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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1997.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1996
OR
[ ] 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)
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<S> <C>
DELAWARE 94-2885898
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
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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<S> <C>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.01 par value New York Stock Exchange
</TABLE>
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 N
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. [ ]
At March 14, 1997, registrant had outstanding 81,597,227 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 March 14,
1997 on the New York Stock Exchange, was approximately $1,111,762,218. Shares of
Common Stock held by each executive 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 1997
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 1. BUSINESS
THIS ITEM CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE FACTORS SET FORTH IN "FACTORS
AFFECTING FUTURE RESULTS" AND ELSEWHERE IN THIS REPORT.
GENERAL
Cypress Semiconductor Corporation ("Cypress" or the "Company") designs,
develops, manufactures and markets a broad line of high performance digital and
mixed-signal integrated circuits for a range of markets, including computers,
data communications, telecommunications and instrumentation systems. The Company
currently offers approximately 402 products from its memory products,
programmable products, computation products and data communications divisions.
Cypress's products are marketed worldwide through a network of 22 North American
sales offices, 7 North American distributors, 23 U.S. sales representative
firms, 9 European sales offices, 2 Japanese sales offices, an office in
Singapore, an office in Korea, an office in Taiwan and 44 international sales
representative firms. The Company sells its products to a wide range of
customers, including AT&T, Alcatel, Cisco Systems, Compaq Computer,
Hewlett-Packard, IBM, Motorola, NEC, Northern Telecom, and 3Com Corporation. In
1996, international sales accounted for 27% 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 the 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
To facilitate its response to market opportunities, Cypress has four
business units -- two focused on core technologies (Memory Products Division and
Programmable Products Division) and two on end-market segments (Data
Communications Division and Computer Products Division). Because the
semiconductor industry is characterized by rapid technological change, resulting
in products with continually increasing 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.
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MEMORY PRODUCTS DIVISION (MPD)
Static RAMs (Static Random Access Memories). Static RAMs are used for
storage and retrieval of data in computers, data communication,
telecommunication 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 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), "organizations"
(number of bits available to the user in a single access of the RAM) and "power
consumption" (low power and ultra low power being required for portable battery
operated equipment). This 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 grading of product by speed and power -- produces a
complex market structure.
The Company introduced a new static RAM technology in the latter half of
1996 that combines the benefits of fast static RAMs with the ultra low power of
a full CMOS six transistor RAM memory cell. This combination is expected to fuel
new growth opportunities in the portable computing (battery operated)
marketplace in 1997 and beyond. The Company's continued progress in lowering its
manufacturing costs has allowed the Memory Product Division to compete
effectively in the high volume personal computer, workstation, data
communication and telecommunications 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-megabyte 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 into 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 the memory
elements used in computers, peripherals, and telecommunication systems which
store fixed data that is not to be altered during normal machine operations.
Customers purchase blank EPROMS which are then programmed for their specific
application needs. Cypress has been a supplier of high performance CMOS EPROMS
since 1984. These early devices were the first to combine the fast memory access
of PROMS with the low power consumption of CMOS technology. The Company offers a
broad family of EPROM products ranging in density from 4K bits to 1 MEG bits
which are available with a variety of standard and proprietary user-interfaces.
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. The Company's PLD portfolio consists
of a wide variety of devices ranging from the Flash 16V8 to the very high
density CPLD (complex PLD's). All Cypress products are supported by the WARP(TM)
software tool set which is based on VHDL (very high speed integrated circuit
hardware description language), an industry standard. In February 1997, the
Company signed a letter of intent with QuickLogic involving the termination of
an existing joint development, licensing, and foundry agreement for antifuse
Field Programmable Gate Array ("FPGA") products and the execution of a new
foundry agreement. Under the new agreement, Cypress will cease to develop,
market, and sell antifuse-based FPGA products.
