lease the Premises or
occupy it for use in its own business after the Designated Payment Date, but
rather shall be under a continuing obligation to use its commercially reasonable
efforts to sell the Premises to one or more unrelated third parties, if the
following condition (the "Use Restriction Condition") is satisfied:
(i) Cypress shall have elected to satisfy its obligations under
paragraph 2(a)(ii) above on the Designated Payment Date and Sumitomo
shall have elected to keep the Premises in accordance with subparagraph
2(a)(ii).
If, but only if, the Use Restriction Condition is satisfied, Sumitomo
shall pay to Cypress the excess, if any, of:
(ii) the sum of all sales, condemnation and insurance proceeds
actually received by Sumitomo from any sale after the Designated Payment Date of
any interest in, or because of any subsequent taking or damage to, the Premises;
over
(iii) the sum of (a) all costs incurred by Sumitomo of collecting
the proceeds described in the preceding paragraph, plus (b) all ad valorem
taxes, insurance premiums and other costs of every kind incurred by Sumitomo
other than Landlord's Taxes (as defined in the Sublease) with respect to the
ownership, operations or maintenance of the Premises after the Designated
Payment Date, plus (c) eighteen and four one hundredths percent (18.04%) of the
Lease Investment Value used to compute the Shortage Amount under
subparagraph 2(a)(ii) above, plus (d) interest computed at the Default
Rate in costs and other amounts described in the preceding clauses (a), (b) and
(c) above from the date incurred (in the case of costs described in clauses (a)
and (b)) or from the Designated Payment Date (in the case of the amount
described in clause (c)) until repaid to Sumitomo by proceeds described in
subparagraph 2(f)(ii) above.
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However, nothing herein contained shall be construed to require Sumitomo,
or to imply a duty on Sumitomo's part, to (i) sell or attempt to sell any
portion of the Premises (a) in a manner, or under circumstances, that could
materially impair Sumitomo's ability to enforce any of its rights or remedies
under the Transaction Documents (as determined in Sumitomo's sole discretion
exercised in good faith), or (b) at a time when market conditions render it
inadvisable to sell or attempt to sell the Premises (as determined in Sumitomo's
sole discretion exercised in good faith); (ii) collect or maximize the excess
proceeds described in the preceding two paragraphs; or (iii) maintain or insure
the Premises. Notwithstanding the above (except in the case of a foreclosure of
the SBLF Deed of Trust) Sumitomo shall in all events sell the Premises no later
than five (5) years after obtaining possession of the Premises and shall
disburse the proceeds pursuant to subparagraphs 2(f)(ii) and (iii)
above. Without limiting the foregoing, if Sumitomo retains the Premises,
Sumitomo shall be entitled, even if the Use Restriction Condition is satisfied,
to determine in its sole and absolute discretion how and for what price (which
need not equal or exceed Fair Market Value) and upon what terms the Premises
should be sold and how and upon what terms to settle any claim for insurance or
condemnation proceeds concerning the Premises. Sumitomo's obligation to pay the
excess proceeds described above to Cypress shall survive any termination of the
Sublease or this Agreement. Cypress agrees that Sumitomo will be deemed to be in
good faith if it refuses to sell its interest for less than the Lease Investment
Balance less the Guaranteed Residual Value.
3. Terms of Conveyance Upon Purchase. Immediately after receipt of
all payments to Sumitomo required pursuant to paragraph 2 above,
Sumitomo must, unless it is to keep the Premises as permitted by
subparagraph 2(a)(ii) above: (A) assign to Cypress or the Applicable
Purchaser all the condemnation and other proceeds applicable to the Premises
which have not been applied to reduce the Lease Investment Balance, (B) convey
Sumitomo's leasehold interest in the Land to Cypress or the Applicable Purchaser
as the case may be pursuant to a duly executed and acknowledged assignment and
assumption of leasehold interest (save and except any interest in or any part of
the Land previously taken by eminent domain), subject to the Permitted Title
Exceptions (excluding the SBLF Mortgage) and (C) convey Sumitomo's interest in
the Improvements (save and except any interest in or any part of the
Improvements previously taken by eminent domain) by limited warranty deed to
Cypress or the Applicable Purchaser, as the case may be, subject to the
Permitted Title Exceptions (excluding the SBLF Mortgage). However, such
conveyances shall not include the right to receive any payment then due Sumitomo
or that may thereafter become due to Sumitomo under the Sublease which has been
applied to reduce the Lease Investment Balance, any other Transaction Documents
or this Agreement because of any expense or liability incurred by Sumitomo
resulting in whole or in part from events or circumstances occurring before such
conveyance. All costs of
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such purchase and conveyance of every kind whatsoever, both foreseen and
unforeseen, shall be the responsibility of the Applicable Purchaser or Cypress,
the form of limited warranty deed used to accomplish such conveyance shall be
substantially in the form attached as Exhibit B, and the form of
assignment and assumption of leasehold interest used to accomplish such
conveyance shall be substantially in the form attached as Exhibit C.
With such limited warranty deed and assignment and assumption of leasehold
interest, Sumitomo shall also tender to Cypress or the Applicable Purchaser, as
the case may be and such additional documents reasonably requested by Cypress to
evidence the transfer of the Premises.
4. Survival of Cypress' Obligations.
(a) Status of this Agreement. Except as expressly provided
herein, this Agreement shall not terminate, nor shall Cypress or Sumitomo or any
of their successors or assigns have any right to terminate this Agreement, nor
shall Cypress be entitled to any adjustment of the Purchase Price hereunder, nor
shall the obligations of Cypress and Sumitomo be affected by reason of (i) any
damage to or the destruction of all or any part of the Premises from whatever
cause, (ii) the taking of or damage to the Premises or any portion thereof under
the power of eminent domain or otherwise for any reason, (iii) the prohibition,
limitation or restriction of Cypress' use of all or any portion of the Premises
or any interference with such use by governmental action or otherwise, (iv) any
eviction of Cypress or any party claiming under Cypress by paramount title or
otherwise (provided, if Cypress is wrongfully evicted by Sumitomo or by any
third party exercising its right under a lien created by Sumitomo other than a
Permitted Title Exception, then Cypress will have the remedies described in the
last sentence of this paragraph), (v) Cypress' prior acquisition or ownership of
any interest in the Premises, (vi) any default on the part of Sumitomo under
this Agreement, the Sublease or any other Transaction Document or (vii) any
other cause, whether similar or dissimilar to the foregoing, any existing or
future law to the contrary notwithstanding. It is the intention of the parties
hereto that the obligations of Cypress hereunder (including Cypress' obligation
to make payments under paragraph 2 above and, if applicable, to cause
the Applicable Purchaser to make payments under paragraph 2 above, shall
be separate and independent of the covenants and agreements of Sumitomo.
Accordingly, subject only to the tender by Sumitomo of the Required Documents
(if such tender is not excused because of an election by Sumitomo to keep the
Premises under subparagraph 2(a)(ii) above) and of any escrowed
proceeds, the Purchase Price and the Shortage Amount, as the case may be under
paragraph 2 above, shall continue to be payable in all events, and the
obligations of Cypress hereunder shall continue unaffected by any breach of this
Agreement by Sumitomo. However, nothing in this subparagraph, nor the
performance without objection by Cypress of its obligations hereunder, shall be
construed as a waiver by Cypress of any right
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Cypress may have at law or in equity, following (A) any failure by Sumitomo to
tender any escrowed proceeds or any of the Required Documents as required by
paragraph 3 above (if such tender is not excused because of an election
by Sumitomo to keep the Premises under subparagraph 2(a)(ii) above) upon
the tender by Cypress or the Applicable Purchaser of the payments required by
paragraph 2 and of any other documents to be executed in favor of
Sumitomo at the closing of the sale hereunder, or (B) any failure by Sumitomo to
remove all liens created by Sumitomo other than the Permitted Title Exceptions
before conveying the Premises pursuant to this Agreement, including the right
(i) to recover monetary damages proximately caused by such failure of Sumitomo
if Sumitomo does not cure the failure within thirty (30) days after Cypress
demands a cure by written notice to Sumitomo, or (ii) to obtain a decree
compelling specific performance of Sumitomo's obligations hereunder.
(b) Remedies Under the Sublease. No repossession of or
re-entering upon the Premises or exercise of any other remedies available under
or in connection with the Sublease (including any termination of the Sublease by
Sumitomo because of an Event of Default or any rejection of the Sublease by
Cypress in any bankruptcy proceeding) shall relieve the parties of their
liabilities and obligations hereunder, all of which shall survive the exercise
of remedies available under or in connection with the Sublease. The parties
acknowledge that the consideration for this Agreement is separate and
independent of the consideration for the Sublease, and their obligations
hereunder shall not be affected or impaired by any event or circumstance that
would excuse Cypress or Sumitomo from performance of an obligation under the
Sublease, the Pledge Agreement, or any other Transaction Document. Nothing in
this paragraph 4(c) shall be construed to impair, amend, modify, limit
or otherwise affect the definition of Designated Payment Date.
5. Remedies Cumulative. No right or remedy herein conferred upon or
reserved to Sumitomo is intended to be exclusive of any other right or remedy
Sumitomo has with respect to the Premises, and each and every right and remedy
shall be cumulative and in addition to any other right or remedy given hereunder
or now or hereafter existing at law or in equity or by statute. In addition to
other remedies available under this Agreement, either party shall be entitled,
to the extent permitted by applicable law, to a decree compelling performance of
any of the other party's agreements hereunder.
6. No Implied Waiver. The failure of either party to this Agreement
to insist at any time upon the strict performance of any covenant or agreement
of the other party or to exercise any remedy contained in this Agreement shall
not be construed as a waiver or a relinquishment thereof for the future. The
waiver by either party of or redress for any violation of any term, covenant,
agreement or condition contained in this Agreement shall not prevent a
subsequent act, which would have originally
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constituted a violation, from having all the force and effect of an original
violation. No express waiver by either party shall affect any condition other
than the one specified in such waiver and only for the time and in the manner
specifically stated. A receipt by Sumitomo of any payment hereunder with
knowledge of the breach of this Agreement shall not be deemed a waiver of such
breach, and no waiver by either party of any provision of this Agreement shall
be deemed to have been made unless expressed in writing and signed by the
waiving party.
7. Attorneys' Fees and Legal Expenses. If either party commences
any legal action or other proceeding to enforce any of the terms of this
Agreement or the documents and agreements referred to herein, or because of any
breach by the other party or dispute hereunder or thereunder, the successful or
prevailing party shall be entitled to recover from the nonprevailing party all
attorneys' fees incurred in connection therewith, whether or not such
controversy, claim or dispute is prosecuted to a final judgment. Any such
attorneys' fees incurred by either party in enforcing a judgment in its favor
under this Agreement shall be recoverable separately from such judgment, and the
obligation for such attorneys' fees is intended to be severable from other
provisions of this Agreement and not to be merged into any such judgment.
8. Estoppel Certificate. Each party will, upon not less than twenty
(20) days' prior written request, execute, acknowledge and deliver to the
requesting party a written statement certifying that this Agreement is
unmodified and in full effect (or, if there have been modifications, that this
Agreement is in full effect as modified, and setting forth such modification)
and either stating that no default exists hereunder or specifying each such
default of which the signer may have knowledge. Any such statement may be relied
upon by any prospective purchaser or assignee with respect to the Premises. Each
party shall be required to provide such a certificate no more frequently than
once in any six month period; provided, however, that if a party determines that
there is a significant business reason for requiring a current certificate,
including, without limitation, the need to provide such a certificate to a
prospective purchaser or assignee, the other party shall provide a certificate
upon request whether or not a certificate has been provided within the prior six
month period.
9. Notices.
(a) All payments required to be made by Cypress or the Applicable
Purchaser to Sumitomo hereunder shall be paid to Sumitomo by immediately
available funds by wire-transfer to:
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<PAGE> 103
Morgan Guaranty Trust Company of New York
ABA #021000238
For Credit to the Sumitomo Bank, Limited
Further Credit to Sumitomo Bank Leasing
and Finance, Inc.
A/C No. 283572
or at such other place and in such other manner as Sumitomo may designate in a
notice to Cypress (provided Sumitomo will not unreasonably designate a method of
payment other than wire-transfer). Time is of the essence as to all payments to
Sumitomo under this Agreement. Any payments required to be made by Sumitomo to
Cypress pursuant to the last sentence of subparagraph 2(a)(ii) above
shall be paid to Cypress in immediately available funds at the address of
Cypress set forth below or as Cypress may otherwise direct by written notice
sent in accordance herewith.
(b) All notices, demands and other communications to be made hereunder
to the parties hereto shall be in writing (at the addresses set forth below) and
shall be given by any of the following means (i) personal service, with proof of
delivery or attempted delivery retained; (ii) overnight courier (charges prepaid
or billed to the sender); or (iii) registered or certified first class mail,
return receipt requested. Such addresses may be changed by at least thirty (30)
days prior notice to the other parties given in the same manner as provided
above. Any notice or other communication sent pursuant to this paragraph shall
be deemed effective upon being personally delivered or actually received.
Address of Sumitomo:
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, NY 10172
Attn: Chief Credit Officer
With a copy to:
Landels, Ripley & Diamond
Hills Plaza
350 Steuart Street
San Francisco, CA 94105-1250
Attn: Bruce W. Hyman, Esq.
And with a copy to:
Sumitomo Bank of New York Trust Company
277 Park Avenue
New York, NY 10172
Attn: Corporate Trust Department
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<PAGE> 104
Address of Cypress:
Cypress Semiconductor (Minnesota) Inc.
2401 E. 86th
Bloomington, MN 55425
Attn: Mr. Jim Weir, Vice President, Finance
With a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill
Palo Alto, California 94304-1050
Attention: Debra Summers, Esq.
And with a copy to:
Cypress Semiconductor
3901 North First Street
San Jose, CA 95134
Attn: Mr. Kirk Johnson, Corporate Controller
10. Severability. Each and every covenant and agreement of Cypress
contained in this Agreement is, and shall be construed to be, a separate and
independent covenant and agreement. If any term or provision of this Agreement
or the application thereof to any person or circumstances shall to any extent be
invalid and unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby. Further,
the obligations of Cypress hereunder, to the maximum extent possible, shall be
deemed to be separate, independent and in addition to, not in lieu of, the
obligations of Cypress under the Sublease. In the event of any inconsistency
between the terms of this Agreement and the terms and provisions of the
Sublease, the terms and provisions of this Agreement shall control.
11. Entire Agreement. This Agreement and the documents and
agreements referred to herein set forth the entire agreement between the parties
concerning the subject matter hereof and no amendment or modification of this
Agreement shall be binding or valid unless expressed in a writing executed by
both parties hereto.
12. Paragraph Headings. The paragraph headings contained in this
Agreement are for convenience only and shall in no way enlarge or limit the
scope or meaning of the various and several paragraphs hereof.
13. Gender and Number. Within this Agreement, words of any gender
shall be held and construed to include any other gender and words in the
singular number shall be held and construed to include the plural, unless the
context otherwise requires.
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<PAGE> 105
14. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE
UNDER AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA WITHOUT REGARD
TO CONFLICTS OR CHOICE OF LAWS.
15. Successors and Assigns. The terms, provisions, covenants and
conditions hereof shall be binding upon Cypress and Sumitomo and their
respective permitted successors and assigns and shall inure to the benefit of
Cypress and Sumitomo and all permitted transferees, mortgagees, successors and
assignees of Cypress and Sumitomo with respect to the Premises; provided, that
the rights of Sumitomo hereunder shall not pass to Cypress or any Applicable
Purchaser or any subsequent owner claiming through them.
16. WAIVER OF JURY TRIAL. SUMITOMO AND CYPRESS EACH HEREBY WAIVES
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THE SUBLEASE, THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE
RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to
be all encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including without
limitation, contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. Cypress and Sumitomo each acknowledge that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on the waiver in entering into this Agreement and the other
documents referred to herein, and that each will continue to rely on the waiver
in their related future dealings. Cypress and Sumitomo each further warrant and
represent that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following consultations
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LEASE OR THIS AGREEMENT.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
17. Certain Tax Matters. The provisions of Section 19.2 of the
Sublease are incorporated herein by this reference.
18. Security and Escrowed Proceeds. Cypress' obligations under this
Agreement are secured by the Pledge Agreement, reference to which is hereby made
for a description of the Collateral (as defined in the Pledge Agreement) covered
thereby and the rights and remedies provided to Sumitomo thereby. Although
Sumitomo shall be entitled to hold all Collateral as security for the full and
faithful performance by Cypress of Cypress' covenants and obligations under this
Agreement, the Collateral shall not be considered an advance payment of the
Purchase Price or any Shortage Amount or a measure of Sumitomo's
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<PAGE> 106
damages should Cypress breach this Agreement. Sumitomo shall be entitled to
return any Collateral not sold or used to satisfy the obligations secured by the
Pledge Agreement directly to Cypress notwithstanding any prior actual or
attempted conveyance or assignment by Cypress, voluntary or otherwise, of any
right to receive the same; neither Sumitomo nor the custodian named in the
Custodial Agreement shall be responsible for the proper distribution or
application by Cypress of any such Collateral returned to Cypress; and any such
return of Collateral to Cypress shall discharge any obligation of Sumitomo to
deliver such Collateral to all persons claiming an interest in the Collateral.
Further, Sumitomo shall be entitled to deliver any escrowed proceeds it holds on
the Designated Payment Date directly to Cypress or to any Applicable Purchaser
purchasing Sumitomo's interest in the Premises and any escrowed proceeds
pursuant to this Agreement notwithstanding any prior actual or attempted
conveyance or assignment by Cypress, voluntary or otherwise, of any right to
receive the same; Sumitomo shall not be responsible for the proper distribution
or application by Cypress or any Applicable Purchaser of any such escrowed
proceeds paid over to Cypress or the Applicable Purchaser; and any such payment
of any escrowed proceeds to Cypress or an Applicable Purchaser shall discharge
any obligation of Sumitomo to deliver the same to all persons claiming an
interest therein.
19. Counterpart Signatures. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall comprise but a single instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
[Signatures begin on next page]
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<PAGE> 107
"Sumitomo"
SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation
By: /s/ WILLIAM M. GINN
------------------------------
Name: William M. Ginn
Its: President
"Cypress"
CYPRESS SEMICONDUCTOR (MINNESOTA) INC., a Delaware corporation
By: /s/ EMMANUEL HERNANDEZ
------------------------------
Name: Emmanuel Hernandez
Title: Authorized Representative
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<PAGE> 108
Exhibit A
The land referred to is situated in the State of Minnesota, County of Hennepin,
and is described as follows:
Lot 1, Block 1, Cypress Addition, Hennepin County, Minnesota
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<PAGE> 109
Exhibit B
LIMITED WARRANTY DEED
Form No. 23-A1
LIMITED WARRANTY
Corporation or Partnership In
Corporation or Partnership
No delinquent taxes and transfer
entered: Certificate of Real Estate
Value ( ) filed ( ) not required
Certificate of Real Estate Value No. ________
_____________________________, 19 ____
----------------------------------------
County Auditor
by _____________________________________
Deputy
STATE DEED TAX DUE HEREON: $ ___________
Date: ____________________________, 19__
(reserved for recording data)
FOR VALUABLE CONSIDERATION, ____________________________________________________
__________________________, ___________________________________under the laws of
__________________ Grantor, hereby conveys and quitclaims to ___________________
____________________________________________________________________, Grantor, a
_____________________ under the laws of ______________________, real property in
________________________ County, Minnesota, described as follows:
(If more space is needed, continue on back.)
together with all hereditaments and appurturances belonging thereto. Grantor
covenants and represents that:
(1) This Deed conveys after-acquired title; and
(2) Grantor has not made, done, executed or suffered any act or thing whereby
the above-described property or any part thereof, now or at any time
hereafter, shall or may be imperiled, charged or incumbered in any manner,
and Grantor will warrant the title to the above-described property against
all persons claiming the same from or through Grantor as a result of any
such act or thing. EXCEPT: _______________________________________________
__________________________________________________________________________
________________________________
Affix Deed Tax Stamp Here
By _____________________________
Its _________________________
By _____________________________
Its _________________________
STATE OF MINNESOTA
COUNTY OF ss
The forgoing instrument was acknowledged before me this ___ day of _____, 19__
by ______________________________ and ________________________________________
the _______________________________and _______________________________________
of _______________________________________, a ________________________________
under the laws of ________________________, on behalf of the _________________
_______________________________________
Signature of person taking
acknowledgement
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<PAGE> 110
Exhibit C
BILL OF SALE, ASSIGNMENT OF CONTRACT
RIGHTS AND INTANGIBLE ASSETS
Reference is made to that certain ____________________ dated
____________________ (the "Agreement") between ____________________, as seller,
and ____________________ ("Assignor") as buyer.
Assignor hereby sells, transfers and assigns unto (Cypress OR the
Applicable Purchaser, as the case may be], a ____________________ ("Assignee"),
all of Assignor's right, title and interest in and to the following property, if
any, to the extent such property is assignable:
(a) any warranties, guaranties, indemnities and claims Assignor may have
under the Agreement or under any document delivered by the seller thereunder to
the extent related to the real property described in Annex A attached hereto
(the "Property"), including specifically, without limitation, warranties,
guaranties, indemnities and claims for workmanship, materials and performance;
(b) all licenses, permits or similar consents (excluding any prepaid
utility reservations) from third parties to the extent related to the Property;
(c) All insurance, condemnation, causes of action and other reimbursable
amounts with respect to the Property which have not heretofore been applied by
Assignor to any escrowed proceeds and any pending or future award made because
of any condemnation affecting the Property or because of any conveyance to be
made in lieu thereof, and any unpaid award for damage to the Property and any
unpaid proceeds of insurance or claim or cause of action for damage, loss or
injury to the Property; and
(d) any general intangibles, permits, licenses, franchises, certificates,
and other rights and privileges owned by Assignor and used solely in connection
with, or relating solely to, the Property, including any such rights and
privileges conveyed to Assignor pursuant to the Agreement; but excluding any
rights or privileges of Assignor under (i) the Environmental Indemnity, as
defined in that certain ____________________ between __________ and
______________________ dated as of ____________________ (the
"__________________") (pursuant to which this document is being delivered), (ii)
the Lease, as defined in the ____________________, to the extent rights under
the Lease relate to the period ending on the date hereof, whether such rights
are presently known or unknown, including rights of the Assignor to be
indemnified against claims of third parties as provided in the Lease which may
not presently be known, and including rights to recover any accrued unpaid rent
under the Lease which may be
<PAGE> 111
outstanding as of the date hereof, (iii) agreements between Assignor and any
participant, or any modification or extension thereof, and (iv) any other
instrument being delivered to Assignor contemporaneously herewith pursuant to
the ____________________.
Assignor does for itself and its heirs, executors and administrators,
covenant and agree to warrant and defend the title to the Property assigned
herein against any liens created by Landlord but not otherwise.
Assignee hereby assumes and agrees to keep, perform and fulfill Assignor's
obligations, if any, relating to any permits or contracts, under which Assignor
has rights being assigned herein.
Executed: ____________________
ASSIGNOR:
------------------------------
------------------------------
By:
---------------------------
Its:
-----------------------
ASSIGNEE:
[Cypress, or the Applicable
Purchaser], a
-----------------
By:
---------------------------
Its:
-----------------------
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<PAGE> 112
Exhibit A
The land referred to is situated in the State of Minnesota, County of Hennepin,
and is described as follows:
Lot 1, Block 1, Cypress Addition, Hennepin County, Minnesota
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<PAGE> 1
$15,100,000
AMENDED AND RESTATED
LEASE AGREEMENT
BETWEEN
BNP LEASING CORPORATION,
AS LANDLORD
AND
CYPRESS SEMICONDUCTOR CORPORATION,
AS TENANT
EFFECTIVE AS OF SEPTEMBER 1, 1994
PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN SUBPARAGRAPH 19.(K) OF THIS
LEASE, THIS LEASE AND THE PURCHASE AGREEMENT REFERENCED HEREIN ARE TO
CONSTITUTE, FOR INCOME TAX PURPOSES ONLY, A FINANCING ARRANGEMENT OR
CONDITIONAL SALE. AS PROVIDED IN SUBPARAGRAPH 19.(K) OF THIS LEASE, LANDLORD
AND TENANT EXPECT THAT TENANT (AND NOT LANDLORD) SHALL BE TREATED AS THE TRUE
OWNER OF THE PROPERTY FOR INCOME TAX PURPOSES, THEREBY ENTITLING TENANT (AND
NOT LANDLORD) TO TAKE DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE
TO THE OWNER.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Active Negligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) Applicable Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(f) Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(g) Banking Rules Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(h) Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(i) Basement Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(j) Base Rental Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(k) Base Rental Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(l) Breakage Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(m) Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(n) Capital Adequacy Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(o) Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(p) Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(q) Custodial Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(r) Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(s) Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(t) Designated Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(u) Effective Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(v) Environmental Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(w) Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(x) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(y) Environmental Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(z) Environmental Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(aa) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(ab) ERISA Termination Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(ac) Escrow Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(ad) Eurocurrency Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(ae) Eurodollar Rate Reserve Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(af) Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ag) Excluded Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ah) Fed Funds Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ai) GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(aj) Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(ak) Hazardous Substance Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
(al) Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(am) Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(an) Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(ao) Initial Funding Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(ap) Landlord's Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(aq) Landlord's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(ar) LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(as) Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(at) Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(au) Misconduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(av) Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(aw) Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(ax) Permitted Hazardous Substance Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(ay) Permitted Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(az) Permitted Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(ba) Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(bb) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(bc) Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(bd) Prime Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(be) Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(bf) Purchase Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(bg) Qualified Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(bh) Remaining Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(bi) Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(bj) Responsible Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(bk) Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(bl) Stipulated Loss Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(bm) Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(bn) Tenant's Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(bo) Trade Fixture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(bp) Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(bq) Unfunded Benefit Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(br) Other Terms and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
3. Rental
(a) Base Rent. Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Upfront Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Interest and Order of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(f) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) No Demand or Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4. Insurance and Condemnation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5. No Lease Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Status of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Waiver by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6. Purchase Documents and Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7. Use and Condition of Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Consideration of and Scope of Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8. Other Representations, Warranties and Covenants of Tenant . . . . . . . . . . . . . . . . . . . . . . 25
(a) Financial Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Existing Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(c) No Default or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(d) Compliance with Covenants and Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Environmental Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(f) No Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(g) Condition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(h) Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(j) Not a Foreign Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(k) Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(l) Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(m) Tenant Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(n) Operation of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(o) Debts for Operation of Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(p) Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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(q) Repair, Maintenance, Alterations and Additions . . . . . . . . . . . . . . . . . . . . . . . . 31
(r) Insurance and Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(s) Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(t) Protection and Defense of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(u) No Liens on the Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(v) Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(w) Financial statements; Required Notices; Certificates as to Default . . . . . . . . . . . . . . 34
(x) Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(y) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(z) Fees and Expenses; General Indemnification; Increased Costs; and Capital Adequacy Charges . . 37
(aa) Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(ab) Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(ac) Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(i) Environmental Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(ii) Environmental Inspections and Reviews . . . . . . . . . . . . . . . . . . . . . . . . 41
(iii) Notice of Environmental Problems . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(ad) Right of Landlord to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(ae) Affirmative Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(i) Quick Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(ii) Minimum Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(af) Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(ag) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9. Other Representations, Warranties and Covenants of Landlord . . . . . . . . . . . . . . . . . . . . . 44
(a) Removal of Landlord's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) Actions Required of the Title Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) No Default or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(d) No Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(e) Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(f) Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(g) Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(h) Not a foreign Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10. Assignment and Subletting by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Landlord's Consent Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Transfers in Violation of ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) Standard for Landlord's Consent to Assignments and Certain Other Matters . . . . . . . . . . . 46
(d) Consent Not a Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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11. Assignment by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(a) Landlord's Assignment Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(b) Restrictions on Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12. Environmental Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(a) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(b) Assumption of Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(c) Notice of Environmental Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(d) Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(e) Survival of the Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
13. Landlord's Right of Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(a) Definition of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(b) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(c) Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(d) Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
(e) Waiver by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(f) No Implied Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
15. Default by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
16. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
17. Surrender Upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
18. Holding Over by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
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19. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
(a) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
(b) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(c) No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(d) No Immplied Representations by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(e) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(f) Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(g) Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(h) Termination of Prior Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(j) Waiver of a Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(k) Income Tax Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
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<PAGE> 8
LEASE AGREEMENT
This LEASE AGREEMENT (hereinafter called this "LEASE"), made to be
effective as of September 1, 1994 (all references herein to the "DATE HEREOF"
or words of like effect shall mean such effective date), by and between BNP
LEASING CORPORATION, a Delaware corporation (hereinafter called "LANDLORD"),
and CYPRESS SEMICONDUCTOR CORPORATION, a Delaware corporation (hereinafter
called "TENANT");
W I T N E S E T H T H A T:
WHEREAS, pursuant to an Agreement of Purchase and Sale dated September
1, 1994 (hereinafter called the EXISTING CONTRACT") covering the land described
in Exhibit A attached hereto (hereinafter called the "LAND") and improvements
thereon from Oakmead Building Associates (hereinafter called "SELLER")
contemporaneously with the execution of this Lease;
WHEREAS, pursuant to two existing leases (the "EXISTING LEASES")
between Seller, as lessor, and Tenant, as lessee, Tenant is already in
possession of the Land; and
WHEREAS, in anticipation of Landlord's acquisition of the Land and
other property hereinafter described, Landlord and Tenant have reached
agreement as to the terms and conditions upon which Landlord is willing to
lease the same to Tenant, and by this Lease Landlord and Tenant desire to
evidence such agreement and to amend and restate the Existing Leases in their
entirety;
NOW, THEREFORE, in consideration of the rent to be paid and the
covenants and agreements to be performed by Tenant, as hereinafter set
forth,Landlord does hereby LEASE, DEMISE and LET unto Tenant for the term
hereinafter set forth the Land, together with:
(i) Landlord's interest in any and all buildings and
improvements now or hereafter erected on the Land, including, but not
limited to, the fixtures, attachments, appliances, building service,
equipment, machinery and other articles attached to such buildings and
improvements (hereinafter called the "IMPROVEMENTS");
(ii) all easements, rights-of-way now and other
appurtenant rights owned or hereafter acquired by Landlord for use in
connection with the Land or Improvements or as a means of access
thereto;
(iii) all right, title and interest of Landlord, now owned
or hereafter acquired, in and to (A) any land lying within the
right-of-way of any street, open or proposed, adjoining the Land, (B)
any and all sidewalks and alleys adjacent to the Land and (C) any
strips and gores between the Land and abutting land.
<PAGE> 9
The land and all of the property described in items (i) through (iii) above are
hereinafter referred to collectively as the "REAL PROPERTY".
In addition to conveying the leasehold in the Real Property as
described above, Landlord hereby grants and assigns to Tenant for the term of
this Lease the right to use and enjoy (and, to the extent the following consist
of contract rights, to enforce) any interests or rights in, to or under the
following that have been transferred to Landlord by Seller under the Existing
Contract or which are hereafter acquired by Landlord, to the extent any such
rights and interests are assignable and related to the Real Property: (a) any
goods, building service equipment, chattels and personal property of whatever
nature that are located on the Real Property and transferred to Landlord by
Seller under the Existing Contract and all renewals or replacements of or
substitutions for any of the foregoing; and (b) any general intangibles,
permits,licenses, franchises, certificates, and other rights and privileges.
All of the property, rights and privileges described above in this paragraph
are hereinafter collectively called the "PERSONAL PROPERTY." The Real Property
and the Personal Property are hereinafter sometimes collectively called the
"LEASED PROPERTY."
Provided, however, the leasehold estate conveyed hereby and Tenant's
rights hereunder are expressly made subject and subordinate to the Permitted
Encumbrances (as hereinafter defined) and to any other claims not constituting
Landlord's Liens (as hereinafter defined).
The Leased Property is leased by Landlord to Tenant and is accepted
and is to be used and possessed by Tenant upon and subject to the following
terms, provisions, covenants, agreements and conditions:
1. Definitions. As used herein, the terms "Landlord," "Tenant,"
"Existing Contract" "Seller," "Existing Leases," "Land," "Improvements," "Real
Property," "Personal Property" and "Leased Property" shall have the meanings
indicated above and the terms listed immediately below shall have the following
meanings:
(a) Active Negligence. "ACTIVE NEGLIGENCE" of any Person
including Landlord) means, and is limited to, the negligent conduct of
activities on the Leased Property by such Person or by others acting and
authorized to act on such Person's behalf in a manner that proximately causes
actual bodily injury or property damage to occur. "ACTIVE NEGLIGENCE" shall
not include (1) any negligent failure of Landlord to act when the duty to act
would not have bee imposed but for Landlord's status as owner of the Leased
Property or as a party to the transactions described in this lease, (2) any
negligent failure of any other Indemnified Party to act when the duty to act
would not have been imposed but for such party's contractual or other
relationship to Landlord or participation or facilitation in any manner,
directly or indirectly, of the transactions described in this Lease, or (3) the
exercise in a lawful manner by Landlord (or any party lawfully claiming through
or under Landlord) of any right or remedy provided herein or in the Purchase
Documents.
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<PAGE> 10
(b) Additional Rent. "ADDITIONAL RENT" shall have the
meaning assigned to it in subparagraph 3.(c) below.
(c) Affiliate. "AFFILIATE" of any Person means any other
Person controlling, controlled by or under common control with such Person.
For purposes of this definition, the term "CONTROL" when used with respect to
any Person means the power to direct the management of policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.
(d) Applicable Laws. "APPLICABLE LAWS" shall have the
meaning assigned to it in subparagraph 8.(d) below.
(e) Applicable Purchaser. "APPLICABLE PURCHASER" means
any third party designated by Tenant to purchase the Landlord's interest in the
Leased Property and in any Escrowed Proceeds as provided in the Purchase
Agreement.
(f) Attorneys' Fees. "ATTORNEYS' FEES" means the
reasonable fees and expenses of counsel to the parties incurring the same,
which may include fairly allocated costs of in-house counsel, printing,
photostating, duplicating and other expenses, air freight charges, and
reasonable fees billed for law clerks, paralegals, librarians and others not
admitted to the bar but performing services under the supervision of any
attorney. Such terms shall also include, without limitation, all such
reasonable fees and expenses incurred with respect to appeals, arbitrations and
bankruptcy proceedings, and whether or not any manner or proceeding is brought
with respect to the matter for which such fees and expenses were incurred.
(g) Banking Rules Change. "BANKING RULES CHANGE" means
either: (1) the introduction of or any change after the date hereof (other than
any change by way of imposition or increase of reserve requirements included in
the Eurodollar Rate Reserve Percentage) in any law or regulation, in the
generally accepted interpretation by the institutional lending community of any
law or regulation or in the interpretation of any law or regulation asserted by
any regulator, court or other governmental authority or (2) the compliance with
any new guideline or new request after the date hereof from any central bank or
other governmental authority (whether or not having the force of law).
(h) Base Rent. "BASE RENT" means the rent payable by
Tenant pursuant to subparagraph 3.(a) below.
(i) Basement Commencement Date. "BASE RENT COMMENCEMENT
DATE" means the date hereof.
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<PAGE> 11
(j) Base Rental Date. "BASE RENTAL DATE" means the first
Business Day of each January, April, July and October, beginning with the first
Business Day of October, 1994 and continuing regularly thereafter to and
including the Designated Payment Date.
(k) Base Rental Period. The first "BASE RENTAL PERIOD"
shall be a short period beginning on and including the effective date hereof
and ending on but not including the first Base Rental Date. Each successive
"BASE RENTAL PERIOD" after the first Base Rental Period shall be a period of
approximately three (3) months, which shall begin on and include the day on
which the preceding Base Rental Period ends and shall end on but not include
the next following Base Rental Date.
(l) Breakage Costs. "BREAKAGE COSTS" means any and all
costs, losses or expenses incurred or sustained by Landlord's Lender or any
Participant, for which Landlord's Lender or the Participant shall expect
reimbursement from Landlord, because of the resulting liquidation or
redeployment of deposits or other funds used to make or maintain advances to
the Landlord in connection with the Leased Property upon any application of a
Qualified Payment, any sale of the Leased Property pursuant to the Purchase
Agreement or any termination of this Lease, if such application, sale or
termination occurs on any day other than a Base Rental Date. Breakage costs
will include losses attributable to any decline in LIBOR as of the effective
date of termination as compared to LIBOR used to determine the Effective Rate
then in effect. (However, if Landlord's Lender or the applicable Participant
actually receives a profit upon the liquidation or redeployment of deposits or
other funds used to make or maintain advances to the Landlord in connection
with the Leased Property, because of any increase in LIBOR, then such profit
will be offset against costs or expenses that would otherwise be charged as
Breakage Costs under this Lease.) Each determination by Landlord's Lender of
Breakage Costs shall, in the absence of clear and demonstrable error, be
conclusive and binding upon Landlord and Tenant.
(m) Business Day. "BUSINESS DAY" means any day that is
(1) not a Saturday, Sunday or day on which commercial banks are generally
closed or required to be closed in New York City, New York or San Francisco,
California, and (2) a day on which dealings in deposits of dollars are
transacted in the London interbank market; provided that if such dealings are
suspended indefinitely for any reason, "BUSINESS DAY" shall mean any day
described in clause (1).
(n) Capital Adequacy Charges. "CAPITAL ADEQUACY CHARGES"
means any additional amounts Landlord's Lender requires Landlord to pay as
compensation for an increase in required capital as provided in subparagraph
8.(z)(iv).
(o) Closing Costs. "CLOSING COSTS" means the excess of
$15,100,000 over the sums actually paid by Landlord for or in connection with
Landlord's acquisition of the Leased Property at the closing under the Existing
Contract, which excess will be advanced by or on behalf of Landlord to pay
Attorneys' Fees and other costs incurred in connection with the preparation and
negotiation of this Lease, the Purchase Documents, the Environmental Indemnity
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<PAGE> 12
and related documents. To the extent that Landlord does not itself use such
excess to pay expenses incurred by Landlord in connection with the preparation
and negotiation of such documents, the remainder thereof will be advanced to
Tenant for payment of expenses incurred by Tenant in connection therewith or
the payment of Rents next due.
(p) Code. "CODE" means the Internal Revenue Code of
1986, as amended from time to time.
(q) Custodial Agreement. "CUSTODIAL AGREEMENT" means the
Custodial Agreement dated as of the date hereof between Banque Nationale de
Paris,new York Branch, and Tenant pursuant to which such bank will hold
securities pledged by Tenant as collateral for Tenant's obligations under the
Purchase Agreement, as such Custodial Agreement may be extended, supplemented,
amended, restated or otherwise modified from time to time in accordance with
its terms.
(r) Default. "DEFAULT" means any event which, with the
passage of time or the giving of notice or both, would (if not cured within any
applicable cure period) constitute an Event of Default.
(s) Default Rate. "DEFAULT RATE" means a floating per
annum rate equal to three percent (3%) above the Prime Rate. However, in no
event will the Default Rate exceed the maximum interest rate permitted by law.
(t) Designated Payment Date. "DESIGNATED PAYMENT DATE"
shall have the meaning assigned to it in the Purchase Agreement.
(u) Effective Rate. "EFFECTIVE RATE" means:
(i) for the short first Base Rental Period ending
October 1, 1994, the per annum rate which equals the
Spread plus the per annum rate charged to Landlord by
Landlord's Lender on the Initial Funding Advance for
such Base Rental Period, it being understood that the
rate charged to Landlord by Landlord's Lender during
such period will be equal to the rate Landlord's
Lender establishes internally as its marginal cost of
funds; and
(ii) for each subsequent Base Rental Period, the
per annum rate which equals the Spread plus the per
annum rate determined by dividing (A) LIBOR for such
Base Renal Period by (B) 100% minus the Eurodollar
Rate Reserve Percentage for such Base Rental Period.
When "LIBOR or the "Eurodollar Rate Reserve
Percentage" changes upon the commencement of a new
Base Rental Period in accordance with the definitions
of those terms herein, then the Effective Rate shall
be automatically increased or decreased, as the case
may be, upon the
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commencement of such Base Rental Period. If for any
reason Landlord determines that it is impossible or
impractical to determine the Effective Rate with
respect to a given Base Rental Period in accordance
with the preceding sentences, then the "EFFECTIVE
RATE" with respect to a given Base Rental Period in
accordance with the preceding sentences, then the
"EFFECTIVE RATE" for that Base Rental Period shall
equal the Spread plus any published index or per annum
interest rate determined in good faith by Landlord's
Lender to be comparable to LIBOR at the beginning of
the first day of that period. A comparable interest
rate might be, for example, the then existing yield on
short term United States Treasury obligations (as
compiled by and published in the then most recently
published United states Federal Reserve Statistical
Release H.15(519) or its successor publication), plus
or minus a fixed adjustment based on Landlord's
Lender's comparison of past eurodollar market rates to
past yields on such Treasury obligations. Any
determination by Landlord's Lender of the Effective
Rate hereunder shall, in the absence of clear and
demonstrable error, be conclusive and binding.
(v) Environmental Cutoff Date. "ENVIRONMENTAL CUTOFF
DATE" means the later of the dates upon with (i) this Lease terminates, (ii)
Tenant surrenders possession of the Leased Property or (iii) Tenant ceases to
have any leasehold or other interest in the Leased Property under this Lease or
otherwise.
(w) Environmental Indemnity. "ENVIRONMENTAL INDEMNITY"
means the separate Environmental Indemnity Agreement dated as of the date
hereof executed by Tenant in favor of Landlord covering the Land and certain
other property described therein, as such agreement may be extended,
supplemented, amended, restated or otherwise modified from time to time in
accordance with its terms.
(x) Environmental Laws. "ENVIRONMENTAL LAWS" means any
and all existing and future Applicable Laws pertaining to safety, health or the
environment, or to Hazardous Substances or Hazardous Substance Activities,
including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986 (as amended, hereinafter called "CERCLA"), and
the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the
Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called
"RCRA") .
(y) Environmental Losses. "ENVIRONMENTAL LOSSES" means
Losses suffered or incurred by any Indemnified Party relating to or arising out
of, based on or as a result of: (i) any Hazardous Substance Activity that
occurs or is alleged to have occurred on or prior to the Environmental Cutoff
Date; (ii) any violation on or prior to the Environmental Cutoff Date of
Environmental Laws relating to the Leased Property or to the ownership, use,
occupancy or
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operation thereof; (iii) any investigation, inquiry, order, hearing, action, or
other proceeding by or before any governmental or quasi-governmental agency or
authority in connection with any Hazardous Substance Activity that occurs or is
alleged to have occurred in whole or in part on or prior to the Environmental
Cutoff Date; or (iv) any claim, demand, cause of action or investigation, or
any action or other proceeding, whether meritorious or not, brought or asserted
against any Indemnified Party which relates to, arises from, is based on, or
results from any of the matters described in clauses (i), (ii) or (iii) of this
subparagraph 1.(x), or any allegation of any such matters. For purposes of
determining whether Losses constitute "Environmental Loss," as the term is used
in this Lease, any actual or alleged Hazardous Substance Activity or violation
of Environmental Laws relating to the Leased Property will be presumed to have
occurred prior to the Environmental Cutoff Date unless Tenant establishes by
clear and convincing evidence to the contrary that the relevant Hazardous
Substance Activity or violation of Environmental Laws did not occur or commence
prior to the Environmental Cutoff Date. Even if after the Environmental Cutoff
Date Losses are incurred by or asserted against a particular Indemnified Party
that would not have been incurred or asserted, but for any matter described in
clauses (i), (ii) or (iii) of this subparagraph 1.(x), or an allegation of any
such matter,then such Losses will constitute Environmental Losses. FURTHER,
ENVIRONMENTAL LOSSES INCURRED BY OR ASSERTED AGAINST A PARTICULAR INDEMNIFIED
PARTY SHALL INCLUDE LOSSES RELATING TO OR ARISING OUT OF OR AS A RESULT OF ANY
MATTERS LISTED IN THE PRECEDING SENTENCE EVEN WHEN SUCH MATTERS ARE CAUSED BY
THE NEGLIGENCE OF THAT PARTICULAR OR ANY OTHER INDEMNIFIED PARTY; PROVIDED,
HOWEVER,THAT LOSSES INCURRED BY OR ASSERTED AGAINST A PARTICULAR INDEMNIFIED
PARTY AND PROXIMATELY CAUSED BY (AND ATTRIBUTED BY ANY APPLICABLE PRINCIPLES OF
COMPARATIVE FAULT TO) MISCONDUCT OF THAT INDEMNIFIED PARTY WILL NOT CONSTITUTE
ENVIRONMENTAL LOSSES OF SUCH INDEMNIFIED PARTY FOR PURPOSES OF THIS LEASE.
(z) Environmental Report. "ENVIRONMENTAL REPORT" means
the following certain reports: Environmental Site Assessment for 3833 N. First
Street, 3901 North First Street, 195 Champion Court, San Jose, California,
prepared by Earth Metrics Incorporated, dated April 19, 1989; Level One
Environmental Site Assessment for Two Lots Known as the Cypress Property, 3901
North First Street and 195 Champion Court, San Jose, California, prepared by
Certified/Earth Metrics, dated November 25, 1992; Final Annual Report of
Ground-Water Monitoring (1993) at 3901 North First Street, San Jose,
California, prepared by Certified/Earth Metrics, dated January 31, 1994; and
Phase I Environmental Assessment Report, Cypress Semiconductor Corporation,
3901 North First Street, 195 Champion Court, San Jose, California, prepared by
Weiss Associates, dated July 20, 1994, and the Addenda to such Phase I
environmental Assessment Report dated August 4, 1994 and August 5, 1994.
(aa) ERISA. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time,together with all rules and
regulations promulgated with respect thereto.
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(ab) ERISA Termination Event. "ERISA TERMINATION EVENT"
means (i) the occurrence with respect to any Plan of a) a reportable event
described in Sections 4043(b)(5) or (6) of ERISA or b) any other reportable
event described in Section 4043(b) of ERISA other than a reportable event not
subject to the provision for 30-day notice to the Pension Benefit Guaranty
Corporation pursuant to a waiver by such corporation under Section 4043(a) of
ERISA, or (ii) the withdrawal of Tenant or any Affiliate of Tenant from a Plan
during a plan year in which it was a "SUBSTANTIAL EMPLOYER" as defined in
Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to
terminate any Plan or the treatment of any Plan amendment as a termination
under Section 4041 of ERISA, or (iv) the institution of proceedings to
terminate any Plan by the Pension Benefit Guaranty Corporation under Section
4042 of ERISA, or (v) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan.
(ac) Escrow Proceeds. "ESCROWED PROCEEDS" means any
proceeds that are received by Landlord from time to time during the Term (and
any interest earned thereon), which Landlord is holding for the purposes
specified in the next sentence, from any party (1) under any casualty insurance
policy as a result of damage to the Leased Property, (2) as compensation for
any restriction placed upon the use or development of the Leased Property or
for the condemnation of the Leased Property or any portion thereof, (3) because
of any judgment, decree or award for injury or damage to the Leased Property or
(4) under any title insurance policy or otherwise as a result of any title
defect or claimed title defect with respect to the Leased Property; provided,
however, in determining "ESCROWED PROCEEDS" there shall be deducted all
expenses and costs of every type, kind and nature (including Attorneys' Fees)
incurred by Landlord to collect such proceeds; and provided, further, "ESCROWED
PROCEEDS" shall not include any payment to Landlord by a Participant or an
Affiliate of Landlord that is made to compensate Landlord for the Participant's
or Affiliate's share of any Losses Landlord may incur as a result of any of the
events described in the preceding clauses (1) through (4). "ESCROWED PROCEEDS"
shall include only such proceeds as are held by Landlord (A) pursuant to
Paragraph 4 for the payment to Tenant for the restoration or repair of the
Leased Property or (B) for application as a Qualified Payment or as
reimbursement of Breakage Costs incurred in connection with a Qualified
Payment. "ESCROWED PROCEEDS" shall not include any proceeds that have been
applied as a Qualified Payment or to pay any Breakage Costs incurred in
connection with a Qualified Payment. Until Escrowed Proceeds are paid to
Tenant pursuant to Paragraph 4 below or applied as a Qualified Payment or as
reimbursement for costs incurred in connection with a Qualified Payment,
Landlord shall keep the same deposited in an interest bearing account, and all
interest earned on such account shall be added to and made a part of Escrowed
Proceeds.
(ad) Eurocurrency Liabilities. "EUROCURRENCY LIABILITIES"
has the meaning assigned to that term in Regulation D of the Board of Governors
of the Federal Reserve System, as in effect from time to time.
(ae) Eurodollar Rate Reserve Percentage. "EURODOLLAR RATE
RESERVE PERCENTAGE" means, for purposes of determining the Effective Rate for
any Base Rental Period,
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the reserve percentage applicable two Business Days before the firs day of such
Base Rental Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
reserve requirement (including, but not limited to,any emergency, supplemental
or other marginal reserve requirement) for Landlord's Lender with respect to
liabilities or deposits consisting of or including Eurocurrency Liabilities (or
with respect to any other category or liabilities by reference to which LIBOR
is determined) having a term comparable to such Base Rental Period.
(af) Event of Default. "EVENT OF DEFAULT" shall have the
meaning assigned to it in subparagraph 14.(a) below.
(ag) Excluded Taxes. "EXCLUDED TAXES" shall mean (1) all
Federal, state and local income taxes upon Base Rent, the Upfront Fee, any
interest paid to Landlord pursuant to subparagraph 3.(d) and any additional
compensation claimed by Landlord pursuant to subparagraph 8.(z)(iv); (2) all
federal, state and local income taxes upon any amounts paid as reimbursement
for or to satisfy Losses incurred by Landlord under this Lease or otherwise to
the extent such taxes are offset by a corresponding reduction of Landlord's
income taxes because of Landlord's deduction of the reimbursed Losses from
Landlord's taxable income or because of any tax credits attributable thereto;
(3) taxes imposed by any governmental authority outside the United States; and
(4) any transfer or change of ownership taxes assessed because of Landlord's
transfer or change of ownership taxes assessed because of Landlord's transfer
or conveyance to any third party of Landlord's rights or interest in the Lease,
the Purchase Documents or the Leased Property, but excluding any such taxes
assessed because of any Permitted Transfer described in clauses (4) or (5) of
the definition of Permitted Transfer below. For purposes of this definition,
income taxes shall include without limitation any income taxes (whether or not
so designated) imposed under the Code of California Bank and Corporation Tax
Law as well as Texas corporate franchise taxes.
(ah) Fed Funds Rate. "FED FUNDS RATE" means, for any
period, a fluctuating interest rate (expressed as a per annum rate and rounded
upwards, if necessary, to the next 1/16 of 1%) equal for each day during such
period to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York,or, if such rates are not so published for any day which is a Business
Day, he average of the quotations for such day on such transactions received by
the Landlord's Lender from three Federal funds broker or recognized standing
selected by Landlord's Lender. All determinations of the Fed Funds Rate by
landlord's Lender. All determinations of the Fed Funds Rate by Landlord's
Lender shall, in the absence of clear and demonstrable error be binding and
conclusive upon Landlord and Tenant.