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DATA COMMUNICATIONS DIVISION (DCD)
The Company's DataCom products provide a range of products for telecom,
networking applications, mass storage and high-end video. In 1996, the business
unit continued its expansion of new product offerings in the Specialty Memory
business segment, which the Company believes will provide broadened product
portfolio and an increased revenue stream in 1997. DataCom's new family of
synchronous FIFOs has been expanded and established Cypress as a leader in Deep
Synchronous FIFOs, up to 32K by 9 and 16K by 18. All of these new Deep
Synchronous FIFOs conform to the industry standard pinouts and architecture.
Going forward in 1997 the Company plans on retaining its leadership position in
FIFOs and Dual Ports by expanding the Synchronous FIFO family and Dual Port
product offerings to 1 megabit.
The first DataCom PLL (Phase Locked Loop) based products, RoboKlok(TM) and
HOTLink(TM), have been in production for several years and revenues attributed
to such products have continued to increase. The SST (Serial Sonet Transceiver),
a clock and data separator for ATM and the newest of the physical layer
interface products, has become one of the DCD top ten revenue products. In
addition to the products described above, an ATM framer is currently entering
production.
DCD's first EtherNet product, the Coaxial Tap Transceiver, has reached
production stage. This product brings the original EtherNet interface up to date
in performance on a current low cost technology. A wide range of products will
follow by the middle of 1997, including the 100 Mbit Transceiver, 10 Base FL
Transceiver and various repeater products.
The combination of these products serving different applications represents
the Company's broad product offering to the large and expanding data
communications market. They illustrate the commitment of the DataCom Division to
provide a multiplicity of products and solutions to the complex problem of data
transfer between systems.
COMPUTATION PRODUCTS DIVISION (CPD)
Systems Control. The Company's Systems Control products provide a range of
integrated circuits serving the frequency control and peripheral control
markets.
The Clocks business segment leads the timing technology device market in
sales and profits. Clocks' PLL (Phase Lock Loop) frequency synthesizers
integrate essentially all clock requirements of a microprocessor based system,
thus reducing size, power, consumption and cost. These devices are widely used
in personal computers, disk drives, modems and video games.
The FCT (Fast CMOS Technology) Device business segment offers a full
complement of standard logic and bus interface functions. FCT devices are used
in a wide variety of applications whenever the need arises for very high speed
logic functions.
New to Systems Control, the USB (Universal Serial Bus) business segment is
rapidly expanding into the universal serial bus market. The universal serial bus
forum is a cooperative effort by Compaq, Digital Equipment Corporation, IBM,
Intel, Microsoft, NEC and Northern Telecom to create a simple protocol to
implement and integrate the PC "Plug and Play" architecture. The USB business
segment has entered into a strategic alliance with Microsoft to produce the
Company's first line of 8-bit, RISC-based microcontrollers. The USB business
segment will be releasing a variety of general purpose universal serial bus
microcontrollers in 1997.
Systems Logic. The Company serves the PC and Industrial logic markets with
its hyperCache(TM) PC chipset and VME business segments.
The PC Logic group produces Cypress's hyperCache(TM) PC chipset, a highly
integrated product which combines both functionality and system cache memory
into one highly integrated set of components. The PC Logic group concentrates on
Pentium-based industrial control markets, with Intel as its primary competitor
in the PC arena. Current research and development efforts include integrating
USB into the Company's chipset structure.
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The VME business segment provides complete solutions to PC and Industrial
markets requiring connections across multiple industry standard interfaces. The
Company is currently focusing on cost reduction efforts that include a reduction
in VME manufacturing flows.
RESEARCH AND DEVELOPMENT
The Company places great emphasis on research and development. This is
partially reflected by significant management time committed to continuously
improve process and product design development cycle time. 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 Company's divisions, in cooperation with the new
product production teams.