(ai) GAAP. "GAAP" means generally accepted accounting
principles in the United States of America as in effect from time to time,
applied on a basis consistent with those
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used in the preparation of the financial statements referred to in subparagraph
8.(w) (except for changes concurred in by Tenant's independent public
accountants).
(aj) Hazardous Substance. "HAZARDOUS SUBSTANCE" means (i)
any chemical, compound, material, mixture or substance that is now or hereafter
defined or listed in, regulated under, or otherwise classified pursuant to,
"hazardous waste," "extremely hazardous waste or substance," "infectious
waste," "toxic substance," "toxic pollutant," or any other formulation intended
to define, list or classify substances by reason of deleterious properties
addressed by Environmental Laws, including, without limitation, ignitability,
corrosiveness, reactivity, carcinogenicity, toxicity or reproductive toxicity;
(ii) petroleum, any fraction of petroleum, natural fuel (or mixtures of natural
gas and such synthetic gas), and ash produced by a resource recovery facility
utilizing a municipal sold waste stream, and drilling fluids, produced waters
and other wastes associated with the exploration, development or production of
crude oil, natural gas or geothermal resources; (iii) asbestos and any asbestos
containing material; (iv) "waste" as defined in Section 13050(d) of the
California Water Code and (v) any other material that,because of its quantity,
concentration or physical or chemical characteristics, poses a significant
present or potential hazard to human health or safety or to the environment if
released into the workplace or the environment.
(ak) Hazardous Substance Activity. "HAZARDOUS SUBSTANCE
ACTIVITY" means any actual, proposed or threatened use, storage, holding,
release (including, without limitation, any spilling, leaking, leaching,
pumping, pouring, emitting, emptying, dumping, disposing into the environment,
and the continuing migration into or through soil, surface water, groundwater or
any body of water), discharge, deposit, placement, generating, processing,
construction, treatment, abatement, removal, disposal, disposition, handling or
transportation of any Hazardous Substance from, under, in, into or on the Leased
Property, including without limitation, the movement or migration of any
Hazardous Substance from surrounding property, surface water, groundwater or
anybody of water under, in, into or onto the Leased Property and any resulting
residual Hazardous Substance contamination in, on or under the Leased Property.
"HAZARDOUS SUBSTANCE ACTIVITY" also means any existence of Hazardous Substances
on the Leased Property that would cause the Leased Property or the owner or
operator thereof to be in violation of, or that would subject the Leased
Property to any remedial obligation sunder, any Environmental Laws, including
without limitation CERCLA and RCRA, assuming disclosure to the applicable
governmental authorities of all relevant facts, conditions and circumstances
pertaining to the Leased Property.
(al) Impositions. "IMPOSITIONS" shall have the meaning
assigned to it in subparagraph 8(p) below.
(am) Improvements. "IMPROVEMENTS," as defined in the
recitals at the beginning of this Lease, shall include not only existing
improvements to the Land as of the date hereof, if any, but also any new
improvements or changes to existing improvements made by Tenant and any
replacements, substitutions or restorations thereof.
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(an) Indemnified Party. "INDEMNIFIED PARTY" means each of
(1) Landlord and any of Landlord's permitted successors and assigns as to all
or any portion of the Leased Property or any interest therein (but excluding
any Applicable Purchaser under the Purchase Agreement or any Person that claims
its interest in the Leased Property through or under Tenant or such Applicable
Purchaser), and (2) any Affiliate, officer, agent, director, employee or
servant of any of the parties described in clause (1) preceding.
(ao) Initial Funding Advance. "INITIAL FUNDING ADVANCE"
means the advance of $15,100,000 made by Landlord's lender (directly or through
one or more of its Affiliates) to or on behalf of Landlord on or prior to the
date of this Lease to finance the cost of Landlord's acquisition of the Leased
Property and Closing Costs.
(ap) Landlord's Lender. "LANDLORD'S LENDER" means
Landlord's Affiliate, Banque Nationale de Paris, a bank organized and existing
under the laws of France and any successors of such bank.
(aq) Landlord's Liens. "LANDLORD'S LIENS" means, and is
limited to, Liens encumbering the Leased Property that are asserted (1) other
than as contemplated by this Lease or the Purchase Documents by Landlord
itself, (2) by third parties lawfully claiming through or under Landlord (which
for purposes of this Lease shall include any judgment lien established against
the Leased Property because of a judgment rendered against Landlord and shall
also include any lien established against the Leased Property to secure past
due Excluded Taxes), or (3) by third parties claiming under a deed or other
instrument duly executed by Landlord; provided, Landlord's Liens shall not
include (a) any Permitted Encumbrances (regardless of whether claimed through
or under Landlord), (b) this Lease, the Purchase Documents or any other
document executed by Landlord contemporaneously with the execution of this
Lease, (c) Liens which are neither lawfully claimed through or under Landlord
(as described above) nor claimed under a deed or other instrument duly executed
by Landlord, (D) Liens claimed by, through or under Tenant, (E) Liens arising
because of Landlord's compliance with Applicable Law, the Existing Agreement,
subparagraph 9(b) below or any written request made by Tenant, or (F) Liens
securing the payment of property taxes or other amounts assessed against the
Leased Property by any governmental authority, other than to secure the payment
of Excluded Taxes which Landlord owes but has failed to pay or damages caused
by (and attributed by any applicable principles of comparative fault to)
Landlord's own Misconduct.
(ar) LIBOR. "LIBOR" means, for purposes of determining
the Effective Rate for each Base Rental Period, the rate determined by
Landlord's Lender to be the average rate of interest per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) of the rates at which deposits
of dollars are offered or available to Landlord's Lender in the London
interbank market at approximately 11:00 a.m. (London time) on the second
Business Day preceding the first day of such Base Rental Period. Landlord
shall instruct Landlord's Lender to consider deposits, for purposes of making
the determination described in the preceding sentence, that are offered: (i)
for delivery on the first day of such Base Rental Period, (ii) in an amount
equal or
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comparable to the total (projected on the applicable date of determination by
Landlord's Lender) Stipulated Loss Value on the first day of such Base Rental
Period, and (iii) for a period of time equal or comparable to the length of
such Base Rental Period. If Landlord's Lender so chooses, it may determine
LIBOR for any period by reference to the rate reported by the British Banker;s
Association on Page 3750 of the Telerate Service at approximately 11:00 a.m.
(London time) on the second Business Day preceding the first day of such
period. If for any reason Landlord's Lender determines that it is impossible
or impractical to determine LIBOR with respect to a given Base Rental Period in
accordance with the preceding sentences, or if Landlord's Lender shall
determine that it is unlawful (or any central bank or governmental authority
shall assert that it is unlawful) for Landlord's Lender to fund or maintain
advances to Landlord in connection with the Leased property during any Base
Rental Period for which Base Rent is computed by reference to LIBOR, then
"LIBOR" for that Base Rental Period shall equal the rate which is forty basis
points (40/100 of 1%) above the Fed Funds Rate for that period. All
determinations of LIBOR by Landlord's Lender shall, in the absence of clear and
demonstrable error, be binding and conclusive upon Landlord and Tenant.
(as) Lien. "LIENS" means any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, any agreement to sell receivables
with recourse, and the filing of or agreement to give any financing statement
under the Uniform Commercial Code of any jurisdiction). Customary bankers'
rights of set-off arising by operation of law or by contract (however styled,
if the contract grants rights no greater than those arising by operation of
law) in connection with working capital facilities, lines of credit, term loans
and letters of credit facilities and other contractual arrangements entered
into with banks in the ordinary course of business are not "Liens" for the
purposes of this Lease.
(at) Losses. "LOSSES" means any and all losses,
liabilities, damages (whether actual, consequential, punitive or otherwise
denominated), demands, claims, actions, judgments, causes of action,
assessments, fines, penalties, costs, and out-of-pocket expenses (including,
without limitation, Attorneys' Fees and the fees of outside accountants and
environmental consultants), of any and every kind or character, foreseeable and
unforeseeable, liquidated and contingent, proximate and remote, known and
unknown. However, Losses incurred by any Indemnified Party (including
Landlord) shall not include, for purposes of this Lease, losses, liabilities,
damages, demands, claims, actions judgments, causes of action, assessments,
fines, penalties, costs, or out-of-pocket expenses incurred because of (and
attributed by any applicable principles of comparative fault to) such
Indemnified Party's Misconduct and shall not in any event include Excluded
Taxes.
(au) Misconduct. "MISCONDUCT" of a Person means, and is
limited to: (1) if the person is subject to the terms of this Lease or the
Purchase Documents, a breach by such Person of the express provisions of this
Lease or the Purchase Documents, a breach by such Person of the express
provisions of this Lease or the Purchase Documents that continues beyond
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any period for cure provided herein, and (2) any Active Negligence, gross
negligence or wilful misconduct of such Person or its Affiliates of the
officers, employees or employers of such Person or its Affiliates. Misconduct
of one Indemnified Party is not an Affiliate, officer, employee or employer of
the first. Negligence which does not constitute Active Negligence or gross
negligence shall not constitute Misconduct.
(av) Participant. "PARTICIPANT" means any future banks or
financial institutions organized under the laws of the United States or any
state thereof or any European Country and any Affiliates of such entities who
agree with Landlord to participate in all or some of the risks and rewards to
Landlord of this Lease and the Purchase Documents.
(aw) Permitted Encumbrances. "PERMITTED ENCUMBRANCES"
means (i) the encumbrances and other matters affecting the Leased Property that
are set forth in Exhibit B attached hereto and made a part hereof, and (ii) any
provisions of the Existing Contract that survived closing thereunder, and (iii)
any easement agreement or other document affecting title to the Leased Property
executed by Landlord pursuant to the Existing Contract or pursuant to a
document executed in accordance with the Existing Contract or otherwise
executed by Landlord at the written request of or with the consent of Tenant.
(ax) Permitted Hazardous Substance Use. "PERMITTED
HAZARDOUS SUBSTANCE USE" means the use, storage and offsite disposal of
Permitted Hazardous Substances in strict accordance with applicable
Environmental laws and with due care given the nature of the Hazardous
Substances involved; provided, the scope and nature of such use, storage and
disposal shall not include the use of underground storage tanks for any purpose
other than the storage of water for fire control and existing below grade waste
water treatment tanks, nor shall such scope and nature:
(1) exceed that reasonably required for the
operation of the Leased property for the purposes
permitted under subparagraph 7(a); or
(2) include any disposal, discharge or other
release of Hazardous Substances in any manner that
poses a significant risk of allowing such substances
to reach the San Francisco Bay, surface water or
groundwater, except (i) through a lawful and properly
authorized discharge (A) to a publicly owned
treatment works or (B) with rainwater or storm water
runoff in accordance with Applicable Laws and any
permits obtained by Tenant that govern such runoff;
or (ii) any such disposal, discharge or other release
of Hazardous Substances for which no permits are
required and which are not otherwise regulated under
applicable Environmental Laws.
Further, notwithstanding anything to the contrary herein contained, Permitted
Hazardous Substance Use shall not include any use of the Leased Property in
manner which requires a
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RCRA treatment, storage or disposal facility permit, including but limited to
landfill, incinerator or other waste disposal facility.
(ay) Permitted Hazardous Substances. "PERMITTED HAZARDOUS
SUBSTANCES" means Hazardous Substances used and reasonably required for Tenant's
operation of the Leased Property for the purposes expressly permitted by
subparagraph 7(a), in strict compliance with all Environmental Laws and with due
care given the nature of the Hazardous Substances involved. Without limiting the
generality of the foregoing, Permitted Hazardous Substances shall include,
without limitation, usual and customary office and janitorial products, and the
materials listed on Exhibit C attached hereto.
(az) Permitted Transfer. "PERMITTED TRANSFER" means any
one of more of the following:
(1) an assignment or conveyance to an Affiliate
of Landlord of either (A) all, but not less than all,
of Landlord's then existing rights and interests
hereunder, under the Purchase Documents and in the
Leased Property, or (B) less than all of such rights
and interests of Landlord pursuant to conveyancing
documentation which requires that any action taken
directly against Tenant for the collection of Rent or
other payments due under this Lease or the Purchase
Documents will be taken by or on behalf of Landlord
in Landlord's own name and not by or in the name of
the Affiliate;
(2) any assignment to Participants of any
interest in Rent, payments required by the Purchase
Agreement or payments to be generated from the Leased
Property after the Term, provided such assignment (A)
requires that any action taken directly against
Tenant for the collection of Rent or other payments
due under this Lease or the Purchase Documents will
be taken by or on behalf of Landlord in Landlord's
own name and not by or in the name of such
Participants, (B) does not purport to convey any
interest in the Leased Property itself, and (C)
expressly requires, pursuant to provisions reasonably
acceptable to Tenant, that the assignee thereunder
remove any Liens asserted against the Leased Property
by, through or under such assignee;
(3) any assignment or conveyance of all, but not
less than all, of Landlord's then existing rights and
interests hereunder, under the Purchase Documents and
in the Leased Property, when an Event of Default
shall have occurred and be continuing or after the
Designated Payment Date.
(ba) Person. "PERSON" means an individual, a corporation,
a partnership, an unincorporated organization, an association, a joint stock
company, a joint venture, a trust, an
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estate, a government or agency or political subdivision thereof or other
entity, whether acting in an individual, fiduciary or other capacity.
(bb) Plan. "PLAN" means at any time an employee pension
benefit plan which is covered under Title IV of Erisa or subject to the minimum
funding standards under Section 412 of the Code and is either (i) maintained by
Tenant or any Subsidiary for employees of Tenant or any Subsidiary or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
Tenant or any Subsidiary is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions.
(bc) Pledge Agreement. "PLEDGE AGREEMENT" means the
Pledge Agreement dated as of the date hereof between Landlord and Tenant
pursuant to which Tenant will pledge securities as collateral for Tenant's
obligations under the Purchase Agreement, as such Pledge Agreement may be
extended, supplemented, amended, restated or otherwise modified from time to
time in accordance with its terms.
(bd) Prime Rate. "PRIME RATE" means the prime interest
rate or equivalent charged by Landlord's Lender in the United States as
announced or published by Landlord's Lender from time to time, which need not be
the lowest interest rate charged by Landlord's Lender. If for any reason
Landlord's Lender does not announce or publish a prime rate or equivalent, the
prime rate or equivalent announced or published by either Citibank, N.A. or any
New York branch or office of Credit Commercial de France as selected by Landlord
shall be used to compute the rate described in the preceding sentence. The prime
rate or equivalent announced or published by such bank need not be the lowest
rate charged by it. The Prime Rate may change from time to time after the date
hereof without notice to Tenant as of the effective time of each change in rates
described in this definition.
(be) Purchase Agreement. "PURCHASE AGREEMENT" means the
Purchase Agreement dated as of the date hereof between Landlord and Tenant
pursuant to which Tenant has agreed to purchase or to arrange for the purchase
by a third party of the Leased Property, as such Purchase Agreement may be
extended, supplemented, amend, restated or otherwise modified from time to time
in accordance with its terms.
(bf) Purchase Documents. "PURCHASE DOCUMENTS" means
collectively the Purchase Agreement, the Pledge Agreement and the Custodial
Agreement.
(bg) Qualified Payments. "QUALIFIED PAYMENTS" means all
payments received by Landlord from time to time during the Term from any party
(1) under any casualty insurance policy as a result of damage to the Leased
Property, (2) as compensation for any restriction placed upon the use or
development of the Leased Property or for the condemnation of the Leased
Property or any portion thereof, (3) because of any judgment, decree or award
for injury or damage to the Leased Property or (4) under any title insurance
policy or otherwise as result
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of any title defect or claimed title defect with respect to the Leased
Property; provided, however, that (x) in determining Qualified Payments, there
shall be deducted all expenses and costs of every kind, type and nature
(including taxes, Breakage Costs and Attorneys' Fees) incurred by Landlord with
respect to the collection of such payments, (y) Qualified Payments shall not
include any payment to Landlord by a Participant or an Affiliate of Landlord
that is made to compensate Landlord for the Participant's or Affiliate's share
of any Losses Landlord may incur as a result of any of the events described in
the preceding clauses (1) through (4) and (z) Qualified Payments shall not
include any payments received by Landlord that Landlord has paid to Tenant for
the restoration or repair of the Leased Property or that Landlord is holding as
Escrowed Proceeds. For purposes of computing the total Qualified Payments (and
other amounts dependent upon Qualified Payments, such as Stipulated Loss Value)
paid to or received by Landlord as of any date, payments described in the
preceding clauses (1) through (4) will be considered as Escrowed Proceeds, not
Qualified Payments, until they are actually applied as Qualified Payments by
Landlord as provided in subparagraph 4(c).
(bh) Remaining Records. "REMAINING PROCEEDS" shall have
the meaning assigned to it in subparagraph 4(a)(ii).
(bi) Rent. "RENT" means the Base Rent and all Additional
Rent.
(bj) Responsible Financial Officer. "RESPONSIBLE
FINANCIAL OFFICER" means the chief financial officer, the controller, the
treasurer of the assistant treasurer of Tenant.
(bk) Spread. "SPREAD" means, 0.25% per annum.
(bl) Stipulated Loss Value. "STIPULATED LOSS VALUE" means
the amount computed from time to time in accordance with the formula specified
in this definition. Such amount shall equal the Initial Funding Advance (i.e.,
$15,000,000), minus the amount (if any) of Qualified Payments paid to Landlord
on or prior to such date. Thus, for example, if a determination of Stipulated
Loss Value is required under subparagraph 3(a) on the first day of the
applicable Base Rental Period and if the Leased Property has been damaged by
fire or other casualty with the result that $7,000,000 of net insurance
proceeds have been paid to Landlord and retained by Landlord as Qualified
Payments, then the Stipulated Loss Value as of the date of the required
determination shall equal $8,1000,000. Under no circumstances will any payment
of Base Rent or the Upfront Fee reduce Stipulated Loss Value.
(bm) Subsidiary. "SUBSIDIARY" means any corporation of
which Tenant or its other Subsidiaries own, directly or indirectly, such number
of outstanding shares as have more than 50% of the ordinary voting power for
the election of directors.
(bn) Tenant's Knowledge. "TENANT'S KNOWLEDGE," "TO THE
KNOWLEDGE OF TENANT" and words of like effect means the actual knowledge (with
due investigation) of any of the following employees of Tenant: Douglas Smith,
Treasurer; Manny Hernandez, Chief
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Financial Officer; and, Mark Beck, Director of Site Services. However, to the
extent Tenant's knowledge after the date hereof may become relevant hereunder
or under any certificate or other notice provided by Tenant to Landlord in
connection with this Lease, "Tenant's Knowledge" and words of like effect shall
include the then actual knowledge of other employees of Tenant (if any) that
have assumed responsibilities of the current employees listed in the preceding
sentence or that have replaced such current employees. But none of the
employees of Tenant whose knowledge is now or may hereafter be relevant shall
be personally liable for the representations of Tenant made herein.
(bo) Trade Fixture. "TRADE FIXTURE" means (1) anything
(including, without limitation, furniture, fixtures, equipment, vessels,
piping, electrical panels, conduit, ventilating equipment, demountable
partitions, etc.) brought onto or fixed to the Premises during the term of this
Lease by Tenant at Tenant's expense other than repairs and replacement of the
Leased Property and (2) all of the items more particularly described on
attached Exhibit D.
(bp) Term. "TERM" shall have the meaning assigned to it
in Paragraph 2 below.
(bq) Unfunded Benefit Liabilities. "UNFUNDED BENEFIT
LIABILITIES" means, with respect to any Plan, the amount (if any) by which the
present value of all benefit liabilities (within the meaning of Section
4001(a)(16) of ERISA) under the Plan exceeds the fair market value of all Plan
assets allocable to such benefit liabilities, as determined on the most recent
evaluation date of the Plan and in accordance with the provisions of ERISA for
calculating the potential liability of Tenant or any ERISA Affiliate of Tenant
under Title IV of ERISA.
(br) Other Terms and References. Words of any gender used
in this lease shall be held and construed to include any other gender, and
words in the singular number shall be held to include the plural and vice
versa, unless the context otherwise requires. References herein to Paragraphs,
subparagraphs or other subdivisions shall refer to the corresponding
Paragraphs, subparagraphs or other subdivisions shall refer to the
corresponding Paragraphs, subparagraphs or subdivisions of this Lease, unless
specific reference is made to another document or instrument. References
herein to any Schedule or Exhibit shall refer to the corresponding Schedule or
Exhibit shall attached hereto, which shall be made a part hereof by such
reference. All capitalized terms used in this Lease which refer to other
documents shall be deemed to refer to such other documents as they may be
renewed, extended, supplemented, amended or otherwise modified from time to
time, provided such documents are not renewed, extended or modified in breach
of any provision contained herein or therein or, in the case of any other
document to which Landlord or Tenant is a party of which Landlord is an
intended beneficiary, without the consent of Landlord. All accounting terms
not specifically define herein shall be construed in accordance with GAAP. The
words "THIS LEASE", "HEREIN", "HEREOF", "HEREBY", "HEREUNDER" and words of
similar import refer to this Lease as whole and not to any particular
subdivision unless expressly so limited. The phrases "THIS PARAGRAPH" and
"THIS SUBPARAGRAPH" and similar phrases refer only to the Paragraphs or
subparagraphs hereof in
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which the phrase occurs. The world "OR" is not exclusive. Other capitalized
terms are defined in the provisions that follow.
2. Term. The term of this Lease (herein called the "TERM") shall
commence on and include the effective date hereof, and end at 8:00 A.M. on
September 1, 1999 (or the next following Business Day if September 1, 1999) is
not a Business Day), unless sooner terminated as herein provided. Tenant may
terminate this Lease immediately after purchasing or causing an Applicable
Purchaser to purchase the Leased Property pursuant to the Purchase Agreement;
provided, however, on any Designated Payment Date established under and in
accordance with the Purchase Agreement, Tenant must have paid to Landlord all
unpaid Rent then due or past due, must have satisfied Tenant's obligations
under the Purchase Agreement, must have paid to Landlord all Base Rent accruing
to the Designated Payment Date (even though such Base Rent will not be due
pursuant to the definitions set forth above if the Designated Payment Date does
not fall on a scheduled Base Rental Date) and must have paid any Breakage Costs
caused by the Landlord's sale of the Leased Property pursuant to the Purchase
Agreement. Satisfaction of the requirements listed in the proviso to the
preceding sentence shall be a condition precedent to the effectiveness of any
early termination of this Lease by Tenant.
3. Rental.
(a) Base Rent. Tenant shall pay Landlord rent (herein
called "BASE RENT") in arrears, in currency that at the time of payment is
legal tender for public and private debts in the United States of America, in
quarterly installments on each Base Rental Date through the end of the Term.
Each Payment of Base Rent must be received by Landlord no later than 10:00 A.M.
(San Francisco time) on the date it becomes due; if received after 10:00 A.M.
it will be considered for purposes of this Lease as received on the next
following Business Day. Each installment of Base Rent shall represent
allocable to the Base Rental Period ending on the date on which the installment
is due. Landlord shall notify Tenant in writing of the Base Rent due for each
Base Rental Period at least three (3) days prior to the Base Rental Date on
which such period ends, but any failure by Landlord to so notify Tenant shall
not constitute a waiver of Landlord's right to payment. If Tenant or any other
Applicable Purchaser purchases Landlord's interest in the Leased Property
pursuant to the Purchase Agreement, any Base Rent for the period ending on the
date of purchase and all outstanding Additional Rent shall be due on the
Designated Payment Date in addition to the purchase price and other sums due
Landlord under the Purchase Agreement. The Base Rent for the Base Rental
Period shall equal (A) Stipulated Loss Value on the firs day of such Base
Rental Period, times (B) the Effective Rate with respect to such Base Rental
Period, times (C) the number of days in such Base Rental Period, divided by (D)
three hundred sixty (360). Assume, only for the purpose of illustration; that
a hypothetical Base Rental Period contains exactly ninety (90) days; that on
the first day of such Base Rental Period, after deducting a total of
$10,100,000 of Qualified Payments received by Landlord, the resulting
Stipulated Loss Value is $5,000,000; and that the Effective Rate computed with
respect to the applicable Base Rental Period is 6%. Under such assumptions,
the Base Rent for the hypothetical Base Rental Period will equal:
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$5,000,000 x 6% x 90/360, or $75,000
(b) Upfront Fees. Upon execution and delivery of this
Lease by Landlord, Tenant shall pay Landlord an upfront fee (the "UPFRONT FEE")
as provided in the letter dated June 7, 1994 from Landlord to Tenant (less the
deposit already paid by Tenant pursuant to that letter which will be applied
against the Upfront Fee). The Upfront Fee shall represent Additional Rent for
the First Base Rental Period.
(c) Additional Rent. All amounts which Tenant is
required to pay to or on behalf of Landlord pursuant to this Lease, together
with every charge, premium, interest and cost set forth herein which may be
added for nonpayment or late payment thereof, shall constitute rent (all such
amounts, other than Base Rent, are herein called "ADDITIONAL RENT").
(d) Interest and Order of Application. All rent shall
bear interest, if not paid when first due, at the Default Rate in effect from
time to time from the date due until paid; provided, that nothing herein
contained will be construed as permitting the charging or collection of
interest at a rate exceeding the maximum rate permitted under Applicable Laws.
Landlord shall be entitled to apply any amounts paid by or on behalf of Tenant
hereunder against any Rent then past due in the order the same became due or in
such other order as Landlord may elect.
(e) Net Lease. It is the intention of Landlord and
Tenant that the Base Rent and all other payments herein specified shall be
absolutely net to Landlord, and that Tenant shall pay all costs, expenses and
obligations of every kind relating to the Leased Property or this Lease which
may arise or become due, including, without limitation: (i) Impositions,
including any axes payable by virtue of Landlord's receipt of amounts paid to or
on behalf of Landlord in accordance with this subparagraph 3(e); (ii) any
Capital Adequacy Charges; (iii) any amount for which Landlord is or becomes
liable with respect to the Permitted Encumbrances; and (iv) any costs incurred
by Landlord (including Attorneys' Fees) because of Landlord's acquisition or
ownership of the Leased Property or because of this Lease or the transactions
contemplated herein. However, the preceding sentence shall not be construed to
make Tenant liable for (1) damages suffered by Landlord because of (and
attributed by any applicable principles of comparative fault to) its own
Misconduct, (2) Excluded Taxes, (3) withholding taxes permitted by subsection
3(f) or (4) general overhead or internal administrative expenses of Landlord,
Landlord's Lender or any Participant, except to the extent allowed by
subparagraph 8(z)(iii) because of changes described in that subparagraph after
the date of this Lease.
(f) Withholding Taxes. Subject to the provisions of this
subparagraph 3(f), but notwithstanding anything else to the contrary in this
Lease, to the extent required by law Tenant may deduct United States and
California withholding taxes imposed as a way of collecting or in lieu of
Excluded Taxes on payments of the Upfront Fee, Base Rent, any interest payable
pursuant to subparagraph 3(d) or any additional compensation claimed by
Landlord pursuant to subparagraph 8(z)(iv) (collectively, "INCOME PAYMENTS")
from Income Payments,
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without obligation to gross up, indemnify or otherwise increase payments in
consequence thereof. Such withholding will be permitted if, but only if:
(i) in the case of withholding for Excluded Taxes
imposed by the United States, the Person entitled to receive
Income Payments (whether the original Landlord named herein or
an assignee of the original Landlord's rights hereunder, a
"PAYEE") is not exempt from withholding by reason of having
been organized under the laws of the United States or any
State thereof, and such Person shall not have provided Tenant
with three (3) counterparts of each of the forms prescribed by
the Internal Revenue Service (Form 1001 or 4224, or successor
forms, as the case may be) claiming for Payee an exemption
from federal withholding on all Income Payments;
(ii) in the case of withholding for Excluded Taxes
imposed by the State of California, the Payee is not exempt
from withholding by reason of having been qualified to do
business in California, and such Person shall not have
provided Tenant with three (3) counterparts of the forms (if
any) prescribed by the California taxing authorities claiming
for Payee an exemption from California withholding on all
Income Payments;
(iii) at least thirty (30) days prior to any
withholding from or reduction of Income Payments, Tenant shall
have notified the Payee that Tenant believes the withholding
is required and permitted by this subparagraph; and
(iv) the withholding taxes on the Income Payments
would have been assessed even if the applicable taxing
authorities had characterized the transactions evidenced by
this Lease and the Purchase Agreement as a mere financing
arrangement.
Any payee exempt from withholding for Excluded Taxes imposed by the
United States by reason of having been organized under the laws of the United
States or any State thereof shall provide to Tenant statements conforming to
the requirements of Treasury Regulation 1.1441-5(b) or any successor thereto
(which statements may be made on a Form W-9). If Tenant shall ever be required
to pay Excluded Taxes that Landlord has failed to pay when due because of
Tenant's failure to withhold from payments made under this Lease, Landlord
shall reimburse Tenant for such Excluded Taxes. Nothing in this subparagraph
3(f) shall excuse Tenant from its obligation under subparagraph 8(z)(iii) to
compensate Landlord for increased costs attributable to any change in law
relating to withholding taxes after the date hereof.
(g) No Demand or Setoff. The Base Rent and all
Additional Rent shall be paid without notice or demand and without abatement,
counterclaim, deduction, setoff or defense, except as expressly provided
herein.
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4. Insurance and Condemnation Proceeds.
(a) Subject to Landlord's rights under this Paragraph 4,
and so long as no Event of Default shall have occurred and be continuing,
Tenant shall be entitled to use al casualty insurance and condemnation proceeds
payable with respect to the Leased Property during the Term for the restoration
and repair of the Leased Property or any remaining portion thereof. All
insurance and condemnation proceeds received with respect to the Leased
Property (including proceeds payable under any insurance policy covering the
Leased Property which is maintained by Tenant) shall be paid to Landlord and
then applied as follows:
(i) First, such proceeds shall be used to
reimburse Landlord for any costs and expenses, including
Attorney's Fees, incurred in connection with the collection of
such proceeds.
(ii) Second, the remainder of such proceeds (the
"REMAINING PROCEEDS"), shall be held by Landlord as Escrowed
Proceeds and applied to reimburse Tenant from the actual cost
of the repair, restoration or replacement of the Leased
Property. However, any Remaining Proceeds not needed for such
purpose shall be applied by Landlord as Qualified Payments, as
provided in subparagraph 4(c), after Tenant notifies Landlord
that they are not needed for repairs, restoration or
replacement.
(b) Any remaining Proceeds held by Landlord as Escrowed
Proceeds shall be deposited by Landlord in an interest bearing account as
provided in the definition of Escrowed Proceeds and shall be paid to Tenant as
the applicable repair, restoration or replacements progresses and upon
compliance by Tenant with such terms, conditions and requirements as may be
reasonably imposed by Landlord, but in no event shall Landlord be required to
pay any Escrowed Proceeds to Tenant in excess of the actual cost to Tenant of
the applicable repair, restoration or replacement, as evidenced by invoices or
other documentation reasonably satisfactory to Landlord, it being understood
that Landlord may retain any such excess as a Qualified Payment. In any event,
Tenant will not be entitled to any abatement or reduction of the Base Rent or
any other amount due hereunder except to the extent that such excess Remaining
Proceeds result in Qualified Payments which reduce Stipulated Loss Value (and
thus payments computed on the basis of Stipulated Loss Value) as provided in
the definitions set out above.
Furthermore, notwithstanding the inadequacy of the Remaining Proceeds
held by Landlord as Escrowed Records, if any, or anything herein to the
contrary, Tenant must, after taking of less than all or substantially all of
the Leased Property by condemnation and after any damage to the Leased Property
by fire or other casualty, either:
(1) promptly restore or improve the Leased
Property or the remainder thereof to a value no less than
sixty percent (60%) of Stipulated Loss Value
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(computed after the application of any Remaining Proceeds as a
Qualified Payment) and to a reasonably safe and sightly
condition; or
(2) promptly restore the Leased Property to a
reasonably safe and sightly condition and pay to Landlord for
application as a Qualified Payment the amount (if any), as
determined by Landlord, needed to reduce Stipulated Loss Value
(computed after the application of such amount and any
available Remaining Proceeds as Qualified Payments) to no more
than one hundred sixty-six percent (166%) of the then-current
market value of the Leased Property or remainder thereof.
Any taking of so much of the Leased Property as, in Landlord's
reasonable judgment, makes it impracticable to restore or improve the remainder
thereof as required by part (1) of the preceding sentence shall be considered a
taking of substantially all the Leased Property for purposes of this Paragraph
4.
(c) Notwithstanding the foregoing, if an Event of Default
shall have occurred and be continuing, Landlord shall be entitled to receive
and collect all insurance or condemnation proceeds payable with respect to the
Leased Property, and:
(i) Landlord shall apply the Remaining Proceeds
received by Landlord as a Qualified Payment (or as reimbursement for Breakage
Costs incurred in connection with such Qualified Payment) within ten (10)
Business Days after Landlord receives a written notice from Tenant
unconditionally directing Landlord to so apply the same; and
(ii) in the absence of such a notice from Tenant
to Landlord, Landlord shall be entitled to either, at the discretion of
Landlord, (A) hold all Remaining Proceeds as Escrowed Proceeds until paid to
Tenant as reimbursement for the actual and reasonable cost of repairing,
restoring or replacing the Leased Property when Tenant has completed such
repair, restoration or replacement, or (B) apply such proceeds as Qualified
Payments when and to the extent deemed appropriate by Landlord.
When no Event of Default shall have occurred and be continuing, Landlord shall
apply any Remaining Proceeds paid to it or other amounts which are to be
applied as a Qualified Payment (or as reimbursement for Breakage Costs incurred
in connection with a Qualified Payment) within three (3) Business Days after
Landlord receives a written notice from Tenant unconditionally directing
Landlord to so apply the same. In any event, Landlord may deduct Breakage
Costs incurred in connection with the Qualified Payment from the Remaining
Proceeds or other amounts available to Landlord for application as the
Qualified Payment, and Tenant will reimburse Landlord upon request for any such
Breakage Costs that Landlord incurs but does not so deduct. If Remaining
Proceeds held by Landlord exceed Stipulated Loss Value and any Rent payable by
Tenant, Tenant may get the excess by terminating this Lease in accordance with
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Paragraph 2 and purchasing any remaining interest of Landlord in the Leased
Property and the Escrowed Proceeds, pursuant to the Purchase Agreement.
(d) In the event of any taking of all or substantially
all of the based Property, Landlord shall be entitled to apply all Remaining
Proceeds as a Qualified Payment, notwithstanding the foregoing. In addition,
if Stipulated Loss Value immediately prior to any taking of all or
substantially all of the based Property by condemnation exceeds the sum of the
Remaining Proceeds resulting from such condemnation then Landlord shall be
entitled to recover the excess from Tenant upon demand as an additional
Qualified Payment, whereupon this use shall terminate.
(e) Nothing herein contained shall be construed to
prevent Tenant from obtaining a separate award from any condemning authority
for a taking of Tenant's personal property or Trade Fixtures, for moving
expenses, for severance damages to other real property owned by Tenant adjacent
to the Land or for business interruption, provided, such award is not combined
with and does not reduce the award for any taking of the based Property,
including Tenant's interest therein.
(f) Without limiting Landlord's obligations under the
other provisions of this paragraph 4 or Tenant's obligations to make repairs
under other provisions of this Lease, Landlord and Tenant each waive any right
of recovery against the other, and the other's agents, officers or employees,
for any damage to the used Property or to the personal property situated from
time to time in or on the used Property resulting from fire or other casualty
covered by a valid and collectible insurance policy; provided, however, that
the waiver set forth in this subparagraph 4.(f) shall be effective insofar, but
only insofar, as compensation for such damage or loss is actually recovered by
the waiving party (net of costs of collection) under the policy notwithstanding
the waivers set out in this paragraph. Tenant shall cause the insurance
policies required of Tenant by this base to be properly endorsed, if necessary,
to prevent any loss of coverage because of the waivers set forth in this
paragraph. If such endorsements are not available, the waivers set forth in
this paragraph shall be ineffective to the extent that such waivers would cause
required insurance with respect to the used Property to be impaired.
5. No Lease Termination.
(a) Status of Lease. Except as expressly provided
herein, this lease shall not terminate, nor shall Tenant have any right to
terminate this lease, nor shall Tenant be entitled to any abatement of the
Rent, nor shall the obligations of Tenant under this lease be excused, for any
reason whatsoever, including without limitation any of the following: (i) any
damage to or the destruction of all or any part of the leased Property from
whatever cause, (ii) the taking of the leased Property or any portion thereof
by eminent domain or otherwise for any reason, (iii) the prohibition,
limitation or restriction of Tenant's use of all or any portion of the based
Property or any interference with such use by governmental action or otherwise,
(iv) any eviction of Tenant or of anyone claiming through or under Tenant by
paramount title or
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otherwise (provided, if Tenant is wrongfully evicted by Landlord or by any
third party exercising its rights under a Landlord's Lien, then Tenant will
have the remedies described in Paragraph 15 below), (v) any default on the part
of Landlord under this Lease or under any other agreement to which Landlord and
Tenant are parties, (vi) the inadequacy in any way whatsoever of the design or
construction of any improvements included in the Leased Property, it being
understood that Landlord has not made and will not make any representation
express or implied as to the adequacy thereof, or (vii) any other cause whether
similar or dissimilar to the foregoing, any existing or future law to the
contrary notwithstanding. It is the intention of the parties hereto that the
obligations of Tenant hereunder shall be separate and independent of the
covenants and agreements of Landlord, that the Base Rent and all other sums
payable by Tenant hereunder shall continue to be payable in all events and that
the obligations of Tenant hereunder shall continue unaffected, unless the
requirement to pay or perform the same shall have been terminated or limited
pursuant to an express provision of this Lease. However, nothing in this
Paragraph shall be construed as a waiver by Tenant of any right Tenant may have
at law or in equity to (i) recover monetary damages for any default under this
Lease by Landlord that Landlord fails to cure within the period provided in
Paragraph 15, (ii) injunctive relief in case of the violation, or attempted or
threatened violation, of any of the express covenants, agreements, conditions
or provisions of this Lease which are binding upon Landlord, or (iii) a decree
compelling performance of any of the express covenants, agreements, conditions
or provisions of this Lease.
(b) Waiver by Tenant. Without limiting the foregoing,
Tenant waives to the extent permitted by Applicable Laws, except as otherwise
expressly provided herein, all rights to which Tenant may not or hereafter be
entitled by law (including any such rights arising because of any implied
"warranty of suitability" or other warranty under Applicable Laws) (i) to quit,
terminate or surrender this Lease or the Leased Property or any part thereof or
(ii) to any abatement, suspension, deferment or reduction of the Base Rent or
any other sums payable under this Lease.
6. Purchase Documents and Environmental Indemnity. Tenant
acknowledges and agrees that nothing contained in this Lease shall limit,
modify or otherwise affect any of Tenant's obligations under the Purchase
Documents or Environmental Indemnity, which obligations are intended to be
separate, independent and in addition to, and not in lieu of, the obligations
established by this Lease. Except as provided in subparagraph 19.(k), in the
event of any inconsistency between the terms and provisions of the Purchase
Documents or Environmental Indemnity and the terms and provisions of this
Lease, the terms and provisions of the Purchase Documents or Environmental
Indemnity (as the case may be) shall control.
7. Use and Condition of Leased Property.
(a) Use. Subject to the Permitted Encumbrances and the
terms hereof, Tenant may use and occupy the Leased Property so long as no Event
of Default occurs hereunder, but only for the following purposes and other
lawful purposes incidental thereto:
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(i) manufacturing, assembly, warehousing and
laboratory-based research and development of semiconductor, computer-related
and other electronic products.
(ii) cafeteria, library, and other support
function uses that Tenant may provide to its employees; and
(iii) those uses specified under Section 5.1.2 of
the Declaration of Covenants, Conditions and Restrictions for Oakmead-San Jose
(included in Permitted Encumbrances), except for subsections 5.1.2(a) relating
to gasoline service stations and 5.1.2(c) relating to public utility service
facilities, transmission and distribution substations and public utility
service centers, which shall be prohibited uses.
As used in this subparagraph, "products" shall not include products designed to
detect, monitor, neutralize, handle or process Hazardous Substances.
(b) Condition. Tenant accepts the Leased Property (and
will accept the same upon any purchase of the Landlord's interest therein) in
its present state, AS IS, and without any representation or warranty, express
or implied, as to the condition of such property or as to the use which may be
made thereof. Tenant also accepts the Leased Property without any
representation or warranty, express or implied, by Landlord regarding the title
thereto or the rights of any parties in possession of any part thereof, except
as set forth in subparagraph 9.(a). Landlord shall not be responsible for any
latent or other defect or change of condition in the Land, Improvements,
fixtures and personal property forming a part of the Leased Property, and the
Rent hereunder shall in no case be withheld or diminished because of any latent
or other defect in such property, any change in the condition thereof or the
existence with respect thereto of any violations of Applicable Laws. Nor shall
Landlord be required to furnish to Tenant any facilities or service of any
kind, such as, but not limited to, water, steam, heat, gas, hot water,
electricity, light or power.
(c) Consideration of and Scope of Waiver. The provisions
of subparagraph 7.(b) above have been negotiated by the Landlord and Tenant
after due consideration for the Rent payable hereunder and are intended to be a
complete exclusion and negation of any representations or warranties of the
Landlord, express or implied with respect to the Leased Property that may arise
pursuant to any law now or hereafter in effect, or otherwise. However, such
exclusion of representations and warranties by Landlord is not intended to
impair any representations or warranties made by other parties, including
Seller, the benefit of which is to pass to Tenant because of the definition of
Personal Property and Leased Property above.
8. Other Representations, Warranties and Covenants of Tenant.
Tenant represents, warrants and covenants as follows:
(a) Financial Matters. Tenant is solvent and has no
outstanding liens, suits, garnishments or court actions which could render
Tenant insolvent. There has not been filed by
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or, to Tenant's Knowledge, against Tenant a petition in bankruptcy or a
petition or answer seeking an assignment for the benefit of creditors, the
appointment of a receiver, trustee, custodian or liquidator with respect to
Tenant or any significant portion of Tenant's property, reorganization,
arrangement, rearrangement, composition, extension, liquidation or dissolution
or similar relief under the federal Bankruptcy Code or any state law. The
financial statements and all financial data heretofore delivered to Landlord
relating to Tenant are true, correct and complete in all material respects. No
material adverse change has occurred in the financial position of Tenant and
its Subsidiaries taken as a whole as reflected in Tenant's financial statements
covering the fiscal period ended July 4, 1994.
(b) Existing Contract. Except to the extent required of
Landlord under subparagraph 9.(b), Tenant shall satisfy all surviving
obligations of the "Buyer" (as the term "Buyer" is used in the Existing
Contract) under the Existing Contract and under all other documents, the
execution of which is required by or in connection with the Existing Contract.
Tenant agrees to indemnify, defend and hold Landlord harmless from and against
any and all Losses imposed on or asserted against or incurred by Landlord at
any time and from time to time by reason of, in connection with or arising out
of any obligations imposed by the Existing Contract. THE INDEMNITY SET OUT IN
THIS SUBPARAGRAPH SHALL APPLY EVEN IF THE SUBJECT OF THE INDEMNIFICATION IS
CAUSED BY OR ARISES OUT OF THE NEGLIGENCE OF LANDLORD; PROVIDED, SUCH INDEMNITY
SHALL NOT APPLY TO LOSSES PROXIMATELY CAUSED BY (AND ATTRIBUTED BY ANY
APPLICABLE PRINCIPLES OF COMPARATIVE FAULT TO) THE MISCONDUCT OF LANDLORD.
Because Tenant hereby assumes and agrees to satisfy all surviving obligations
of the Buyer under the Existing Contract, no failure by Landlord to take any
action required by the Existing Contract (save and except any actions required
of Landlord under subparagraph 9.(b)) shall, for the purposes of this
indemnity, be deemed to be caused by the Misconduct of Landlord. The foregoing
indemnity is in addition to the other indemnities set out herein and shall not
terminate upon the closing of any sale of Landlord's interest in the Leased
Property pursuant to the provisions of the Purchase Agreement or the
termination of this Lease.
(c) No Default or Violation. The execution, delivery and
performance by Tenant of this Lease, the Purchase Documents and the
Environmental Indemnity do not and will not constitute a breach or default
under any other material agreement or contract to which Tenant is a party or by
which Tenant is bound or which affects the Leased Property or Tenant's use,
occupancy or operation of the Leased Property or any part thereof and do not,
to the knowledge of Tenant, violate or contravene any law, order, decree, rule
or regulation to which Tenant is subject, and such execution, delivery and
performance by Tenant will not result in the creation of imposition of (or the
obligation to create or impose) any lien, charge or encumbrance not
contemplated by this Lease or the Purchase Documents on, or security interest
in, Tenant's property pursuant to the provisions of any of the foregoing.
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(d) Compliance with Covenants and Laws. The intended use
of the Leased Property by Tenant complies, or will comply after Tenant obtains
readily available permits, in all material respects with all applicable
restrictive covenants, zoning ordinances and building codes, flood disaster
laws, applicable health, safety and environmental laws and regulations, the
Americans with Disabilities Act and other laws pertaining to disabled persons,
and all other applicable laws, statutes, ordinances, rules, permits,
regulations, orders, determinations and court decisions (all of the foregoing
are herein sometimes collectively called "APPLICABLE LAWS"). Tenant has
obtained or will promptly obtain all utility, building, health and operating
permits as may be required for Tenant's use of the Leased Property by any
governmental authority or municipality having jurisdiction over the Leased
Property.
(e) Environmental Representations. To Tenant's Knowledge
and except as otherwise disclosed in the Environmental Report, as of the date
hereof: (i) neither Tenant nor any prior owner or operator of the Leased
Property or any surrounding property has reported or been required to report
any release of any Hazardous Substances on or from the Leased Property or the
surrounding property pursuant to any Environmental Law; (ii) neither Tenant nor
any prior owner or operator of the Leased Property has received from any
federal, state or local governmental authority any warning, citation, notice of
violation regarding a suspected or known release or discharge of Hazardous
Substances on or from the Leased Property or regarding a suspected or known
violation of Environmental Laws concerning the Leased Property which has not
been completely rectified; and (iii) none of the following are located on the
Leased Property: asbestos; urea formaldehyde foam insulation; transformers or
other equipment which contain dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty (50) parts per million; any other
Hazardous Substances other than Permitted Hazardous Substances; or any
underground storage tank or tanks prohibited by this Lease. Further, Tenant
represents that to Tenant's Knowledge, the Environmental Report is not
misleading or inaccurate in any material respect.
(f) No Suits. As of the effective date of this Lease,
there are no judicial or administrative actions, suits, proceedings or
investigations pending or, to Tenant's Knowledge, threatened that will affect
Tenant's intended use of the Leased Property or the validity, enforceability or
priority of this Lease, or Tenant's use, occupancy and operation of the Leased
Property or any part thereof, and Tenant is not in default with respect to any
order, writ, injunction, decree or demand of any court or other governmental or
regulatory authority that could materially and adversely affect the business or
assets of Tenant and its Subsidiaries taken as a whole or Tenant's use,
occupancy or operation of the Leased Property. No condemnation or other like
proceedings or pending or, to Tenant's Knowledge, threatened against the Leased
Property.
(g) Condition of Property. The Land as described in
Exhibit A is the same as the land shown on the survey plat entitled "A.L.T.A.
Survey" dated January 11, 1994, prepared by Nolte and Associates, Job No.
190-92-00, which was delivered to Landlord at the request of Tenant. The Lease
Property is currently served by electric, gas, storm and sanitary sewers,
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sanitary water supply, telephone and other utilities as required for the use
thereof. All streets, alleys and easements necessary to serve the Leased
Property have been completed and are serviceable. The Leased Property is in a
condition satisfactory for its use and occupancy. To Tenant's Knowledge, no
latent or patent defects or deficiencies in the Leased Property exist that,
either individually or in the aggregate, could materially and adversely affect
Tenant's use or occupancy of the Leased Property or could reasonably be
anticipated to endanger life or limb. No part of the Real Property is within a
flood plain as designated by any governmental authority, or if located in flood
plain, Tenant has insured the improvements from loss by flood in accordance with
Section 8(r).
(h) Organization. Tenant is duly incorporated and legally
existing under the laws of the State of Delaware and is duly qualified to do
business in the State of California. Tenant has all requisite power and has
procured or will procure on a timely basis all governmental certificates of
authority, licenses, permits, qualifications and other documentation required to
lease and operate the Leased Property. Tenant has the corporate power and
adequate authority, rights and franchises to own Tenant's property and to carry
on Tenant's business as now conducted and is duly qualified and in good standing
in each state in which the character of Tenant's business makes such
qualification necessary (including, without limitation, the State of California)
or, if it is not so qualified in a state other than California, such failure
does not have a material adverse effect on the properties, assets, operations or
businesses of Tenant and its Subsidiaries, taken as a whole.
(i) Enforceability. The execution, delivery and performance of
this Lease, the Purchase Documents and the Environmental Indemnity are duly
authorized and do not require the consent or approval of any governmental body
or other regulatory authority that has not heretofore been obtained and are not
in contravention of or conflict with any Applicable Laws or any term or
provision of Tenant's articles of incorporation or bylaws. This Lease, the
Purchase Documents and the Environmental Indemnity are valid, binding and
legally enforceable obligations of Tenant in accordance with their terms, except
as such enforcement is affected by bankruptcy, insolvency and similar laws
affecting the rights of creditors, generally, and equitable principles of
general application.
(j) Not a Foreign Person. Tenant is not a "foreign person"
within the meaning Sections 1445 and 7701 of the Code (i.e., Tenant is not a
non-resident alien, foreign corporation, foreign partnership, foreign trust or
foreign estate as those terms are defined in the Code and regulations
promulgated thereunder).
(k) Omissions. None of Tenant's representations or warranties
contained in this Lease or any document, certificate or written statement
furnished to Landlord by or on behalf of Tenant contains any untrue statement of
a material fact or omits a material fact necessary in order to make the
statements contained herein or therein (when taken in their entireties) not
misleading.
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(l) Existence. Tenant shall continuously maintain its
existence and its qualification to do business in the State of California.
(m) Tenant Taxes. Tenant shall comply with all applicable tax
laws and pay before the same become delinquent all taxes imposed upon it or upon
its property (but not Excluded Taxes) where the failure to so comply or so pay
would have a material adverse effect on the financial condition or operations of
Tenant; except that Tenant may in good faith by appropriate proceedings contest
the validity, applicability or amount of any such taxes and pending such contest
Tenant shall not be deemed in default under this subparagraph if (1) Tenant
diligently prosecutes such contest to completion in an appropriate manner, and
(2) Tenant promptly causes to be paid any tax adjudged by a court of competent
jurisdiction to be due, with all costs, penalties, and interest thereon,
promptly after such judgment becomes final; provided, however, in any event such
contest shall be concluded and the tax, penalties, interest and costs shall be
paid prior to the date any writ or order is issued under which any of Tenant's
property that is material to the business of Tenant and its Subsidiaries taken
as a whole may be seized or sold because of the nonpayment thereof.