The Company's research and development expenditures in 1996 were $84.3
million (16% of revenues), compared with $71.7 million (12% of revenues) in 1995
and $53.2 million (13% of revenues) in 1994. Research and development as a
percentage of revenues increased from the prior year, a result of lower overall
corporate revenues in 1996. 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 four 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. The Company invested $110 million in 1996 to increase
the capacity of its existing wafer fabrication plants, Fabs II, III and IV. In
the third quarter of 1996, Cypress announced the restructuring of its San Jose
wafer fabrication facility (Fab I) from a production fab. The change will allow
the San Jose facility to focus on research and development, with the goal of
improving process technology and new product development cycle time. In 1995,
the Company also broke ground on what will be its largest plant, Fab V, which is
adjacent to Fab II in Round Rock, Texas. Cypress decided in the third quarter of
1996 to put construction for the new fab on hold due to less favorable economic
conditions. As a result of bigger clean rooms and improved efficiencies, the
Company believes that its capacity will be $1.4 billion with Fabs II through IV
operating at full capacity. Assembly and Test operations continue in Asia with
offshore contractors. In the third quarter of 1996, the Company's new highly
automated assembly and test manufacturing plant in the Philippines became
operational. Although currently at less than 50% of total capacity, once the new
plant is fully utilized, it is expected to increase assembly and test
manufacturing capacity by 300 million units. In 1996, the Company invested $52
million in capital to quickly expand the plant's manufacturing capability.
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 that is indigenous to the semiconductor industry.
The Company's philosophy is to prevent wafer fab yield loss and/or quality
problems to the extent possible 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.
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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 materially adversely
affecting the Company; however, there can be no assurance that future shortages,
if any, would not have a material adverse effect on the Company's business,
financial condition or results of operations.
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 by certain operations
and with 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 accounted for 27% of the Company's total revenues in
1996 compared to 34% in 1995 and 32% in 1994, respectively. 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 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
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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 256K-bit and 1M-bit static RAM area, in which the Company's
competitors include IDT, Motorola, Micron Technology, Alliance Semiconductor,
Integrated Silicon Solution, Inc., 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 and AMD.
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 Corporation and
Xilinx. Additionally, the sale of PLDs is, in part, dependent on the
availability of user design software. Like the Company, 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 ICW 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 Silicon Integrated Systems, Acer Labs, Inc. and
United Microelectronics Corporation.
PATENTS AND LICENSES
The Company currently has 82 patents and has 240 additional patent
applications on file with the United States Patent Office and is preparing to
file more patent applications. In addition to factors such as innovation,
technological expertise and experienced personnel, the Company believes that
obtaining patents to protect its intellectual property rights is becoming
increasingly important to the Company's ability to compete in the industry and
has an active program to acquire additional patent protection.
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, and may in the future be involved in litigation (including the
Texas Instruments and AMD litigation discussed under Item 3 hereof) to enforce
its patents or other intellectual property rights, to protect its trade secrets,
to determine the validity or scope of the
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proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation has in the past resulted 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 it 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 in
connection with 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 certain rights to use patents and other
technology developed by the Company and which give the Company certain rights 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 December 30, 1996, the Company and its subsidiaries had 2,171
employees, as compared to 1,859 at the end of fiscal 1995. 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.
Located immediately adjacent to the Company's executive offices is one of the
Company's wafer fabrication facilities (Fab I) which primarily includes R & D
manufacturing operations. This facility is located in an approximately 61,000
square feet leased building at 3901 North First Street, San Jose, California.
The current lease for such building expires in 1999. The lease rates for these
facilities are 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 6 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 2001. In addition, Cypress has leased 75,000
square feet of additional office space at 3939 North First Street, San Jose,
California. This building will be occupied in 1997 and is currently leased until
2001. As described above, the lease rates for these facilities are subject to
variations based on LIBOR and Cypress is required to sell or acquire the
property at the end of the lease term.