(n) Operation of Property. Tenant shall operate the Leased
Property in a good and workmanlike manner and in compliance with all Applicable
Laws and will pay all fees or charges of any kind in connection therewith other
than Excluded Taxes. Tenant shall not use or occupy, or allow the use or
occupancy of, the Leased Property in any manner which violates any Applicable
Law or which constitutes a public or private nuisance or which makes void,
voidable or cancelable any insurance then in force with respect thereto. To the
extent that any of the following would, individually or in the aggregate,
materially and adversely affect the value of the leased Property Tenant shall
not: (i) initiate or permit any zoning reclassification of the Leased Property;
(ii) seek any variance under existing zoning ordinances applicable to the Leased
Property; (iii) use or permit the use of the Leased Property in a manner that
would result in such use becoming a nonconforming use under applicable zoning
ordinances or similar laws, rules or regulations; (iv) execute or file any
subdivision plat affecting the Leased Property; or (v) consent to the annexation
of the Leased Property to any municipality. If a change in the zoning or other
Applicable Laws affecting the permitted use or development of the Leased
Property shall occur that Landlord determines will materially reduce the
then-current market value of the Leased Property, and if after such reduction
the Stipulated Loss Value shall substantially exceed the then-current market
value of the Leased Property in the reasonable judgment of Landlord, then Tenant
pay Landlord prior to the termination or expiration of this lease an amount
equal to such excess for application as a Qualified Payment. Tenant shall not
impose any restrictive covenants or encumbrances upon the leased Property
without the prior written consent of the Landlord; provided, that such consent
shall not be unreasonably withheld for any encumbrance or restriction that is
made expressly subject to this Lease, as modified from time to time, and
subordinate to Landlord's interest in the Leased Property by an agreement in
form satisfactory to Landlord. Tenant shall not cause or permit any drilling or
exploration for, or extraction, removal or production of, minerals from the
surface or subsurface of the Leased Property. Tenant shall not do any act
whereby the market value of the Leased Property may be
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materially lessened. Tenant shall allow Landlord or its authorized
representative to enter the Leased Property at any reasonable time to inspect
the Leased Property and, after reasonable notice, to inspect Tenant's books and
records pertaining thereto, and Tenant shall assist Landlord or Landlord's
representative in whatever way reasonably necessary to make such inspections. If
Tenant receives a written notice or claim from any federal, state or other
governmental entity that the Leased Property is not in compliance in any
material respect with any Applicable Law, or that any action may be taken
against the owner of the Leased Property because the Leased Property does not
comply with Applicable Law, Tenant shall promptly furnish a copy of such notice
or claim to Landlord. Notwithstanding the foregoing, Tenant may in good faith,
by appropriate proceedings, contest the validity and applicability of any
Applicable Law with respect to the Leased Property, and pending such contest
Tenant shall not be deemed in default hereunder because of a violation of such
Applicable Law, if Tenant diligently prosecutes such contest to completion in a
manner reasonably satisfactory to Landlord, and if Tenant promptly causes the
Leased Property to comply with any such Applicable Law upon a final
determination by a court of competent jurisdiction that the same is valid and
applicable to the Leased Property; provided, that in any event such contest
shall be concluded and the violation of such Applicable Law must be corrected
and any claims asserted against Landlord or the Leased Property because of such
violation must be paid by Tenant, all prior to the date that (i) any criminal
charges are threatened or instituted against Landlord or any of its directors,
officers or employees because of such violation or (ii) any action is threatened
or instituted by any governmental authority against Landlord or any property
owned by Landlord (including the Leased Property) because of such violation.
(o) Debts for Operation of Leased Property. Tenant shall
promptly pay or cause to be paid all debts and liabilities incurred in the
maintenance and operation of the Leased Property, including without limitation
all debts and liabilities for labor, material and equipment and all debts and
charges for utilities servicing the Leased Property; provided, nothing in this
subparagraph will be construed to make Tenant liable for Landlord's Liens or
Excluded Taxes. Notwithstanding the foregoing, Tenant may in good faith by
appropriate proceedings contest the validity, applicability or amount of any
asserted mechanic's or materialmen's lien and pending such contest Tenant shall
not be deemed in default under this subparagraph (or subparagraphs 8.(t) or
8.(u)) because of the contested lien if (1) within sixty (60) days after being
asked to do so by Landlord, Tenant bonds over to Landlord's reasonable
satisfaction any contested liens against the Leased Property alleged to secure
an amount in excess of $500,000 (individually or in the aggregate) (2) Tenant
diligently prosecutes such contest to completion in a manner reasonably
satisfactory to Landlord, and (3) Tenant promptly causes to be paid any amount
adjudged by a court of competent jurisdiction to be due, with all costs and
interest thereon, promptly after such judgment becomes final; provided, however,
that in any event each such contest shall be concluded and the lien, interest
and costs shall be paid prior to the date (i) any criminal action is threatened
or instituted against Landlord or its directors, officers or employees because
of the nonpayment thereof or (ii) any writ or order is issued under which any
property owned by Landlord (including the Leased Property) may be seized or sold
or any other action is
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threatened or instituted against Landlord or any property owned by Landlord
because of the nonpayment thereof.
(p) Impositions. Tenant shall reimburse Landlord for (or, if
requested by Landlord, will pay or cause to be paid prior to delinquency) all
sales, excise, ad valorem, gross receipts, business, transfer, stamp, occupancy,
rental and other taxes, levies, fees, charges, surcharges, assessments or
penalties which arise out of or are attributable to this Lease or which are
imposed upon Landlord or the Leased Property because of the ownership, leasing,
occupancy, sale or operation of the Leased Property, or any part thereof, or
relating to or required to be paid by the terms of any of the Permitted
Encumbrances, excluding only Landlord's Liens and Excluded Taxes (collectively,
all such taxes, levies, fees, charges, surcharges, assessments or penalties,
other than Landlord's Liens and Excluded Taxes, are herein called the
"IMPOSITIONS"). If Landlord requires Tenant to pay any Impositions directly to
the applicable taxing authority or other party entitled to collect the same,
Tenant shall furnish Landlord with receipts showing payment of such Impositions
and other amounts prior to delinquency; except that Tenant may in good faith by
appropriate proceedings contest the validity, applicability or amount of any
asserted Imposition, and pending such contest Tenant shall not be deemed in
default of this subparagraph (or subparagraphs 8.(t) or 8.(u)) because of the
contested Imposition if (1) within sixty (60) days after being asked to do so by
Landlord, Tenant bonds over to the reasonable satisfaction of Landlord any lien
asserted against the Leased property and alleged to secure an amount in excess
of $500,000 because of the contested Imposition, (2) Tenant diligently
prosecutes such contest to completion in a manner reasonably satisfactory to
Landlord, and (3) Tenant promptly causes to be paid any amount adjudged by a
court of competent jurisdiction to be due, with all costs, penalties and
interest thereon, promptly after such judgment becomes final; provided, however,
that in any event each such contest shall be concluded and the Impositions,
penalties, interest and costs shall be paid prior to the date (i) any criminal
action is threatened or instituted against Landlord or its directors, officers
or employees because of the nonpayment thereof or (ii) any writ or order is
issued under which any property owned by Landlord (including the Leased
Property) may be seized or sold or any other action is threatened or instituted
against Landlord or any property owned by Landlord because of the nonpayment
thereof.
(q) Repair, Maintenance, Alterations and Additions. Subject to
Paragraph 4, Tenant shall keep the Leased property in good order, repair,
operating condition and appearance (ordinary wear and tear excepted), causing
all necessary repairs, renewals, replacements, additions and improvements to be
promptly made, and will not allow any of the Leased property to be materially
misused, abused or wasted or to materially deteriorate. Tenant shall promptly
replace any worn-out fixtures covered by this Lease with fixtures comparable to
the replaced fixtures when new, and Tenant shall not, without the prior written
consent of Landlord, (i) remove from the Leased Property any fixtures of
significant value covered by this Lease except such as are replaced by Tenant by
articles of equal suitability and value, free and clear of any Lien other than
Permitted Encumbrances or Landlord's Liens, or (ii) make any structural
alteration to any Improvements or any alterations thereto which significantly
reduce the fair
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market value or which change the general character of the Leased Property or
which impair in any significant manner the useful life or utility of any
Improvements. Upon request of Landlord made when an Event of Default shall have
occurred and be continuing, Tenant shall deliver to Landlord an inventory
describing and showing the make, model, serial number and location of all Trade
Fixtures and personalty not included in the Leased Property with a certification
by Tenant that such inventory is a true and complete schedule of all such Trade
Fixtures and personalty and that all items covered hereby are free and clear of
any Lien other than the Permitted Encumbrances or Landlord's Liens.
(r) Insurance and Casualty. Throughout the Term, Tenant will
keep all Improvements (including all alterations, additions and changes made to
the Improvements) which are located within the Leased property insured under an
all-risk property insurance policy (not excluding from coverage perils normally
included within the definitions of extended coverage, vandalism, malicious
mischief and, if the Leased Property is in a flood zone, flood) in the amount of
one hundred percent (100%) of the replacement value with endorsements for
contingent liability from operation of building laws, increased cost of
construction and demolition costs which may be necessary to comply with building
laws. Tenant will be responsible for determining the amount of property
insurance to be maintained, but such coverage will be on an agreed value basis
to eliminate the effects of coinsurance. Such insurance shall be issued by an
insurance company or companies rated by the A.M. Best Company of Oldwick, New
Jersey as having a policyholder's rating of A or better and a reported financial
information rating of X or better. Any deductible applicable to such insurance
shall not exceed $500,000. Such insurance shall cover not only the value of
Tenant's interest in the Improvements, but also the interest of the Landlord,
and such insurance shall include provisions that Landlord must be notified at
least ten (10) days prior to any cancellation or reduction of insurance
coverage. With this Lease Tenant shall deliver to Landlord a certificate from
the applicable insurer or its authorized agent evidencing the insurance required
by this subparagraph and any additional insurance which shall be taken out upon
any part of the Leased Property. Thereafter, Tenant shall deliver to Landlord
certificates from the applicable insurer or its authorized agent of renewals or
replacements of all such policies of insurance at least fifteen (15) days before
any such insurance shall expire. Tenant further agrees that all such policies
shall provide that proceeds thereunder will be payable to Landlord and Tenant as
their interests may appear, it being understood between Landlord and Tenant that
such proceeds will be paid to Landlord as Escrowed Proceeds and will be applied
in accordance with Paragraph 4 of this Lease. Landlord shall have no right to
receive proceeds for loss of Tenant's Trade Fixtures and personal property. If
Tenant fails to obtain any insurance required by this Lease or to provide
confirmation of any such insurance as required by this Lease, Landlord shall be
entitled (but not required) to obtain the insurance that Tenant has failed to
obtain or for which Tenant has not provided the required confirmation and,
without limiting Landlord's other remedies under the circumstances, Landlord may
require Tenant to reimburse Landlord for the cost of such insurance and to pay
interest thereon computed at the Default Rate from the date such cost was paid
by Landlord until the date of reimbursement by Tenant. In the event any of the
Leased Property is destroyed or damaged by fire, explosion, windstorm, hail or
by any other casualty
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against which insurance shall have been required hereunder, (i) Landlord may,
but shall not be obligated to, make proof of loss if not made promptly by
Tenant, (ii) each insurance company concerned is hereby authorized and directed
to make payment for such loss directly to Landlord for application as required
by paragraph 4, and (iii) Landlord may settle, adjust or compromise any and all
claims for loss, damage or destruction under any policy or policies of insurance
(provided, that so long as no Event of Default shall have occurred and be
continuing, Landlord must obtain Tenant's written consent to any such
settlement, which consent will not be unreasonably withheld). If any casualty
shall result in damage to or loss or destruction of the Leased Property, Tenant
shall give immediate notice thereof to Landlord and Paragraph 4 shall apply.
Notwithstanding the foregoing, however, if any insurance claim for damage to the
Leased Property is for less than $500,000 and no Event of Default shall have
occurred and be continuing, Tenant shall have the right to settle, adjust or
compromise the claim as Tenant deems appropriate; and Tenant may directly
receive and hold the proceeds of such claim so long as no Event of Default shall
have occurred and be continuing and so long as Tenant applies such proceeds for
any restoration, replacement and repair of the Leased Property required by
subparagraph 4.(b).
(s) Condemnation. Immediately upon obtaining knowledge of the
institution of any proceedings for the condemnation of the Leased Property or
any portion thereof, or any other similar governmental or quasi-governmental
proceedings arising out of injury or damage to the Leased Property or any
portion thereof, each party shall notify the other (provided, however, Landlord
shall have no liability for its failure to provide such notice) of the pendency
of such proceedings. Tenant shall, at its expense, diligently prosecute any such
proceedings and shall consult with Landlord, its attorneys and experts and
cooperate with them as reasonably requested in the carrying on or defense of any
such proceedings. All proceeds of condemnation awards or proceeds of sale in
lieu of condemnation with respect to the Leased Property and all judgments,
decrees and awards for injury or damage to the Leased Property shall be paid to
Landlord as Escrowed proceeds for application as provided in Paragraph 4 above.
Landlord is hereby authorized, in the name of Tenant, at any time when an Event
of Default shall have occurred and be continuing, or with Tenant's prior written
consent (which consent will not be unreasonably withheld), to execute and
deliver valid acquittances for, and to appeal from, any such judgment, decree or
award concerning condemnation of any of the Leased Property. Landlord shall not
be in any event or circumstances liable or responsible for failure to collect,
or to exercise diligence in the collection of, any such proceeds, judgments,
decrees or awards. Notwithstanding the foregoing provisions of this
subparagraph, if condemnation proceeds totaling not more than $500,000 are to be
recovered as a result of a taking of less than all or substantially all of the
Leased Property, Tenant may directly receive and hold such proceeds so long as
no Event of Default shall have occurred and be continuing and so long as Tenant
applies such proceeds for any restoration, replacement and repair of the
remainder of the Leased property required by Paragraph 4.(b).
(t) Protection and Defense of Title. If any
encumbrance or title defect whatsoever affecting Landlord's fee interest in the
Leased Property is claimed or discovered
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(excluding permitted Encumbrances and Landlord's Liens and this Lease) or if any
legal proceedings are instituted with respect to title to the Leased Property,
Tenant shall give prompt written notice thereof to Landlord and at Tenant's own
cost and expense will promptly cause the removal of any such encumbrance and
cure any such defect and will take all necessary and proper steps for the
defense of any such legal proceedings, including but not limited to the
employment of counsel, the prosecution or defense of litigation and the release
or discharge of all adverse claims. If Tenant fails to promptly remove any such
encumbrance or title defect (other than a Lien Tenant is contesting as expressly
permitted by and in accordance with subparagraph 8.(o) or subparagraph 8.(p)),
Landlord (whether or not named as a party to legal proceedings with respect
thereto) shall be entitled to take such additional steps as in its judgment may
be necessary or proper to remove such encumbrance or cure such defect or for the
defense of any such attack or legal proceedings or the protection of Landlord's
fee interest in the Leased Property, including but not limited to the employment
of counsel, the prosecution or defense of litigation, the compromise or
discharge of any adverse claims made with respect to the Leased property, the
removal of prior liens or security interests, and all expenses (including
Attorneys' Fees) so incurred of every kind and character shall be a demand
obligation owing by Tenant.
(u) No Liens on the Leased Property. Tenant shall not, without
the prior written consent of Landlord, create, place or permit to be created or
placed, or through any act or failure to act, acquiesce in the placing of, or
allow to remain, any Lien which secures any payment or performance obligation
(except Landlord's Liens, the lien for ad valorem taxes on the Leased Property
which are not delinquent and any Lien Tenant is contesting as expressly
permitted by and in accordance with subparagraph 8.(o) or subparagraph 8.(p)),
against or covering the Leased Property or any part thereof regardless of
whether the same are expressly or otherwise subordinate to this Lease or
Landlord's interest in the Leased Property, and should any such prohibited Lien
exist or become attached hereafter in any manner to any part of the Leased
property without the prior written consent of Landlord, Tenant shall cause the
same to be promptly discharged and released to the satisfaction of Landlord.
(v) Books and Records. Tenant shall keep books and records that
are accurate and complete in all material respects for the Leased Property and
will permit all such books and records (including without limitation all
contracts, statements, invoices, bills and claims for labor, materials and
services supplied for the operation of any Improvements) to be inspected and
copied by Landlord and its duly accredited representatives at all times during
reasonable business hours. This subparagraph shall not be construed as requiring
Tenant to regularly maintain separate books and records relating exclusively to
the Leased Property; provided, however, that upon request, Tenant shall
construct or abstract from its regularly maintained books and records
information required by this subparagraph relating to the Leased Property.
(w) Financial statements; Required Notices; Certificates as to
Default. Tenant shall deliver to Landlord:
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(i) as soon as available and in any event within
ninety (90) days after the end of each fiscal year of Tenant, a consolidated
balance sheet of Tenant and its consolidated subsidiaries as of the end of such
fiscal year and a consolidated income statement and statement of cash flows of
Tenant and its consolidated Subsidiaries for such fiscal year, all in reasonable
detail and all prepared in accordance with GAAP and accompanied by a report and
opinion of accountants of national standing selected by Tenant, which report and
opinion shall be prepared in accordance with generally accepted auditing
standards and shall not be subject to any qualifications or exceptions as to the
scope of the audit nor to any qualification or exception which Landlord
determines, in Landlord's reasonable discretion, is unacceptable; provided that
notwithstanding the foregoing, for so long as Tenant is a company subject to the
periodic reporting requirements of Section 12 of the Securities Exchange Act of
1934, as amended, Tenant shall be deemed to have satisfied its obligations under
this clause (i) so long as Tenant delivers to Landlord the same annual report
and report and opinion of accountants that Tenant delivers to its shareholders;
(ii) as soon as available and in any event within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year of Tenant, the consolidated balance sheet of Tenant and its
consolidated Subsidiaries as of the end of such quarter and the consolidated
income statement and the consolidated statement of cash flows of Tenant and its
consolidated Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, all in reasonable detail
and all prepared in accordance with GAAP and certified by a Responsible
Financial Officer of Tenant (subject to year-end adjustments); provided that
notwithstanding the foregoing, for so long as Tenant is a company subject to the
periodic reporting requirements of Section 12 of the securities Exchange Act of
1934, as amended, Tenant shall be deemed to have satisfied its obligations under
this clause (ii) so long as Tenant delivers to Landlord the same quarterly
reports, certified by a Responsible Financial Officer of Tenant (subject to
year-end adjustments) that Tenant delivers to its shareholders;
(iii) together with the financial statements
furnished in accordance with subparagraph 8.(w) (ii) and 8.(w)(i), a certificate
of a Responsible Financial Officer of Tenant in substantially the form attached
hereto as Exhibit E: (i) certifying that to the Tenant's knowledge no Default or
Event of Default under this Lease has occurred and is continuing or, if a
Default or Event of Default has occurred and is continuing, a brief statement as
to the nature thereof and the action which is proposed to be taken with respect
thereto, (ii) certifying that the representations of Tenant set forth in this
Lease are true and correct in all material respects as of the date thereof as
though made on and as of the date thereof or, if not then true and correct, a
brief statement as to why such representations are no longer true and correct,
and (iii) with computations demonstrating compliance with the financial
covenants contained in subparagraph 8.(ae);
(iv) promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and reports which Tenant
sends to the Securities and Exchange
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Commission and all registration statements (other than registration statements
on Form S-8 or any form substituted therefor) which Tenant files with the
Securities and Exchange Commission or any governmental authority which may be
substituted therefor, or with any national securities exchange;
(v) as soon as possible and in any event within
five (5) days after the occurrence of each Default or Event of Default, a
statement of a Responsible Financial Officer of Tenant setting forth details of
such Default or Event of Default and the action which Tenant has taken and
proposes to take with respect thereto;
(vi) such other information concerning the
compliance by Tenant with the provisions of this Lease or the purchase
Documents, the Leased Property or Tenant's financial condition as Landlord may
from time to time reasonably request.
Landlord is hereby authorized to deliver a copy of any information or
certificate delivered to it pursuant to this subparagraph 8 (w) to any
regulatory body having jurisdiction over Landlord that requires or requests it
(x) Estoppel Certificate. Each party will, upon not less than
twenty (20) days' prior written request, execute, acknowledge and deliver to the
requesting party or its designee a written statement certifying that this Lease
is unmodified and in full effect (or, if there have been modifications, that
this Lease is in full effect as modified, and setting forth such modification)
and either stating that no default exists hereunder or specifying each such
default of which the signer may have knowledge. Any such statement may be relied
upon by any participant and by any prospective assignee or lender of Landlord or
Tenant with respect to the Property. Each Party shall be required to provide
such a certificate no more frequently than once in any six month period;
provided, however, that if a party determines that there is a significant
business reason for requiring a current certificate, including, without
limitation, the need to provide such a certificate to a prospective purchaser or
assignee, the other party shall provide a certificate upon request whether or
not a certificate has been provided within the prior six month period.
(y) Further Assurances. Tenant shall, on request of Landlord,
(i) promptly correct any error which may be discovered in the contents of this
Lease or in any other instrument executed in connection herewith or in the
execution or acknowledgment thereof; (ii) execute, acknowledge, deliver and
record or file such further instruments and do such further acts as may be
necessary, desirable or proper to carry out more effectively the purposes of
this Lease and to subject to this Lease any property intended by the terms
hereof to be covered hereby including specifically, but without limitation, any
renewals, additions, substitutions, replacements or appurtenances to the Leased
property; (iii) execute, acknowledge, deliver, procure and record or file any
document or instrument deemed advisable by Landlord to protect its rights in and
to the Leased Property against the rights or interests of third persons; and
(iv) provide such certificates, documents, reports, information, affidavits and
other instruments and do such further acts as may be necessary, desirable or
proper in the reasonable determination of
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Landlord to enable Landlord, Landlord's Lender to comply with the requirements
or requests of any agency or authority having jurisdiction over them.
(z) Fees and Expenses; General Indemnification;
Increased Costs; and Capital Adequacy Charges.
(i) Except for any costs paid by Landlord with the
proceeds of the Initial Funding Advance as part of the Closing Costs, Tenant
shall pay (and shall indemnify and hold harmless Landlord, Landlord's Lender and
any Person claiming through Landlord by reason of a Permitted Transfer from and
against) all Losses incurred by Landlord or Landlord's Lender (or any Person
claiming through Landlord by reason of a Permitted Transfer) in connection with
or because of (A) the ownership of any interest in or operation of the Leased
Property or (B) the negotiation or administration of this Lease, the Purchase
Documents or the Environmental Indemnity, whether such Losses are incurred at
the time of execution of this Lease or at any time during the Term. Costs and
expenses included in such Losses may include, without limitation: all appraisal
fees, filing and recording fees, inspection fees, survey fees, taxes (other than
Excluded Taxes), brokerage fees and commissions, abstract fees, title policy
fees, uniform Commercial Code search fees, escrow fees, Attorneys' Fees and
environmental consulting fees incurred by Landlord with respect to the Leased
Property; but will not include an allocation of general overhead or internal
administrative expenses of Landlord, Landlord' s Lender or any Participant,
except to the extent allowed by subparagraph 8.(z) (iii) because of a Banking
Rules Change after the date of this Lease, and will not include costs incurred
in connection with the negotiation and execution of agreements between Landlord
and Participants. If Landlord pays or reimburses Landlord's Lender for any such
Losses, Tenant shall reimburse Landlord for the same notwithstanding that
Landlord may have already received any payment from any Participant on account
of such Losses, it being understood that the participant may expect repayment
from Landlord when Landlord does collect the required reimbursement from Tenant.
(ii) Tenant shall also pay (and indemnify and hold
harmless Landlord, Landlord's Lender and any Person claiming through Landlord by
reason of a permitted Transfer from and against) all Losses, including
Attorneys' Fees, incurred or expended by Landlord or Landlord's Lender or any
Person claiming through Landlord through a permitted Transfer or in connection
with (A) the breach by Tenant of any covenant of Tenant herein or in any other
instrument executed in connection herewith or (B) Landlord's exercise of any of
Landlord's rights and remedies hereunder or under Applicable Law or Landlord's
protection of the Leased Property and Landlord's interest therein as permitted
hereunder or under Applicable Law. (However, the indemnity in the preceding
sentence shall not be construed to make Tenant liable to both Landlord and any
other party claiming through Landlord for the same costs, expenses or damages or
for any allocation of general overhead or internal administrative expenses of
Landlord, Landlord's Lender or any participant except to the extent allowed by
subparagraph 8.(z) (iii) because of a Banking Rules Change after the date of
this Lease.) Tenant shall further indemnify and hold harmless Landlord and all
other Indemnified Parties against, and reimburse them for, all Losses which may
be imposed upon, asserted against or incurred or paid by them
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by reason of, on account of or in connection with any bodily and personal injury
or death or damage to the property of third parties occurring in or upon or in
the vicinity of the Leased Property through any cause whatsoever. THE FOREGOING
INDEMNITY FOR INJURY, DEATH OR PROPERTY DAMAGE SHALL APPLY EVEN WHEN INJURY,
DEATH OR PROPERTY DAMAGE IN, ON OR IN THE VICINITY OF TEE LEASED PROPERTY
RESULTS IN WHOLE OR IN PART FROM THE NEGLIGENCE OF AN INDEMNIFIED PARTY
PROVIDED, SUCH INDEMNITY SHALL NOT APPLY TO LOSSES SUFFERED BY AN INDEMNIFIED
PARTY THAT ARE PROXIMATELY CAUSED BY (AND ATTRIBUTED BY ANY APPLICABLE
PRINCIPLES OF COMPARATIVE FAULT TO) THE MISCONDUCT OF SUCH INDEMNIFIED PARTY.
(iii) If, after the date hereof, there shall be any
increase in the cost to Landlord's Lender or any Participant agreeing to make or
making, funding or maintaining advances to Landlord in connection with the
Leased Property because of any Banking Rules Change, then Tenant shall from time
to time, upon demand by Landlord pay to Landlord for the account of Landlord's
Lender, or such Participant, as the case may be, additional amounts sufficient
to compensate Landlord's Lender or the Participant for such increased cost. A
certificate as to the amount of such increased cost, submitted to Landlord and
Tenant by Landlord's Lender of the Participant, shall be conclusive and binding
for all purposes, absent clear and demonstrable error.
(iv) Landlord's Lender or any Participant may
demand additional payments (herein called "Capital Adequacy Charges") if
Landlord's Lender or the Participant determines that any Banking Rules Change
affects the amount of capital to be maintained by it and that the amount of such
capital is increased by or based upon the existence of advances made or to be
made to Landlord to permit Landlord to maintain Landlord's investment in the
Leased Property. To the extent that Landlord's Lender or the Participant demands
Capital Adequacy Charges as compensation for the additional capital requirements
reasonably allocable to such advances, Tenant shall pay to Landlord for the
account of the Landlord's Lender or the Participant, as the case may be, the
amount so demanded. Without limiting the foregoing, Landlord and Tenant hereby
acknowledge and agree that the Spread (as such term is used herein in the
calculation of Base Rent) was established assuming that because of the Pledge
Agreement, the risk weight assigned to 85% of the collective investment of
Landlord and its Affiliates in the Leased Property pursuant to 12 Code of
Federal Regulations, part 225, as from time to time supplemented or amended, or
pursuant to any other similar or successor statute or regulation applicable to
Landlord and its Affiliates (the "Regulations") would remain at twenty percent
during the term of this Lease. If and so long as such risk weight is increased
because of a Banking Rules Change, Capital Adequacy Charges may be collected in
the form of an increase in the Spread which will yield the same rate of return
to Landlord, Landlord's Lender and any participants (net of their costs of
maintaining required capital) that would have existed absent such increase.
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(v) Any amount to be paid to Landlord, Landlord's
Lender or any Indemnified Party under this subparagraph 8.(z) shall be a demand
obligation owing by Tenant. Tenant's indemnities and obligations under this
subparagraph 8.(z) shall survive the termination or expiration of this Lease
with respect to any circumstance or event existing or occurring prior to such
termination or expiration. However, Landlord must notify Tenant of any claim for
additional compensation pursuant to subsections 8.(z)(iii) or 8.(z)(iv) within
six (6) months after Tenant or any Applicable purchaser purchases the Leased
Property pursuant to the purchase Agreement. Further, nothing in this
subparagraph 8.(z) shall be construed to make Tenant liable to any Person for
Losses suffered by that Person because of such Person's own Misconduct.
(aa) Liability Insurance. Tenant shall maintain commercial
general liability insurance against claims for bodily and personal injury or
death and property damage occurring or resulting from any occurrence in or upon
the Leased Property, in standard form and with an insurance company or companies
rated by the A.M. Best Company of Oldwick, New Jersey as having a policyholder's
rating of A or better and a reported financial information rating of X or
better, such insurance to afford immediate protection, to the limit of not less
than $10,000,000 combined single limit for bodily and personal injury and
property damage in respect of any one accident or occurrence, with not more than
$500,000 self-insured retention. Such commercial general liability insurance
shall include blanket contractual liability coverage which insures contractual
liability under the indemnifications set forth in this Lease for Losses
attributable to bodily injury, personal injury or property damage (other than
the indemnifications set forth in paragraph 12 concerning environmental
matters), but such coverage or the amount thereof shall in no way limit such
indemnifications. The policy evidencing such insurance shall name as additional
insureds Landlord. Tenant shall maintain with respect to each policy or
agreement evidencing such commercial general liability insurance such
endorsements as may be reasonably required by Landlord and shall at all times
deliver and maintain with Landlord written confirmation (in form satisfactory to
Landlord) with respect to such insurance from the applicable insurer or its
authorized agent, which confirmation must provide that insurance coverage will
not be canceled or reduced without at least fifteen (IS) days notice to
Landlord. Not less than fifteen (IS) days prior to the expiration date of each
policy of insurance required of Tenant pursuant to this subparagraph, Tenant
shall deliver to Landlord a certificate evidencing a paid renewal policy or
policies.
(ab) Permitted Encumbrances. Except to the extent expressly
required of Landlord by subparagraph 9.(b), Tenant shall comply with and will
cause to be performed all of the covenants, agreements and obligations imposed
upon the owner of the Leased Property in the permitted Encumbrances in
accordance with their respective terms and provisions. Tenant shall not modify
or permit any modification of any Permitted Encumbrance without the prior
written consent of Landlord. Such consent will not be unreasonably withheld for
the modification of any Permitted Encumbrance that has been made expressly
subject to this Lease, as modified from time to time, and subordinate to
Landlord's interest in the Leased Property by agreement in form satisfactory to
Landlord.
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(ac) Environmental.
(i) Environmental Covenants. Tenant covenants:
a) not to cause or permit the Leased Property to be in
violation of, or do anything or permit anything to be done which will
subject the Leased Property to any remedial obligations under, any
Environmental Laws, including without limitation CERCLA and RCRA,
assuming disclosure to the applicable governmental authorities of all
relevant facts, conditions and circumstances pertaining to the Leased
Property;
b) not to conduct or authorize others to conduct
Hazardous Substance Activities on the Leased Property, except Permitted
Hazardous Substance Use;
c) to the extent required by Environmental Laws, to
remove Hazardous Substances from the Leased Property (or if removal is
prohibited by law, to take whatever action is required by law) promptly
upon discovery; and
d) not to discharge or authorize the discharge of anything
(including Permitted Hazardous Substances) from the Leased Property
into groundwater or surface water that would require any permit under
applicable Environmental Laws, other than storm water runoff.
If Tenant's failure to cure any breach of the covenants listed above in this
subparagraph 8.(ac)(i) continues beyond the Environmental Cure Period (as
defined below), Landlord may, in addition to any other remedies available to it,
after notifying Tenant of the remediation efforts Landlord believes are needed,
cause the Leased Property to be freed from all Hazardous Substances (or if
removal is prohibited by law, to take whatever action is required by law), and
the cost of the removal shall be a demand obligation owing by Tenant to
Landlord. Further, subject to the provisions of subparagraph 12.(c) below,
Tenant agrees to indemnify Landlord against all Losses incurred by or asserted
or proven against Landlord in connection therewith. As used in this
subparagraph, "ENVIRONMENTAL CURE PERIOD" means the period ending on the earlier
of: (1) one hundred eighty (180) days after Tenant is notified of the breach
which must be cured within such period, or such longer period as is reasonably
required for any cure that Tenant pursues with diligence pursuant to and in
accordance with an Approved Plan (as defined below), (2) the date any writ or
order is issued for the levy or sale of any property owned by Landlord
(including the Leased Property) or any criminal action is threatened or
instituted against Landlord or any of its directors, officers or employees
because of the breach which must be cured within such period, (3) the end of the
Term. As used in this subparagraph, an "APPROVED PLAN" means a plan of
remediation of a violation of Environmental Laws for which Tenant has obtained,
within one hundred eighty (180) days after Tenant is notified of the applicable
breach of the covenants listed above in this subparagraph 8.(ac)(i), the written
approval of the governmental authority with primary jurisdiction over the
violation and with respect to which no other governmental authority asserting
jurisdiction has claimed such plan is inadequate.
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(ii) Environmental Inspections and Reviews. Landlord reserves the right
to retain an independent professional consultant to review any report prepared
by Tenant or to conduct Landlord's own investigation to confirm whether
Hazardous Substances Activities or the discharge of anything into groundwater or
surface water has occurred in violation of the preceding subparagraph 8.(ac)(i),
but Landlord's right to reimbursement for the fees of such consultant shall be
limited to the following circumstances: (1) an Event of Default shall have
occurred; (2) Landlord shall have retained the consultant to establish the
condition of the Leased Property just prior to any conveyance thereof pursuant
to the Purchase Agreement or just prior to the expiration of this Lease; (3)
Landlord shall have retained the consultant to satisfy any regulatory
requirements applicable to Landlord or its Affiliates; or (4) Landlord shall
have retained the consultant because Landlord has been notified of a violation
of Environmental Laws concerning the Leased Property or Landlord otherwise
reasonably believes that Tenant has not complied with the preceding subparagraph
8.(ac)(i). Tenant agrees to Landlord and to Landlord's agents, employees,
consultants and contractors the right during reasonable business hours and after
reasonable notice to enter upon the Leased Property to inspect the Leased
Property and to perform such tests as are reasonably necessary or appropriate to
conduct a review or investigation of Hazardous Substances on, or any discharge
into groundwater or surface water from, the Leased Property. Without limiting
the generality of the foregoing, Tenant agrees that Landlord will have the same
right, power and authority to enter and inspect the Leased Property as is
granted to a secured lender under Section 2929.5 of the California Civil Code.
Tenant shall promptly reimburse Landlord for the cost of any such inspections
and tests, but only when the inspections and tests are (1) ordered by Landlord
after an Event of Default; (2) ordered by Landlord to establish the condition of
the Leased Property just prior to any conveyance thereof pursuant to the
Purchase Agreement or just prior to the expiration of this Lease; 93) ordered by
Landlord to satisfy any regulatory requirements applicable to Landlord or its
Affiliates; or (4) ordered because Landlord has been notified of a violation of
Environmental Laws concerning the Leased Property or Landlord otherwise
reasonably believes that Tenant has not complied with the preceding subparagraph
8.(ac)(i).
(iii) Notice of Environmental Problems. Tenant shall immediately advise
Landlord of (i) any discovery of any event or circumstance which would render
any of the representations contained in subparagraph 8.(e) inaccurate in any
material respect if made at the time of such discovery, (ii) any remedial action
taken by Tenant in response to any (A) discovery of any Hazardous Substances
other than Permitted Hazardous Substances on,k under or about the Leased
Property or (B) any claim for damages resulting from Hazardous Substance
Activities, (iii) Tenant's discovery of any occurrence or condition on any real
property adjoining or in the vicinity of the Leased Property which is not fully
disclosed in the Environmental Report and which could cause the Leased Property
or any part thereof to be subject to any ownership, occupancy, transferability
or use restrictions under Environmental Laws, or (iv) any investigation or
inquiry affecting the Leased Property by any governmental authority in
connection with any Environmental Laws. In such event, Tenant shall deliver to
Landlord within thirty (30) days after Landlord's request, a preliminary written
environmental plan setting forth a general description of the action that Tenant
proposes to take with respect thereto, if any,
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to bring the Leased Property into compliance with Environmental Laws or to
correct any breach by Tenant of the covenants listed above in subparagraph
8.(ac)(i), including, without limitation, any proposed corrective work, the
estimated cost and time of completion, the name of the contractor and a copy of
the construction contract, if any,a nd such additional data, instruments,
documents, agreements or other materials or information as Landlord may
reasonably request.
(ad) Right of Landlord to Perform. If Tenant fails to perform any act
or to take any action which hereunder Tenant is required to perform or take, or
to pay any money which hereunder Tenant is required to pay, and if such failure
or action constitutes an Event of Default or causes Landlord or any director,
officer, employee or affiliate of Landlord to be threatened with criminal
prosecution or renders Landlord's interest in the Leased Property or any part
thereof at risk of forfeiture by forced sale or otherwise, then in addition to
any other remedies specified herein or otherwise available, Landlord may, in
Tenant's name or in Landlord's own name, perform or cause to be performed such
act or take such action or pay such money, but Landlord shall not be obligated
to do so. Any expenses so incurred by Landlord, and any money so paid by
Landlord, shall be a demand obligation owing by Tenant to Landlord. Further,
Landlord, upon making such payment, shall be subrogated to all of the rights of
the person, corporation or body politic receiving such payment.
(ae) Affirmative Financial Covenants.
(i) Quick Ratio. Throughout the Term, Tenant shall maintain a
ratio of (A) Quick Assets to (B) the sum of Current Liabilities of
Tenant and its Subsidiaries, of not less than 1.50 to 1.00. As used in
this Paragraph 8.(ae), "QUICK ASSETS" means the sum (without
duplication of any item) of (a) unencumbered cash on hand or on deposit
in banks; (b) unencumbered readily marketable securities maturing
within one year and issued by the United States of America or any
agency thereof and fully guaranteed by the United States Government or
by any Person rated at least A-2 or the equivalent thereof by Standard
and Poor's Corporation or P-2 or the equivalent thereof by Moody's
Investor Service, Inc.; (c) unencumbered certificates of deposit or
banker's acceptances maturing within two years and issued by commercial
banks operating in the United States of America having capital and
surplus in excess of $1,000,000,000; (d) unencumbered accounts
receivable of Tenant and its Subsidiaries (determined on a consolidated
basis net of reserves for uncollectible amounts in accordance with
GAAP); and (e) the securities with maturities of one (1) year or less
encumbered by the Pledge Agreement. As used in subparagraph 8.(ae),
"CURRENT LIABILITIES" means, with respect to any Person, all
liabilities of such Person treated as current liabilities in accordance
with GAAP other than any obligation under the Purchase Agreement,
including without limitation (a) all obligations payable on demand or
within one year after the date in which the determination is made and
(b) installment and sinking fund payments required to be made within
one year after the date on which determination is made, but excluding
all such liabilities or obligations which are renewable or extendable
at the option of such Person to a date more than one year from the date
of determination.
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(ii) Minimum Tangible Net Worth. Throughout the Term, Tenant
shall maintain a Consolidated Tangible Net Worth of not less than
$235,000,00. As used in this subparagraph 8.(ae), "CONSOLIDATED
TANGIBLE NET WORTH" means, at any date of determination thereof, the
excess of consolidated total assets on such date over consolidated
total liabilities on such date; provided, however, that Intangible
Assets on such date shall be excluded from any determination of
consolidated total assets on such date. As used in this subparagraph
8.(ae), "INTANGIBLE ASSETS" means, as of the date of any determination
thereof, the total amount of all assets of Tenant and its consolidated
Subsidiaries that are properly classified as "INTANGIBLE ASSETS" in
accordance with GAAP and, in any event, shall include, without
limitation, goodwill, patents, trade names, trademarks, copyrights,
franchises, experimental expense, organization expense, unamortized
debt discount and expense, and deferred charges other than prepared
insurance and prepaid taxes and current deferred taxes which are
classified on the balance sheet of Tenant and its consolidated
Subsidiaries as a current asset in accordance with GAAP and in which
classification Tenant's independent public accountants concur.
(af) Negative Covenants. Tenant shall not, without the prior written
consent of Landlord, permit any significant change in the nature of the business
of Tenant and its Subsidiaries, taken as a whole, from that presently conducted.
Tenant shall not sell all or substantially all of its assets or merge with
another corporation, unless (1) immediately after giving effect to such sale or
merger, no default or Event of Default will exist, and (2) the corporation
surviving the merger or acquiring the assets by sale expressly and
unconditionally shall immediately assume and ratify all of Tenant's obligations
under this Lease, the Purchase Documents and the Environmental Indemnity by a
written agreement in form reasonably acceptable to Landlord. Further, Tenant
shall not sell, liquidate, combine, dissolve Subsidiaries to the extent that
such liquidations and dissolutions would, in the aggregate, result in a material
adverse effect on the properties, assets, operations, businesses or financial
condition of Tenant or of Tenant and its Subsidiaries taken as a whole.
(ag) ERISA.
(i) Each Plan is in compliance in all material respects with,
and has been administered in all material respects in compliance with,
the applicable provisions of ERISA, the Code and any other applicable
federal or state law, and as of the date this Lease is executed no
event or condition is occurring or exists which would require a Notice
from Tenant under clause 8.(ag)(ii).
(ii) Tenant shall provide a notice to Landlord as soon as
possible after, and in any event within ten (10) days after Tenant
becomes aware that, any of the following has occurred, with respect to
which the potential aggregate liability to Tenant relating thereto is
$2,000,000 or more, and such notice shall include a statement signed by
a senior financial officer of Tenant setting forth details of the
following and the response, if any, which Tenant or its ERISA Affiliate
proposes to take with respect thereto (and a copy of
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any report or notice required to be filed with or given to Pension
Benefit Guaranty Corporation by Tenant or an ERISA Affiliate with
respect to any of the following or the events or conditions leading up
to it): (A) the assertion, to secure any Unfunded Benefit Liabilities,
of any Lien against the assets of Tenant, against the assets of any
Plan of Tenant or any ERISA Affiliate of Tenant or against any
interests of Landlord or Tenant in the Leased Property or the
collateral covered by the Pledge Agreement, or (b) the taking of any
action by the Pension Benefit Guaranty Corporation or any other
governmental authority action against Tenant or to cause the
appointment of a trustee or receiver to administer any such Plan.
9. Other Representations, Warranties and Covenants of Landlord.
Landlord represents, warrants and covenants as follows:
(a) Removal of Landlord's Liens. If a Landlord's Lien is
claimed against the Leased Property, including without limitation any judgment
lien resulting from a judgment rendered against Landlord, Landlord will at its
own cost and expense remove the Landlord's Lien. However, Landlord shall not be
responsible for any Lien that is expressly excluded from the definition of
Landlord's Liens above.
(b) Actions Required of the Title Holder. So long as no Event
of Default shall have occurred and be continuing, Landlord shall take any and
all action required of Landlord by the Permitted Encumbrances or otherwise
required by Landlord by Applicable Laws or reasonably requested by Tenant;
provided that (i) actions Tenant may require of Landlord under this subparagraph
shall be limited to actions that can only be taken by Landlord as the owner of
the Leased Property, as opposed to any action that can be taken by Tenant or any
third party (and the payment of any monetary obligation shall not be an action
required of Landlord under this subparagraph unless Landlord shall first have
received funds from Tenant, in excess of any other amounts due from Tenant
hereunder, sufficient to pay Landlord (which request must be specified and in
writing, if required by Landlord at the time the request is made) and (iii) the
action to be taken will not constitute a violation of any Applicable Laws or
compromise or constitute a waiver of Landlord's rights hereunder or under the
Purchase Documents or Environmental Indemnity or otherwise be reasonably
objectionable to Landlord. Any Losses incurred by Landlord because of any action
taken pursuant to this subparagraph shall be covered by the indemnification set
forth in subparagraph 8.(z). Further, for purposes of such indemnification, any
action taken by Landlord will be deemed to have been made at the request of
Tenant if made pursuant to any request of Tenant's counsel or of any officer of
Tenant (or with their knowledge, and without their objection) in connection with
the closing under the Existing Contract.
(c) No Default or Violation. The execution, delivery
and performance of this Lease do not contravene, result in a breach of or
constitute a default under any material contract or agreement to which Landlord
is a party or by which Landlord is bound and do not, to the
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knowledge of Landlord, violate or contravene any law, order, decree, rule or
regulation to which Landlord is subject.
(d) No Suits. To Landlord's knowledge there are no
judicial or administrative actions, suits or proceedings involving the validity,
enforceability or priority of this Lease, and to Landlord's knowledge no such
suits or proceedings are threatened.
(e) Organization. Landlord is duly incorporated and legally
existing under the laws of Delaware and is duly qualified to do business in the
State of California. Landlord has or will obtain, at Tenant's expense pursuant
to the other provisions of this Lease, all requisite power and all material
governmental certificates of authority, licenses, permits, qualifications and
other documentation necessary to own and lease the Leased Property and to
perform its obligations under this Lease.
(f) Enforceability. The execution, delivery and performance of
this Lease and the Purchase Documents by Landlord are duly authorized, are not
in contravention of or conflict with any term or provision of Landlord's
articles of incorporation or bylaws and do not, to Landlord's knowledge, require
the consent or approval of any governmental body or other regulatory authority
that has not heretofore been obtained or conflict with any Applicable Laws. This
Lease and the Purchase Documents are valid, binding and legally enforceable
obligations of Landlord except as such enforcement is affected by bankruptcy,
insolvency and similar laws affecting the rights of creditors, generally, and
equitable principles of general application; provided, Landlord makes no
representation or warranty that conditions imposed by any state or local
Applicable Laws to the purchase, ownership, lease or operation of the Leased
Property have been satisfied.
(g) Existence. Landlord will continuously maintain its
existence and will continuously maintain its right to do business in California
to the extent necessary for the performance of Landlord's obligations hereunder.
(h) Not a foreign Person. Landlord is not a "foreign person"
within the meaning of the Sections 1445 and 7701 of the Code (i.e., Landlord is
not a non-resident alien, foreign corporation, foreign partnership, foreign
trust or foreign estate as those terms are defined in the Code and regulations
promulgated thereunder).
10. Assignment and Subletting by Tenant.
(a) Landlord's Consent Required. During the term of this Lease,
without the prior written consent of Landlord first had and received, Tenant
shall not assign, transfer, mortgage, pledge or hypothecate this Lease or any
interest of Tenant hereunder and shall not sublet all or any part of the Leased
Property, by operation of law or otherwise; provided, that, so long as no Event
of Default has occurred and is continuing, Tenant shall be entitled to sublet
all or any portion of the Leased Property if (i) any sublease by Tenant is made
expressly subject
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and subordinate to the terms hereof, (ii) such sublease has a term less than the
remainder of the then effective term of this Lease, and (iii) the use permitted
by such sublease is expressly limited to general office uses or other uses
approved in advance by Landlord.
(b) Transfers in Violation of ERISA. During the term of this
Lease, without the prior written consent of Landlord first had and received,
Tenant shall not permit (1) any sale, assignment or transfer of any direct or
indirect interest in Tenant which would negate Tenant's representations in this
Lease regarding ERISA or cause this Lease, the Purchase Documents or such other
documents (or any exercise of Landlord's rights hereunder or thereunder) to
constitute a violation of any provision of ERISA, and (2) any direct or indirect
transfer of the Leased Property or any interest therein by Tenant (including,
without limitation, any Lien against Tenant's leasehold interest hereunder)
which would cause this Lease, the Purchase Documents or any such other documents
(or any exercise of Landlord's rights hereunder or thereunder) to constitute a
violation of ERISA. Further, not less than fifteen (15) days after consummation
of a transfer of title to all or part of Tenant's leasehold interesse in the
Leased Property or of an interest in Tenant, or of any direct or indirect right,
title or interest in either of them (a "TRANSFER"), or of the placing of any
Lien on Tenant's interest in the Leased Property, Tenant shall obtain from the
proposed transferee or lienholder a representation to Landlord in form and
substance reasonably satisfactory to Landlord that the Transfer or the placement
of the Lien, as the case may be, will not violate this subparagraph 10.(b).
(c) Standard for Landlord's Consent to Assignments and Certain
Other Matters. Consents and approvals of Landlord which are required by this
Paragraph 10 will not be unreasonably withheld, but Tenant acknowledges, without
limiting the reasons why Landlord might reasonably withhold such consents or
approvals, that Landlord's withholding of such consent or approval shall be
reasonable if Landlord determines in good faith that (1) giving the approval may
increase Landlord's risk of liability for any existing or future environmental
problem, or (2) any transaction for which Tenant has requested the consent or
approval would negate Tenant's representations in this Lease regarding ERISA or
cause this Lease, the Purchase Documents or such other documents (or any
exercise of Landlord's rights hereunder or thereunder) to constitute a violation
of any provision of ERISA. Further, Tenant acknowledges that if Tenant requests
Landlord's consent to a Transfer or a placing of any Lien against Tenant's
leasehold, Landlord may reasonably refuse to give such consent if the transferee
does not agree in writing that such Transfer or placement of a Lien will be
governed by the provisions of this Lease relating to ERISA.
(d) Consent Not a Waiver. No consent by Landlord to a sale,
assignment, transfer, mortgage, pledge or hypothecation of this Lease or
Tenant's interest hereunder, and no assignment or subletting of the Leased
Property or any part thereof in accordance with this Lease or otherwise with
Landlord's consent, shall release Tenant from liability hereunder; and any such
consent shall apply only to the specific transaction thereby authorized and
shall not relieve Tenant from any requirement of obtaining the prior written
consent of Landlord to any
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further sale, assignment, transfer, mortgage, pledge or hypothecation of this
Lease or any interest of Tenant hereunder.
11. Assignment by Landlord.
(a) Landlord's Assignment Generally. Subject to subparagraph
11.(b) below, Landlord shall have the right to transfer, assign and convey the
Leased Property and any and all of its rights under this Lease and the Purchase
Documents. In the event Landlord sells or otherwise transfers the Leased
Property and assigns its rights under this Lease and the Purchase Documents, and
if Landlord's successor in interest confirms its liability for the obligations
imposed upon Landlord by this Lease and the Purchase Documents on and subject to
the express terms and conditions set out herein and therein, then the original
Landlord shall thereby be released from any further obligations under this Lease
and under the Purchase Documents, and Tenant agrees to look solely to each
successor in interest of Landlord for performance of such obligations.
(b) Restrictions on Transfers. Except by a Permitted Transfer,
Landlord shall not assign, transfer, mortgage, pledge, encumber or hypothecate
this Lease or the Purchase Documents or any interest of Landlord in and to the
Leased Property during the Term without the prior written consent of Tenant,
which consent will not be unreasonably withheld if Landlord is proposing to
transfer not less than all of its interest in the Leased Property and rights
under this Lease and the Purchase Documents to a single Person who will assume
Landlord's obligations under and be subject to this Lease and the Purchase
Documents; provided, however, in connection with any transfer that constitutes a
Permitted Transfer only because it is a transfer to an Affiliate of Landlord,
the price for the transfer shall not exceed (and in any report or declaration
required in connection therewith by local or state taxing authorities Landlord
shall not report such price to be in excess of) the Stipulated Loss Value.