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. In the third quarter of 1996, the
Company began operations in a new highly automated assembly and test
manufacturing plant in Cavite, Philippines. The
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Company owns an approximately 100,000 square foot wafer fabrication facility
(Fab II) in Round Rock, Texas. In 1995, the Company began construction of a new
fab, Fab V, adjacent to Fab II. Fab V construction will result in a
225,000-square-foot facility, with a 35,000-square-foot clean room. This
facility's construction is currently on hold pending improvement in the economic
environment. In addition, the Company also owns approximately 170,000 square
foot wafer fabrication facility (Fab III) and leases approximately 100,000
square foot wafer fabrication facility (Fab IV) on 18 acres of land in
Bloomington, Minnesota. The Fab IV lease rate is subject to variations based on
LIBOR and a requirement to sell or acquire the property at the end of the lease
term (see Note 6 of the Consolidated Financial Statements).
The Company leases additional space for domestic sales and design centers
in Huntsville, Alabama; Irvine, San Diego, San Jose and Woodland Hills,
California; Denver and Colorado Springs, Colorado; Clearwater, Orlando and
Pompano Beach, Florida; Roswell, Georgia; Palatine, Illinois; Columbia,
Maryland; Bloomington and Minnetonka, Minnesota; Starkville, Mississippi;
Nashua, New Hampshire; Laurence Harbor, New Jersey; Raleigh, North Carolina;
Beaverton and Portland, Oregon; Trevose, Pennsylvania; Austin, Houston and
Richardson, Texas; and Toronto, Ontario, Canada. The Company leases
international sales and design centers in Antwerp and Waterloo, Belgium; Las
Ails Cede, France; Milan and Orbassano, Italy; Tokyo and Osaka, Japan; Taby,
Sweden; Cheshire, Basingstoke and Hertfordshire, United Kingdom; Zorneding,
Germany; Singapore, Singapore; Taipei, Taiwan; Seoul, Korea; and Bangalore,
India.
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 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
TI's 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. In May 1995,
in a case before the U.S. District Court in Dallas, Texas, a jury delivered a
verdict of $17.8 million against the Company. In August 1995, the judge reversed
the decision stating that TI failed to prove that the Company infringed on TI's
patents covering the plastic encapsulation process used to package semiconductor
devices. TI filed an appeal against the judge's ruling and in July 1996, the
Federal Circuit Court of Appeals affirmed the decision of the trial court that
the Company did not infringe on either of the patents at issue in the suit. This
year, the Company reversed its $17.8 million reserve recorded in 1995 as a
result of a September 1996 ruling that denied TI's motion for reconsideration.
TI has filed a petition for certiorari in the United States Supreme Court, which
has not yet made a decision whether to grant the petition and hear the appeal.
Litigation counsel for the Company considers the possibility that the Supreme
Court will grant the petition and hear the appeal to be remote, given the small
percentage of such petitions that are granted and the fact that the case does
not appear to present issues of significant national interest.
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 Northern District of California. In June 1995, the U.S. District
Court for the Northern District of California dismissed this lawsuit by a
summary judgment. The plaintiffs have filed an appeal in which the Company will
continue to defend itself.
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 resolution of these matters will not have a
material adverse impact on the Company's financial position or results of
operations. 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 or results of
operations. In addition, the Company could be required to alter certain of its
production processes or products as a result of these matters.
9
<PAGE> 10
In June 1995, AMD charged the Company with patent infringement and filed
suit in the U.S. District Court in Delaware. The suit claimed that the Company
infringed several of AMD's programmable logic patents. In November 1995, the
Company filed a patent infringement action against AMD in the United States
District Court for the District of Minnesota. The Company alleged infringement
by AMD of a number of the Company's patents in this action. In April 1996, the
Company and AMD signed a cross-licensing agreement terminating the patent
litigation between the two companies. The agreement allows each corporation to
continue to produce its own products with no threat of future patent lawsuits by
either company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information regarding each of the Company's current executive
officers is set forth below:
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE POSITION SINCE
- -------------------------- --- --------------------------------------------------- ---------
<S> <C> <C> <C>
T.J. Rodgers.............. 49 President and Chief Executive Officer 1982
Antonio R. Alvarez........ 40 Vice President, Research and Development 1993
Emmanuel Hernandez........ 41 Vice President, Finance and Administration, Chief 1993
Financial Officer
J. Daniel McCranie........ 53 Vice President, Marketing and Sales 1993
Lothar Maier.............. 42 Vice President, Wafer Fabrication, President, 1994
Cypress Semiconductor (Minnesota), Inc.