Landlord does not, as of the date of this Lease, expect to transfer the Leased
Property to any Person (including any Affiliate of Landlord) that will have no
material assets other than the Leased Property. Even if it is permitted by other
provisions of this Lease, before transferring the Leased Property to any Person
that will have no material assets other than the Leased Property, Landlord will,
so long as no Event of Default has occurred and is continuing, endeavor to
notify Tenant of the transfer at least thirty (30) days in advance. (However,
the failure of Landlord to so notify Tenant of any transfer permitted by other
provisions of this Lease will not render Landlord liable for any Losses of
Tenant.)
12. Environmental Indemnification.
(a) Indemnity. Tenant hereby agrees to assume liability for and
to pay, indemnify, defend, and hold harmless each and every Indemnified Party
from and against any and all Environmental Losses, subject only to the
provisions of subparagraph 12.(c) below.
(b) Assumption of Defense.
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(i) If an Indemnified Party notifies Tenant of any claim,
demand, action, administrative or legal proceeding, investigation or
allegation as to which the indemnity provided for in this Paragraph 12
applies, Tenant shall assume on behalf of the Indemnified Party and
conduct with due diligence and in good faith the investigation and
defense thereof and the response thereto with counsel selected by
Tenant but reasonably satisfactory to the Indemnified Party; provided,
that the Indemnified Party shall have the right to be represented by
advisory counsel of its own selection and at its own expense; and
provided further, that if any such claim, demand, action, proceeding,
investigation or allegation involves both Tenant and the Indemnified
Party and the Indemnified Party shall have been advised in writing by
counsel that there may be legal defenses available to it which are
inconsistent with or in addition to those available to Tenant, then the
Indemnified Party shall have the right to select separate counsel to
participate in the investigation and defense of and response to such
claim, demand, action, proceeding, investigation or allegation on its
own behalf, and Tenant shall pay or reimburse the Indemnified Party for
all Attorneys' Fees incurred by the Indemnified Party because of the
selection of such separate counsel.
(ii) If any claim, demand, action, proceeding, investigation or
allegation arises as to which the indemnity provided for in this
Paragraph 12 applies, and Tenant fails to assume promptly (and in any
event within fifteen (15) days after being notified of the claim,
demand, action, proceeding, investigation or allegation) the defense of
the Indemnified Party, then the Indemnified Party may contest (or
settle, with the prior written consent of Tenant, which consent will
not be unreasonably withheld) the claim, demand, action, proceeding,
investigation or allegation at Tenant's expense using counsel selected
by the Indemnified Party; provided, that after any such failure by
Tenant which continue for thirty (30) days or more no such contest need
be made by the Indemnified Party and settlement or full payment of any
claim may be made by the Indemnified Party without Tenant's consent and
without releasing Tenant from any obligations to the Indemnified Party
under this Paragraph 12 if, in the written opinion of reputable counsel
to the Indemnified Party, the settlement or payment in full is clearly
advisable.
(c) Notice of Environmental Losses. If an Indemnified Party receives a
written notice of Environmental Losses that such Indemnified Party believes are
covered by this Paragraph 12, then such Indemnified Party will be expected to
promptly furnish a copy of such notice to Tenant. The failure to so provide a
copy of the notice to Tenant shall not excuse Tenant from its obligations under
this Paragraph 12; provided, that if Tenant is unaware of the matters described
in the notice and such failure renders unavailable defenses that Tenant might
otherwise assert, or precludes actions that Tenant might otherwise take, to
minimize its obligations hereunder, then Tenant shall be excused from its
obligation to indemnify such Indemnified Party (and any Affiliate of such
Indemnified Party) against Environmental Losses, if any, which would not have
been incurred but for such failure. For example, if Landlord fails to provide
Tenant with a copy of a notice of an obligation covered by the indemnity set out
in subparagraph 12.(a) and Tenant is not otherwise already aware of such
obligation, and if as a result of such failure
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Landlord becomes liable for penalties and interest covered by the indemnity in
excess of the penalties and interest that would have accrued if Tenant had been
promptly provided with a copy of the notice, then Tenant will be excused from
any obligation to Landlord to pay the excess.
(d) Rights Cumulative. The rights of each Indemnified Party
under this Paragraph 12 shall be in addition to any other rights and remedies of
such Indemnified Party against Tenant under the other provisions of this Lease
or under any other document or instrument now or hereafter executed by Tenant,
or at law or in equity (including, without limitation, any right of
reimbursement or contribution pursuant to CERCLA).
(e) Survival of the Indemnity. Tenant's obligations under this
Paragraph 12 shall survive the termination or expiration of this Lease. All
obligations of Tenant under this Paragraph 12 shall be payable upon demand, and
any amount due upon demand to any Indemnified Party by Tenant which is not paid
shall bear interest from the date of such demand at a floating interest rate
equal to the Default Rate, but in no event in excess of the maximum rate
permitted by law.
13. Landlord's Right of Access.
(a) Landlord and Landlord's representatives may enter the
Leased Property, after five (5) Business Days advance written notice to Tenant
(except in the event of an emergency, when no advance notice will be required),
for the purpose of making inspections or performing any work Landlord is
authorized to undertake by the next subparagraph. So long as Tenant remains in
possession of the Leased Property, Landlord or Landlord's representative will,
before making any such inspection or performing any such work on the Leased
Property, if then requested to do so by Tenant to maintain Tenant's security;
(i) sign in at Tenant's security or information desk if Tenant has such a desk
on the premises, (ii) wear a visitor's badge or other reasonable identification
provided by Tenant when Landlord or Landlord's representative first arrives at
the Leased Property, (iii) permit an employee of Tenant to observe such
inspection or work, and (iv) comply with other similar reasonable
nondiscriminatory security requirements of Tenant that do not, individually or
in the aggregate, interfere with or delay inspections or work of Landlord
authorized by this Lease.
(b) If Tenant fails to perform any act or to take any action
which hereunder Tenant is required to perform or take, or to pay any money which
hereunder Tenant is required to pay, and if such failure or action constitutes
an Event of Default or renders Landlord or any director, officer, employee or
Affiliate of Landlord is threatened with criminal prosecution or renders
Landlord's interest in the Leased Property or any part thereof at risk of
forfeiture by forced sale or otherwise, then in addition to any other remedies
specified herein or otherwise available, Landlord may, perform or cause to be
performed such act or take such action or pay such money. Any expenses so
incurred by Landlord, and any money so paid by Landlord, shall be a demand
obligation owing by Tenant to Landlord. Further, Landlord, upon making such
payment, shall be subrogated to all of the rights of the person, corporation or
body politic
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receiving such payment. But nothing herein shall imply any duty upon the part of
Landlord to do any work which under any provision of this Lease Tenant may be
required to perform, and the performance thereof by Landlord shall not
constitute a waiver of Tenant's default. Landlord may during the progress of any
such work permitted by Landlord hereunder on or in the Leased Property keep and
store upon the Leased Property all necessary materials, tools, and equipment.
Landlord shall not in any event be liable for inconvenience, annoyance,
disturbance, loss of business, or other damage to Tenant or the subtenant of
Tenant by reason of making such repairs or the performance of any such work on
or in the Leased Property, or on account of bringing materials, supplies and
equipment into or through the Leased Property during the course of such work
(except for liability in connection with death or injury or damage to the
property of third parties caused by [and attributed by any applicable principles
of comparative fault to] the Misconduct of Landlord), and the obligations of
Tenant under this Lease shall not thereby be affected in any manner.
14. Events of Default.
(a) Definition of Event of Default. Each of the following
events shall be deemed to be an "EVENT OF DEFAULT" by Tenant under this Lease:
(i) Tenant shall fail to pay when due any installment of Rent
due hereunder and such failure shall continue for three (3) Business
Days after Tenant is notified in writing of the delinquency thereof.
(ii) Tenant shall fail to cause any representation or warranty
of Tenant contained herein that is false or misleading in any material
respect when made to be made true and not misleading (other than as
described in the other clauses of this subparagraph 14.(a)), or Tenant
shall fail to comply with any term, provision or covenant of this Lease
(other than as described in the other clauses of this subparagraph
14.(a)), and in either case shall not cure such failure prior to the
earlier of (A) thirty (30) days after written notice thereof is sent to
Tenant or (B) the date any writ or order is issued for the levy or sale
of any property owned by Landlord (including the Leased Property)
because of such failure or any criminal action is threatened or
instituted against Landlord or any of its directors, officers or
employees because of such failure; provided, however, that so long as
no such writ or order is issued and no such criminal action is
threatened or instituted, if such failure is susceptible of cure but
cannot with reasonable diligence be cured within such thirty-day
period, and if Tenant shall promptly have commenced to cure the same
and shall thereafter prosecute the curing thereof with reasonable
diligence, the period within which such failure may be cured shall be
extended for such further period (not to exceed an additional sixty
days beyond the initial thirty-day cure period) as shall be reasonably
necessary for the curing thereof.
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(iii) Tenant shall fail to comply with any term, provision or
condition of the Purchase Documents and shall not cure such failure
within the time, if any, provided for such cure in said agreements.
(iv) Tenant shall abandon the Leased Property.
(v) Tenant or any of its Subsidiaries shall fail to make any
payment described in the next sentence when due, whether due because of
acceleration or otherwise (but taking into consideration the time
Tenant may have to cure such failure, if any, under the documents
governing such payment). Payments covered by this clause 14.(a)(v)
shall include only payments owed by Tenant or any Subsidiary of Tenant
(A) that, individually or in the aggregate, exceed $5,000,000 and are
due and payable to any Person other than Landlord or an Affiliate of
Landlord, or (B) that are payable to Landlord or any Affiliate of
Landlord under any agreement other than this Lease.
(vi) Tenant or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against Tenant or any of its Subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted
against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of thirty (30) consecutive
days, or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or
Tenant or any of its Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this clause (vi).
(vii) Any order, judgment or decree is entered in any
proceedings against Tenant or any Subsidiary decreeing the dissolution
of Tenant or such Subsidiary and such order, judgment or decree remains
unstayed and in effect for more than sixty (60) days.
(viii)Any order, judgment or decree is entered in any
proceedings against Tenant or any Subsidiary decreeing a split-up of
Tenant or such Subsidiary which requires the divestiture of assets
representing a substantial part, or the divestiture of the stock of a
Subsidiary whose assets represent a substantial part, of the
consolidated assets of Tenant and its Subsidiaries (determined in
accordance with GAAP) or which requires the divestiture of assets, or
stock of a Subsidiary, which shall have contributed a substantial part
of the consolidated net income of Tenant and its Subsidiaries
(determined
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in accordance with GAAP) for any of the three fiscal years then most
recently ended, and such order, judgment or decree remains unstayed and
in effect for more than sixty (60) days.
(ix) A final judgment or order for the payment of money in an
amount (not covered by insurance) which exceeds $3,000,000 shall be
rendered against Tenant or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon
such judgment, or (ii) within sixty (60) days after the entry thereof,
such judgment or order is not discharged or execution thereof stayed
pending appeal, or within thirty (30) days after the expiration of any
such stay, such judgment is not discharged.
(x) Any ERISA Termination Event that Landlord determines might
constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States district court of a
trustee to administer any Plan shall have occurred and be continuing
thirty (30) days after written notice to such effect shall have been
given to Tenant by Landlord, or any Plan shall be terminated, or a
trustee shall be appointed by an appropriate United States district
court to administer any Plan, or the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any Plan or to
appoint a trustee to administer any Plan.
(xi) Any merger or consolidation or sale of assets involving
Tenant that is prohibited by subparagraph 8.(af) and that is not
approved in advance by Landlord.
Notwithstanding the foregoing, any Default that could become an Event of Default
under clause 14.(a)(ii) may be cured within the earlier of the periods described
in clauses (A) and (B) thereof by Tenant's delivery to Landlord of a written
notice irrevocably exercising Tenant's option under the Purchase Agreement to
purchase Landlord's interest in the Leased Property and designating as the
Designated Payment Date any Business Day which is at least fifteen (15) days
after the date of such notice and not later than thirty (30) days after the date
of such notice; provided, however, Tenant must, as a condition to the
effectiveness of its cure, on the date so designated as the Designated Payment
Date satisfy all obligations of Tenant under the Purchase Agreement in
accordance with its terms and tender to Landlord all Rent and all other amounts
then due or accrued and unpaid hereunder (including reimbursement for any
Breakage Costs or other Losses incurred by Landlord in connection with the
applicable Default hereunder, regardless of whether Landlord shall have been
reimbursed for such costs in whole or in part by any Participants) and Tenant
must also furnish written confirmation that all indemnities set forth herein
(including specifically, but without limitation, the general indemnity set forth
in Paragraph 8.(z) and the environmental indemnity set forth in Paragraph 12)
shall survive the payment of such amounts by Tenant to Landlord and the
conveyance of Landlord's Interest in the Leased Property to Tenant.
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(b) Remedies. Upon the occurrence of an Event of Default which
is not cured within any applicable period expressly permitted by subparagraph
14.(a), at Landlord's option and without limiting Landlord in the exercise of
any other right or remedy Landlord may have on account of such default, and
without any further demand or notice except as expressly described in this
subparagraph 14.(b):
(i) By notice to Tenant, Landlord may terminate Tenant's
right to possession of the Leased Property. A notice given in
connection with unlawful detainer proceedings specifying a time
within which to cure a default shall terminate Tenant's right to
possession if Tenant fails to cure the default within the time
specified in the notice.
(ii) Upon termination of Tenant's right to possession and
without further demand or notice, Landlord may re-enter the Leased
Property in any manner not prohibited by Applicable Law and take
possession of all improvements, additions, alternations, equipment and
fixtures thereon and remove any persons in possession thereof. Any
property in the Leased Property may be removed and stored in a
warehouse or elsewhere at the expense and risk of and for the account
of Tenant.
(iii) Upon termination of Tenant's right to possession, this
Lease shall terminate and Landlord may recover from Tenant:
a) The worth at the time of award of the unpaid
Rent which had been earned at the time of termination;
b) The worth at the time of award of the amount by
which the unpaid Rent which would have been earned after
termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably
avoided;
c) The worth at the time of award of the amount by
which the unpaid Rent for the balance of the scheduled Term
after the time of award exceeds the amount of such rental loss
that Tenant proves could be reasonably avoided; and
d) Any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's
failure to perform Tenant's obligations under this Lease or
which in the ordinary course of things would be likely to
result therefrom, including, but not limited to, the costs and
expenses (including Attorneys' Fees, advertising costs and
brokers' commissions) of recovering possession of the Leased
Property, removing persons or property therefrom, placing the
Leased Property in good order, condition, and repair, preparing
and altering the Leased Property for reletting, all other costs
and expenses of reletting, and any loss incurred by Landlord as
a result of Tenant's failure to perform Tenant's obligations
under the Purchase Documents.
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The "WORTH AT THE TIME OF AWARD" of the amounts referred to in
subparagraph 14.(b)(iii)a) and subparagraph 14.(b)(iii)b) shall be
computed by allowing interest at ten percent (10%) per annum or such
other rate as may be the maximum interest rate then permitted to be
charged under California law at the time of computation. The "WORTH AT
THE TIME OF AWARD" of the amount referred to in subparagraph
14.(b)(iii)c) shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time
of award plus one percent (1%).
e) Such other amounts in addition to or in lieu
of the foregoing as may be permitted from time to time by
applicable California law.
(iv) The Landlord shall have the remedy described in California
Civil Code Section 1951.4 (lessor may continue lease in force even after
lessee's breach and abandonment and recover rent as it becomes due, if lessee
has right to sublet or assign, subject only to reasonable limitations).
Accordingly, even though Tenant has breached this lease and abandoned the Leased
Property, this lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession, and Landlord may enforce all of
Landlord's rights and remedies under this lease, including the right to recover
the Rent as it becomes due under this lease. Tenant's right to possession shall
not be deemed to have been terminated by Landlord except pursuant to
subparagraph 14.(b)(i) hereof. The following shall not constitute a termination
of Tenant's right to possession.
a) Acts of maintenance or preservation or
efforts to relet the Leased Property;
b) The appointment of a receiver upon the
initiative of Landlord to protect Landlord's interest under
this lease; or
c) Reasonable withholding of consent to an
assignment or subletting, or terminating a subletting or
assignment by Tenant.
(c) Enforceability. This Paragraph 14 shall be enforceable to
the maximum extent not prohibited by Applicable Law, and the unenforceability of
any provision in this Paragraph shall not render any other provision
unenforceable.
(d) Remedies Cumulative. No right or remedy herein conferred
upon or reserved to Landlord is intended to be exclusive of any other right or
remedy, and each and every right and remedy shall be cumulative and in addition
to any other right or remedy given hereunder or now or hereafter existing under
Applicable or in equity. In addition to other remedies provided in this Lease,
Landlord shall be entitled, to the extent permitted by Applicable Law, to
injunctive relief in case of the violation, or attempted or threatened
violation, of any of the covenants, agreements, conditions or provisions of this
lease to be performed by Tenant, or to a decree compelling performance of any of
the other covenants, agreements, conditions or
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provisions of this lease to be performed by Tenant, or to any other remedy
allowed to Landlord under Applicable or in equity. Nothing contained in this
lease shall limit or prejudice the right of Landlord to prove for and obtain in
proceedings for bankruptcy or insolvency of Tenant by reason of the termination
of this lease, an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which, the
damages are to be proved, whether or not the amount be greater, equal to, or
less than the amount of the loss or damages referred to above. Without limiting
the generality of the foregoing, nothing contained herein shall modify, limit or
impair any of the rights and remedies of Landlord under the Purchase Documents
or the Environmental Indemnity.
(e) Waiver by Tenant. To the extent permitted by law, Tenant
hereby waives and surrenders for itself and all claiming by, through and under
it, including creditors of all kinds, (i) any right and privilege which it or
any of them may have under any present or future constitution, statute or rule
of law to have a continuance of this lease for the term hereby demised after
termination of Tenant's right of occupancy by order or judgment of any court or
by any legal process or writ, or under the terms of this lease, or after the
termination of this lease as herein provided, and (ii) the benefits of any
present or future constitution, or statute or rule of law which exempts property
from liability for debt or for distress for rent, and (iii) the provisions of
law relating to notice and-or delay in levy of execution in case of eviction of
a lessee for nonpayment of rent.
(f) No Implied Waiver. The failure of a party to insist at any
time upon the strict performance of any covenant or agreement or to exercise any
option, right, power or remedy contained in this Lease shall not be construed as
a waiver or a relinquishment thereof for the future. The waiver of or redress
for any violation of any term, covenant, agreement or condition contained in
this Lease shall not prevent a similar subsequent act from constituting a
violation. Any express waiver shall affect only the term or condition specified
in such waiver and only for the time and in the manner specifically stated
therein. A receipt by Landlord of any Base Rent or other payment hereunder with
knowledge of the breach of any covenant or agreement contained in this Lease
shall not be deemed a waiver of such breach, and no waiver of any provision of
this Lease shall be deemed to have been made unless expressed in writing and
signed by the waiving party.
15. Default by Landlord. If Landlord should default in the performance
of any of its obligations under this Lease, Landlord shall have the time
reasonably required, but in no event less than thirty (30) days, to cure such
default after receipt of written notice from Tenant specifying such default and
specifying what action Tenant believes is necessary to cure the default. If
Tenant prevails in any litigation brought against Landlord because of Landlord's
failure to cure a default within the time required by the preceding sentence,
then Tenant shall be entitled to an award against Landlord for the damages
proximately caused to Tenant by such default.
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16. Quiet Enjoyment. Provided Tenant pays the Base Rent and all
Additional Rent payable hereunder as and when due and payable and keeps and
fulfills all of the terms, covenants, agreements and conditions to be performed
by Tenant hereunder, Landlord shall not during the Term disturb Tenant's
peaceable and quiet enjoyment of the Leased Property; however, such enjoyment
shall be subject to the terms, provisions, covenants, agreements and conditions
of this Lease and the Permitted Encumbrances and any other claims or
encumbrances not constituting Landlord's Liens, to which this Lease is subject
and subordinate as hereinabove set forth. Any breach by Landlord of the
foregoing covenant of quiet enjoyment shall, subject to the other provisions of
this Lease, render Landlord liable to Tenant for any monetary damages
proximately caused thereby, but as more specifically provided in Paragraph 5
above, no such breach shall entitle Tenant to terminate this Lease or excuse
Tenant from its obligation to pay Base Rent and other amounts hereunder.
17. Surrender Upon Termination. Unless Tenant or an Applicable
Purchaser purchases Landlord's entire interest in the Leased Property pursuant
to the terms of the Purchase Agreement, Tenant shall, upon the termination of
Tenant's right to occupancy, surrender to Landlord the Leased Property,
including any buildings, alterations, improvements, replacements or additions
constructed by Tenant (but excluding Tenant's Trade Fixtures and personal
property not covered by this Lease) free of all Hazardous Substances (including
Permitted Hazardous Substances) and tenancies and, to the extent required by
Landlord, with all Improvements in the same condition as of the date hereof,
excepting only (i) ordinary wear and tear (provided that the Leased Property
shall have been maintained as required by the other provisions hereof) and (ii)
alterations and additions which are expressly permitted by the terms of this
Lease and which have been completed by Tenant in a good and workmanlike manner
in accordance with all Applicable Laws. Any movable furniture or movable
personal property belonging to Tenant or any party claiming under Tenant, if not
removed at the time of such termination and if Landlord shall so elect, shall be
deemed abandoned and become the property of Landlord without any payment or
offset therefor. If Landlord shall not so elect, Landlord may remove such
property from the Leased Property and store it at Tenant's risk and expense.
Tenant shall bear the expense of repairing any damage to the Leased Property
caused by such removal by Landlord or Tenant.
18. Holding Over by Tenant. Should Tenant not purchase Landlord's
right, title and interest in the Leased Property as provided in the Purchase
Agreement, but nonetheless continue to hold the Leased Property after the
termination of this Lease without Landlord's written consent, whether such
termination occurs by lapse of time or otherwise, such holding over shall
constitute and be construed as a tenancy from day to day only, at a daily Base
Rent equal to: (i) Stipulated Loss Value on the day in question, times (ii) (A)
the Prime Rate in effect for such day so long as the holdover period does not
extend beyond ninety (90) days and (B) for each such day beginning with the
ninety-first day after the holdover commences, three percent (3%) above the
Prime Rate; divided by (iii) 365; subject, however, to all of the terms,
provisions, covenants and agreements on the part of Tenant hereunder. No
payments of money by Tenant to Landlord after the termination of this Lease
shall reinstate, continue or extend the Term of this Lease and
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no extension of this Lease after the termination thereof shall be valid unless
and until the same shall be reduced to writing and signed by both Landlord and
Tenant.
19. Miscellaneous.
(a) Notices. Each provision of this Lease, or of any Applicable Laws
with reference to the sending, mailing or delivery of any notice or with
reference to the making of any payment by Tenant to Landlord, shall be deemed to
be complied with when and if the following steps are taken:
(i) All Rent required to be paid by Tenant to Landlord
hereunder shall be paid to Landlord in immediately available funds by
wire transfer to:
Federal Reserve Bank of San Francisco
Account: Banque Nationale de Paris
ABA: 121027234
Reference: Cypress
or at such other place and in such other manner as Landlord may
designate in a notice to Tenant. Time is of the essence as to all
payments and other obligations of Tenant under this Lease.
(ii) All notices, demands and other communications to be made
hereunder to the parties hereto shall be in writing (at the addresses
set forth below) and shall be given by any of the following means: (A)
personal service; (B) electronic communication, whether by telex,
telegram or telecopying (if confirmed in writing sent by United States
first class mail, return receipt requested); or (C) registered or
certified first class mail, return receipt requested; or (D) overnight
commercial courier. Such addresses may be changed by notice to the
other parties given in the same manner as provided above. Any notice or
other communication sent pursuant to clause (A) or (B) hereof shall be
deemed received upon such personal service or upon dispatch by
electronic means, and, if sent pursuant to clause (C) shall be deemed
received five (5) days following deposit in the mail, and, if sent
pursuant to clause (D), on the next Business Day.
Address of Landlord:
BNP Leasing Corporation
717 North Harwood Street
Suite 2630
Dallas, Texas 75201
Attention: Lloyd Cox
Telecopy: (214) 969-0060
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<PAGE> 65
With a copy to:
Banque Nationale de Paris, San Francisco
180 Montgomery Street
San Francisco, California 94104
Attention: Rafael Lumanlan
Telecopy: (415) 296-8954
And with a copy to:
Clint Shouse
Thompson & Knight, P.C.
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
Telecopy: (214) 969-1550
Address of Tenant:
Cypress Semiconductor Corporation
3901 North First Street
San Jose, CA 95134
Attn: Chief Financial Officer
Telecopy: (408) 943-2796
With a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill
Palo Alto, California 94304-1050
Attention: Real Estate Department
Telecopy: (415) 493-6811
(b) Severability. If any term or provision of this Lease or the
application thereof shall to any extent be held by a court of competent
jurisdiction to be invalid and unenforceable, the remainder of this Lease, or
the application of such term or provision other than to the extent to which it
is invalid or unenforceable, shall not be affected thereby.