James Kupec............... 42 Vice President, Product Lines 1997
</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.
T.J. Rodgers is a co-founder of the Company and has been its President and
Chief Executive Officer since 1982. Mr. Rodgers serves as a director of Vitesse
Semiconductor Corporation and C-Cube Corporation.
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 I
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.
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, from
1976 to 1993, Mr. Hernandez held various financial positions with National
Semiconductor Corporation.
J. Daniel McCranie joined the Company in October 1993 as Vice President of
Marketing and Sales. Prior to joining the Company, from 1989 to 1993, Mr.
McCranie was President and CEO of SEEQ Technology. Mr. McCranie also held the
position of Vice President of Sales and Marketing for SEEQ for five years 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
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<PAGE> 11
January 1991 as subsidiary President. In addition, Mr. Maier was promoted to
Vice President of Wafer Fabrication of the Company in September, 1994 and
relocated back to San Jose in the first half of 1996.
James Kupec joined the Company in 1983 as Product Engineering Manager. In
1988, he transferred to the Company's subsidiary Aspen Semiconductor as Director
of Operations. In 1992, Mr. Kupec became Cypress's Memory Product Division Vice
President. Last year he was promoted to Vice President of Product Divisions
responsible for all of Cypress's Product Divisions. Prior to joining Cypress,
Mr. Kupec worked in engineering and management positions at Mostek and United
Technologies.
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
December 30, 1996 there were approximately 3,579 holders of record of the
Company's Common Stock.
<TABLE>
<CAPTION>
PRICE RANGE OF COMMON
STOCK($)
-------------------------
LOW HIGH CLOSE
----- ----- -----
<S> <C> <C> <C>
Fiscal year ended December 30 1996:
First Quarter..................................... 10.00 16.25 11.75
Second Quarter.................................... 11.38 15.00 12.25
Third Quarter..................................... 9.13 13.63 12.63
Fourth Quarter.................................... 10.50 16.63 14.50
Fiscal year ended January 1, 1996:
First Quarter..................................... 10.75 16.13 14.31
Second Quarter.................................... 13.06 21.63 20.13
Third Quarter..................................... 17.06 27.75 18.81
Fourth Quarter.................................... 11.50 19.19 12.63
</TABLE>
11
<PAGE> 12
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED(1)
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating results:
Revenues.............................. $528,385 $596,071 $406,359 $304,512 $272,242
Acquisition-related non-recurring
charges............................ -- -- -- 18,271 --
Restructuring and other nonrecurring
costs (benefits)................... (7,018) 17,800 -- (408) 39,700
Operating Income (loss)............... 81,594 159,171 77,792 10,686 (35,636)
Income (loss) before tax.............. 83,505 161,384 80,115 12,567 (32,928)
Net income (loss)..................... 53,029 102,477 50,472 8,043 (21,010)
Net income (loss) per share
Primary............................... $ 0.63 $ 1.15 $ 0.61 $ 0.11 $ (0.28)
Fully diluted......................... $ 0.62 $ 1.09 $ 0.60 -- --
Weighted average common and common
equivalent shares outstanding
Primary............................... 83,661 89,347 82,313 76,218 74,514
Fully diluted......................... 92,016 97,583 88,602 -- --
Balance sheet data:
Cash and short-term investments....... $ 93,786 $161,618 $193,275 $ 80,590 $ 82,046
Working capital....................... 126,006 190,580 225,952 124,651 133,966
Total assets.......................... 794,047 750,728 555,699 340,648 320,504
Long term debt and capital lease
obligations (excluding current
portion)........................... 127,895 117,572 111,538 7,776 8,468
Stockholders' equity.................. 510,746 472,099 352,999 271,685 262,061
</TABLE>
- ---------------
(1) The Company operates on a 52- or 53-week fiscal year, ending on the Monday
closest to December 31.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
CONDITION
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of the factors set forth
on the inside front cover, in "Factors Affecting Future Results" and elsewhere.