(c) No Merger. There shall be no merger of this Lease or of the
leasehold estate hereby created with the fee estate in the Leased Property or
any part thereof by reason of the fact that the same person may acquire or hold,
directly or indirectly, this Lease or the leasehold estate hereby created or any
interest in this Lease or in such leasehold estate as well as the fee estate in
the Leased Property or any interest in such fee estate, unless all Persons with
an interest in the Leased Property that would be adversely affected by any such
merger specifically agree in writing that such a merger shall occur.
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<PAGE> 66
(d) NO IMPLIED REPRESENTATIONS BY LANDLORD. LANDLORD AND LANDLORD'S
AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE LEASED
PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND NO RIGHTS, EASEMENTS OR
LICENSES ARE ACQUIRED BY TENANT BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY
SET FORTH IN THE PROVISIONS OF THIS LEASE AND THE PURCHASE DOCUMENTS.
(e) Entire Agreement. This Lease and the instruments referred to herein
supersede any prior negotiations and agreements between the parties concerning
the Leased Property and no amendment or modification of this Lease shall be
binding or valid unless expressed in a writing executed by both parties hereto.
(f) Binding Effect. All of the covenants, agreements, terms and
conditions to be observed and performed by the parties hereto shall be
applicable to and binding upon their respective successors and, to the extent
assignment is permitted hereunder, their respective assigns.
(g) Time is of the Essence. Time is of the essence as to all
obligations of Tenant and all notices required of Tenant under this Lease, but
this subparagraph shall not limit Tenant's opportunity to prevent an Event of
Default by curing any breach within the cure period (if any) applicable under
subparagraph 14.(a).
(h) Termination of Prior Rights. Without limiting the rights and
obligations of Tenant under this Lease, Tenant acknowledges that any and all
rights or interest of Tenant under the Existing Leases or otherwise in and to
the Land, the improvements to the Land and to any other property included in the
Leased Property (except under this Lease and the Purchase Documents) are hereby
superseded. Landlord shall have no liability for any breach by Seller of the
Existing Leases. Tenant quitclaims unto Landlord any rights or interests Tenant
has in or to the Land, the improvements to the Land and to any other property
included in the Leased Property other than the rights and interests created by
this Lease and the Purchase Documents.
(i) Governing Law. This Lease shall be governed by and construed in
accordance with the laws of the State of California, without regard to conflict
of laws principals.
(j) Waiver of a Jury Trial. LANDLORD AND TENANT EACH HEREBY WAIVES ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS LEASE OR ANY OTHER DOCUMENT OR DEALINGS BETWEEN THEM
RELATING TO THIS LEASE OR THE LEASED PROPERTY. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including,
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims Tenant and Landlord each acknowledge that
this waiver is a material inducement to enter into a business relationship, that
each has already relied on the
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waiver in entering into this Lease and the other documents referred to herein,
and that each will continue to rely on the waiver in their related future
dealings. Tenant and Landlord each further warrants and represents that it has
reviewed this waiver with its legal counsel, and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE OR TO ANY OTHER DOCUMENTS
OR AGREEMENTS RELATING TO THIS LEASE OR THE LEASED PROPERTY. In the event of
litigation, this Lease may be filed as a written consent to a trial by the
court.
(k) Income Tax Reporting. Landlord and Tenant intend this Lease and the
Purchase Agreement to have a form for income taxes which is different than the
form of this Lease and the Purchase Agreement for other purposes, and thus the
parties acknowledge and agree as follows:
a) For purposes of determining their respective
federal, state and local income tax obligations, Landlord and
Tenant believe and intend that this Lease and the Purchase
Agreement constitute a financing arrangement or conditional
sale. Both Landlord and Tenant agree to report this Lease and
the Purchase Agreement as a financing arrangement or
conditional sale on their respective income tax returns (the
"Required Reporting"), unless such Required Reporting is
challenged in writing by the Internal Revenue Service or
another governmental authority with Jurisdiction (a "Tax
Challenge"). Consistent with the foregoing, Landlord and Tenant
expect that Tenant (and not Landlord) shall be treated as the
true owner of the Property for income tax purposes, thereby
entitling Tenant (and not Landlord) to take depreciation
deductions and other tax benefits available to the owner.
Tenant shall also report all interest earned on Escrowed
Proceeds or the collateral covered by the Pledge Agreement as
Tenant's income for federal, state and local income tax
purposes REFERENCES IN THIS LEASE OR IN THE PURCHASE AGREEMENT
TO A "LEASE" OF TEE "LEASED PROPERTY" ARE NOT INTENDED FOR
INCOME TAX PURPOSES TO REFLECT THE INTENT OF LANDLORD OR TENANT
AS TO THE FORM OF THE TRANSACTIONS COVERED BY, OR THE PROPER
CHARACTERIZATION OF THIS LEASE AND THE PURCHASE AGREEMENT
b) For all other purposes, including the
determination of the appropriate financial accounting for
this Lease and the determination of their respective rights
and remedies under state law, Landlord and Tenant believe and
intend that (i) this Lease constitutes a true Lease, not a mere
financing arrangement, enforceable in accordance with its
express terms (and neither this subparagraph 19.(k) nor the
provisions referencing this subparagraph on the title page of
this Lease and in the Purchase Agreement are intended to affect
the
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<PAGE> 68
enforcement of any other provisions of this Lease or the Purchase
Agreement) and (ii) the Purchase Agreement shall constitute a separate
and independent contract, enforceable in accordance with the express
terms and conditions set forth therein. In this regard, Tenant
acknowledges that Tenant asked Landlord to participate in the
transactions evidenced by this Lease and the Purchase Agreement as a
landlord and owner of the Leased Property, not as a lender. Although
other transactions might have been used to accomplish similar results,
Tenant expects to receive certain material accounting and other
advantages through the use of a lease transaction. Accordingly, and
notwithstanding the Required Reporting for income tax purposes, Tenant
cannot equitably deny that this Lease and the Purchase Agreement should
be construed and enforced in accordance with their respective terms,
rather than as a mortgage or other security device, in any action
brought by Landlord to enforce this Lease or the Purchase Agreement.
In the event of a Tax Challenge, Landlord and Tenant shall each provide to the
other copies of all notices from the Internal Revenue Service or any other
governmental authority presenting the Tax Challenge. Further, before changing
from the Required Reporting because of a Tax Challenge, Landlord and Tenant
shall each consider in good faith any reasonable suggestions received from the
other party to this Lease about an appropriate response to the Tax Challenge:
provided, however, that the suggestions are set forth in a written notice
delivered no later than thirty (30) days after the suggesting party is first
notified of the Tax Challenge; and, provided further, that when presented with a
Tax Challenge, Landlord and Tenant shall each have the right to change from the
Required Reporting rather than participate in any litigation or other legal
proceeding against the Internal Revenue Service or another governmental
authority. In any event, Tenant must indemnify and hold harmless Landlord from
and against all liabilities, costs, additional taxes and other expenses that may
arise or become due because of any challenge to the Required Reporting or
because of any resulting recharacterization of this Lease or the Purchase
Agreement required by the Internal Revenue Service or another governmental
authority, including any additional taxes that may become due upon any sale
under the Purchase Agreement, to the extent (if any) that such liabilities,
costs, additional taxes and other expenses are not offset by tax savings
resulting from additional depreciation deductions or other tax benefits to
Landlord of the recharacterization.
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<PAGE> 69
IN WITNESS WHEREOF, this Lease is hereby executed in multiple originals
as of the effective date set forth.
"Landlord"
BNP LEASING CORPORATION
By: /s/ LLOYED G. COX
---------------------------------
Name: Lloyd G. Cox
Title: Vice President
"Tenant"
CYPRESS SEMICONDUCTOR CORPORATION
By: /s/ EMMANUEL HERNANDEZ
---------------------------------
Name: Emmanual Hernandez
Title: Chief Financial Officer
---------------------------------
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<PAGE> 1
10K Attachment
10.10
CYPRESS SEMICONDUCTOR CORPORATION
1995 KEY EMPLOYEE BONUS PLAN AGREEMENT (KEBP)
ARTICLE 1 - PLAN OBJECTIVE
1.1 The objective of this Key Employee Bonus Plan is to provide incentive to
key employees of the company based on the company's overall Sales and
Earnings Per Share (EPS) achievement and individual's performance against
set individual or group Critical Success Factors (CSFs).
ARTICLE 2 - EFFECTIVE DATE
2.1 This agreement will become effective January 3, 1995 for the plan period
of fiscal year 1995. The plan period for fiscal year 1995 covers January
3, 1995 to January 2, 1996.
ARTICLE 3 - ELIGIBILITY FOR PLAN PARTICIPATION
3.1 Prior to the commencement of each Plan Period, members of Cypress's
Executive Staff will recommend to the President/CEO proposed participants
for the plan period and their incentive levels for approval.
3.2 Prior to the commencement of each Plan Period, the CEO and his executive
staff's plan participation and their incentive levels will be presented
to the Compensation Committee of the Board of Directors for approval.
3.3 Participants are notified of their eligibility at the beginning of each
plan period.
3.4 Newly hired employees may be added as participants during the plan
period. Other employees who are currently not plan participants may be
considered for participation at the beginning of the plan period,
provided however that they have assumed greater responsibility or
demonstrated greater contribution to the company. Participants added
during the plan period shall receive prorated awards based on the number
of months of participation in the plan with a minimum of six months
participation. Otherwise, eligibility will be deferred until the next
plan period. Exceptions are subject to CEO approval.
3.5 Changes in plan participants require the approval of the President/CEO.
1
<PAGE> 2
CYPRESS SEMICONDUCTOR CORPORATION
1995 KEY EMPLOYEE BONUS PLAN AGREEMENT (KEBP)
ARTICLE 4 - INCENTIVE LEVEL CONFIGURATION
4.1 Incentive levels for each plan participant will be defined to include
weights for the following bonus plan elements:
<TABLE>
<S> <C>
------------------------------------------------------------------------------------
EPS - bonus plan scoring based on the Company's reported
Earnings per share.
------------------------------------------------------------------------------------
Group Goals - bonus plan scoring based on accomplishments of CSFs
associated with the participant's group or team affiliations.
------------------------------------------------------------------------------------
Individual Goals - bonus plan scoring based on participant's
accomplishments of individual CSFs.
------------------------------------------------------------------------------------
</TABLE>
4.2 Each plan participant will be given an incentive level expressed as a
percent of Base Salary. The following incentive levels have been defined:
<TABLE>
<S> <C>
-------------------------------------------------
40% CEO, Senior VPs
-------------------------------------------------
30% VPs, Key Mgrs, Key Employees
-------------------------------------------------
20% Other Key Employees
-------------------------------------------------
</TABLE>
4.3 Plan participants will be measured based on the following bonus plan
factors:
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------
20%Bonus 30%Bonus 40%Bonus
-------------------------------------------------------------
EPS 20% 40% 50%
-------------------------------------------------------------
Group Goals >=40% >=40% >=40%
-------------------------------------------------------------
Individual Goals <=40% <=20% <=10%
-------------------------------------------------------------
</TABLE>
4.4 No bonus will be awarded unless the company achieves 90% of its 1995 EPS
goal.
Participants can earn 0% to 100% on CSFs, however, EPS can be earned
from 90% 100%. EPS that exceeds the 1995 goal will be handled by the
"sur-bonus" factor explained in Article 6.
4.5 For the purpose of the KEBP, EPS is defined as Earnings Per Share reported
by the company adjusted for extra-ordinary events.
4.6 Plan payout will be based on the plan participant's base salary at the end
of the plan period.
4.7 Should an employee change job during the plan period, and the change
results in a change in incentive level either as a result of a promotion or
demotion, the new incentive level will be determined immediately and the
employee will be notified in writing. In any case, changes in incentive
level require the approval of the CEO.
2
<PAGE> 3
CYPRESS SEMICONDUCTOR CORPORATION
1995 KEY EMPLOYEE BONUS PLAN AGREEMENT (KEBP)
ARTICLE 5 - BASE BONUS CALCULATION
5.1 A participant's base bonus is comprised of bonus earned from the EPS factor
and bonus earned from the CSF factor. (Refer to Exhibit 1 for a detailed
example of base bonus calculation).
5.2 A participant's bonus from the EPS factor is calculated as:
(Participant's base salary) x (Bonus incentive level) x (EPS
weight) x (Actual EPS/1995 EPS goal, not to exceed 100%)
5.3 A participant's bonus from the CSF factor is calculated as:
(Participant's base salary) x (Bonus incentive level) x (CSF
weight) x (Actual CSF score, not to exceed 100%)
a) Group and individual CSFs are given weights at the beginning of the
plan period. The sum of the weights of these CSFs should equal 100%.
At the end of the plan period, performance against CSFs are scored and
multiplied by the associated weight. The sum of these weighted scores
is calculated to determine the total percent attainment for bonus
purposes.
b) A 0% threshold will be defined for each CSF. This threshold, which
could be timing and/or deliverable-based, is a point at which CSF score
starts to be earned. If a participant does not reach/complete the
minimum threshold, the CSF will be scored 0% (zero). Progress beyond
the threshold earns the participant a pro-rated score up to 100%.
ARTICLE 6 - "SUR-BONUS" CALCULATION
6.1 For the 1995 KEBP, an additional feature is being introduced, to provide
plan participants with upside opportunity for beating the 1995 goals and
meeting the challenge of attaining higher Sales and higher EPS. This new
feature is called the "Sur-Bonus Factor". As with any upside opportunity
however, there can be a downside as well.
6.2 After the base bonus has been calculated (per Article 5), the sur-bonus
factor will be calculated based on the following rules: (Refer to Exhibit
2 for detailed example of sur-bonus calculation)
a) The sur-bonus factor is comprised of Sales and EPS, with each element
weighting equally at 50%/50%.
3
<PAGE> 4
CYPRESS SEMICONDUCTOR CORPORATION
1995 KEY EMPLOYEE BONUS PLAN AGREEMENT (KEBP)
b) If the actual sales for FY95 are lower than or equal to the 1995 goal,
the sur-bonus factor for Sales is 50%. However, if the actual sales
for FY95 equals or exceeds the upside goal, the sur-bonus factor for
Sales is 200%.
For the purpose of computing sur-bonus factor for Sales, the actual
FY95 sales will be rounded to the nearest million.
c) If the actual EPS for FY95 is lower than or equal to the 1995 goal, the
sur-bonus for EPS factor is 50%. However, if the actual EPS for FY95
equals or exceeds the upside goal, the sur-bonus factor for EPS is
200%.
For the purpose of computing sur-bonus factor for EPS, the actual EPS
will be rounded to the nearest penny.
d) The composite factor for sur-bonus on Sales and sur-bonus on EPS is the
simple average of the two sur-bonus factors. For instance, a sur-bonus
factor or 150% on Sales and 200% on EPS will result in a simple average
composite factor of 175%.
6.3 This composite sur-bonus factor will then be used to either gross-up or
discount the base bonus calculated per Article 5. The opportunity to beat
the 1995 goal numbers on Sales and EPS is significant, to a point
participants can double their base bonus. On the other hand, simply
meeting the sales and EPS goals could discount the base bonus by half.
ARTICLE 7 - PAYMENT OF BONUS EARNED
7.1 At the end of the plan period, the CEO will present the proposed bonus pool
[aggregate amount of computed bonus] to the Compensation Committee of the
Board for approval.
7.2 Bonus will be paid in three installments, defined as follows:
50% of bonus earned at the end of the plan period will be paid one
week after financial results are made public from the fiscal year
concluded. (tentatively January 31st)
25% of bonus earned will be paid 6 months after the first installment.
(tentatively July 31st)
25% of bonus earned will be paid in the following year coinciding with
that plan year's first 50% payout. (tentatively January 31st)
On the basis of this schedule, 1st payout for 1995 plan period is
tentatively January 31, 1996.
4
<PAGE> 5
CYPRESS SEMICONDUCTOR CORPORATION
1995 KEY EMPLOYEE BONUS PLAN AGREEMENT (KEBP)
ARTICLE 8 - ELIGIBILITY FOR PAYMENT
8.1 To be eligible for bonus payment, the participant must be employed by the
company at the scheduled payment date. A participant who terminates
employment prior to the payment date will forfeit the bonus including all
future payment schedules, except as otherwise provided in this article.
8.2 Disability: If a participant is disabled, i.e. inability to perform any
services for the company and eligible to receive disability benefits under
the standards used by the company's disability benefit plan, the
participant will receive an award representing a proration for each month
of employment in the plan period.
8.3 Retirement: In a participant retires, i.e. permanent termination of
employment with the company in accordance with the company's retirement
policies, the participant will receive an award representing a proration
for each month of employment in the plan period.
8.4 Death: If a participant dies, awards will be paid to the beneficiary
ignated by the participant, otherwise, to the persons entitled thereto
as determined by a court of competent jurisdiction. The award will be a
proration of each month of employment in the plan period.
8.5 Lay-off: If a participant is terminated by lay-off during the plan period,
no bonus will be awarded. If a participant is terminated by lay-off after
the plan period but prior to a scheduled bonus payment, it will be the
discretion of the CEO to pay bonus in full or on a prorate basis. No bonus
will be paid to employees who are terminated for cause.
8.6 All qualified bonus payments including future schedule pursuant to para
8.2, 8.3 and 8.5 will be paid in lump-sum..
8.8 The CEO reserves the right to reduce the bonus award of a participant on a
pro-rata basis to reflect a participant's leave of absence during the plan
period.
ARTICLE 9 - MISCELLANEOUS
9.1 Unless as defined in article 8.4, no right or interest in this plan is
transferable or assignable except by will or laws of descent and
distribution.
9.2 Participation in this plan does not guarantee any right to continued
employment with the Company.
9.3 Participation in the plan in a particular plan period is not a guarantee to
participation in subsequent plan periods.
9.4 Management reserves the right to discontinue participation of any
participant in this plan, at any time, and for whatever reasons.
5
<PAGE> 6
CYPRESS SEMICONDUCTOR CORPORATION
1995 KEY EMPLOYEE BONUS PLAN AGREEMENT (KEBP)
9.5 This plan is unfunded and the company does not intend to set up a sinking
fund. Consequently, payments arising out of bonus earned shall be paid out
of the company's general assets. Accounts recognized by the company for
book purposes is not an indication of funds set aside for payment. Plan
participants are considered as general creditors of the company and the
obligation of the company is purely contractual and is not secured by any
particular company asset.
9.6 The provision of this plan shall not limit the CEO and the Compensation
Committee of the Board of Directors to modify said plan, or adopt such
other plans on matters of compensation, bonus or incentive, which in its
own judgment it deems proper, at any time.
9.7 This agreement is construed to be in accordance with the laws of the State
of Delaware.
6
<PAGE> 1
Exhibit 10.11
PROMISSORY NOTE
$210,000
San Jose, CA
October 7, 1993
FOR VALUE RECEIVED, the undersigned DAN McCRANIE promises to pay to the order
of CYPRESS SEMICONDUCTOR CORPORATION, a Delaware corporation (the Company) the
principal sum of Two Hundred and Ten Thousand Dollars ($210,000) on or before
October 7, 1996. This note bears interest at the rate of four percent (4%) per
annum.
The entire principal and interest due pursuant to this note shall be due and
payable in a lump sum on October 7, 1996, the third anniversary of this Note.
Subject to continuing employment with the Company, principal and interest on
this Note shall be forgiven October 7, 1996. If Mr. McCranie voluntarily
terminates his employment with the Company, the full amount of the note plus
accumulated interest shall be repaid to the Company within one year from
termination date. If employment in involuntarily terminated for reasons other
than gross negligence or malfeasance, the full principal and interest amounts
shall be forgiven. This note may be repaid at any time without penalty.
If an action is instituted for collection of the Note, the undersigned agrees
to pay court costs and reasonable attorney's fees incurred by the holder
thereof.
/s/ J. Daniel McCranie
----------------------
Dan McCranie
<PAGE> 1
10K Exhibit 10.12
Lothar Maier's Relocation Agreement
January 9, 1991
Lothar Maier
2306 Gloria Court
Pleasanton, CA 94566
Dear Lothar,
This is to confirm our understanding with respect to your employment with
Cypress (the 'Company'):
1. Effective on the date specified below, you will become a full-time employee
of the Company to serve in the position of President reporting to Mark K.
Allen, Vice President of Manufacturing and SRAMs, and to perform such other
duties and responsibilities as may be assigned to you from time to time by the
President or the Board of Directors of the Company.
2. In consideration for all services rendered by you in such employment, you
will be paid an annual salary of $138,732.00 annually which includes a 10%
promotion from you current base salary. Salary payments will be made
bi-weekly. This current salary does not reflect any increase you may receive
due to the 1990 Focal Review process. During you employment, you shall be
entitled to participate in the Company's employee fringe benefit programs,
stock purchase, profit sharing and 401(k) plans to the extent of your
eligibility.
3. Subject to Board approval, Cypress proposes to grant to you an option to
purchase 50,000 shares of its Common Stock at the fair market value of the
common stock as determined by the Board of Directors at the next Board Meeting
following your hire date. This (new) option shall be subject to a one-time
vesting at the end of five years following the date of grant.
In addition, this options shall have the provision of accelerated vesting
dependent on the successful attainment of certain key milestones to be outlined
in the business plan for your activity. These milestones will include such
events as product qualification, production ramp and financial goals. The
business plan and commensurate accelerated vesting schedule shall be subject to
approval by the Board of Directors of Cypress.
4. You will also receive coverage under the Company's relocation guidelines to
cover your move from California (Pleasanton home) to Minnesota. In the event
of your voluntary termination of employment from the Company before completing
<PAGE> 2
one your of service, the relocation expenses will be repaid, in full, by you to
the Company. Should you otherwise leave the Company during your first year of
employment, the relocation benefits will be subject to vesting at a rate of
1/12 per month. A copy of our relocation policy is attached.
5. Cypress will pay the actual realtor fees upon sale of your California
(Pleasanton home), not to exceed 6% of the selling price.
6. Cypress will pay all reasonable expenses associated with the purchase of the
employee's new home, excluding realtor fees, but including loan origination
fee's as incurred, not to exceed 2% of the new mortgage.
7. Cypress will also pay for any delta in potential rental income of primary
residence as compared to current mortgage and property tax payments. This
commitment shall not exceed four years. In the event that the primary
residence in Pleasanton is sold, the payment will continue and be used to
offset potential capital gains taxes. This will initiate as of January 1,
1991. Any costs which result from disposal or management of other California
properties will be the sole responsibility of Lothar Maier.
8. Upon your acceptance of employment, you will sign the Company's standard
Proprietary Information and Inventions Agreement.
9. This offer is contingent upon your ability to present documents establishing
your right to work in the United States as required by the 1986 Federal
Immigration Reform and Control Act.
10. Your hereby confirm that (i) you will not disclose or use any confidential
or proprietary information or trade secrets of any prior employer of other
person in connection with your employment by the Company, (ii) your are not
subject to any agreement or restriction which would restrict your employment
with the Company, and (iii) your have not solicited, nor has the Company
requested that you solicit, any person employed by your former employer to join
the Company.
Very truly yours,
CYPRESS SEMICONDUCTOR CORPORATION
/s/ Mark K. Allen
---------------------------------------
Mark K. Allen
Vice President of Manufacturing & SRAMs
The foregoing is agreed to and accepted by me:
/s/ Lothar Maier January 12, 1991
--------------- ---------------------------
Lothar Maier Start Date: January 3, 1991
<PAGE> 1
Exhibit 21.1
List of Subsidiaries
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
---- ---------------
<S> <C>
Cypress Semiconductor (Minnesota) Inc. (CMI) . . . . . . . . . . . . . . . . . . . Delaware
Cypress Semiconductor (Texas) Inc. (CTI) . . . . . . . . . . . . . . . . . . . . . Delaware
IC Designs, Inc. (ICD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Washington
Multichip Technology Incorporated (MTI) . . . . . . . . . . . . . . . . . . . . . Delaware
Cypress Export, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barbados
Cypress Semiconductor International, Inc. . . . . . . . . . . . . . . . . . . . . Delaware
Cypress Semiconductor SARL . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Cypress Semiconductor GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
Cypress Semiconductor Italia S.r.l. . . . . . . . . . . . . . . . . . . . . . . . Italy
Cypress Semiconductor K.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan
Cypress Semiconductor AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scandinavia
Cypress Semiconductor Limited . . . . . . . . . . . . . . . . . . . . . . . . . . UK
Cypress Semiconductor Singapore Pte. Ltd. . . . . . . . . . . . . . . . . . . . . Singapore
Cypress Investment Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-57499, 33-54637 and 33-49756) of Cypress
Semiconductor Corporation of our report dated January 20, 1995 appearing on
page 28 of this Form 10-K. We also consent to the incorporation by reference
of our report on the Financial Statement Schedule, which appears on page F-1 of
this Form 10K.
PRICE WATERHOUSE LLP
San Jose, California
March 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JANUARY 2, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-02-1995
<PERIOD-END> JAN-02-1995
<CASH> 33,308
<SECURITIES> 159,967
<RECEIVABLES> 67,763
<ALLOWANCES> 1,393
<INVENTORY> 28,372
<CURRENT-ASSETS> 317,114
<PP&E> 380,672
<DEPRECIATION> 179,082
<TOTAL-ASSETS> 555,699
<CURRENT-LIABILITIES> 91,162
<BONDS> 93,653
<COMMON> 437
0
0
<OTHER-SE> 352,562
<TOTAL-LIABILITY-AND-EQUITY> 555,699
<SALES> 406,359
<TOTAL-REVENUES> 406,359
<CGS> 222,620
<TOTAL-COSTS> 222,620
<OTHER-EXPENSES> 53,188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,041
<INCOME-PRETAX> 80,115
<INCOME-TAX> 29,643
<INCOME-CONTINUING> 50,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,472
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.20
</TABLE>