OVERVIEW
In 1996, the Company's revenues decreased to $528.4 million compared to the
$596.1 million recorded in 1995. This was a decrease of 11.4% over last year and
a 30.0% increase over the $406.4 million recorded in 1994. The decline in
revenues resulted in lower profits of $53.0 million or $0.62 per share, compared
to $102.5 million, or $1.09 per share in 1995 and $50.5 million, or $0.60 per
share in 1994. The revenue decline was primarily due to a significant drop in
the Company's average selling prices ("ASPs"), particularly in its largest
product line, Memory Products, which includes Static Random Access Memory
products ("SRAMs"). As a result of lower ASPs, the Company's gross margin
dropped to 42.2% in 1996, compared with 53.7% in 1995 and 45.2% in 1994. The
Company projects that ASPs will decrease across many of its product lines in
1997, but at a reduced rate from that experienced in 1996. As a result of this
projection, the Company will continue its plan to offset the effects of lower
ASPs by introducing new products with higher margins and by redesigning its
existing products and manufacturing processes to lower manufacturing costs.
In October 1996, the Company began production in its new assembly and test
manufacturing facility in the Philippines. Although the new plant is expected to
generate cost savings for the Company in the future, under absorption due to
ramping a new facility adversely impacted the Company's cost of revenues during
the
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<PAGE> 13
last quarter of 1996. At the end of 1996, less than 50% of the plant's capacity
was being utilized. Fully utilized, the Philippines plant is expected to
increase assembly and test manufacturing capacity by 300 million units per year.
Should the need for additional back-end manufacturing capacity not materialize,
the expected cost savings may not be realized. The Company also began
construction of a new fab in Texas ("Fab V"). However, in the third quarter, the
Company decided to put on hold construction of Fab V due to market conditions.
In the third quarter of 1996, the Company recorded a pre-tax restructuring
and other non-recurring benefit of $7.0 million. A majority of the benefit was
derived from the reversal of the $17.8 million reserve established in 1995
related to the Texas Instruments ("TI") patent infringement lawsuit. In July
1996, the Federal Circuit Court of Appeals affirmed the earlier decision of the
trial court that the Company did not infringe on either of the patents in the
suit. In September 1996 the Court decided that it would not hear any appeal
filed by the plaintiff regarding this matter. In December 1996, TI filed a
petition of certiorari in the United States Supreme Court. If the petition is
granted, the Supreme Court would review on appeal the decision of the Federal
Circuit Court of Appeals. Litigation counsel for the Company considers the
possibility that the Supreme Court will grant the petition and hear the appeal
to be remote, given the small percentage of such petitions that are granted and
the fact that the case does not appear to present issues of significant national
interest. During the same quarter, the Company also announced a restructuring of
its San Jose wafer fabrication facility from a production wafer fabrication
plant to predominantly a research and development wafer fabrication facility. As
a result of this restructuring, the Company recorded a pre-tax charge of $9.1
million, $5.9 million relating to the write-down of certain excess equipment and
the transfer of certain other equipment to its Texas and Minnesota production
wafer fabrication facilities and $3.2 million relating to severance and other
cash related restructuring charges. In September, the Company also recorded a
one-time, pre-tax credit of $3.3 million related to the insurance reimbursement
of defense costs incurred in conjunction with the securities class-action
lawsuit. This credit was approximately offset by other non-recurring charges
related to agreements with certain companies regarding cross-licensing and other
matters.
In February 1997, the Company signed a letter of intent with QuickLogic
Corporation ("Quick Logic") involving termination of an existing joint
development, licensing and foundry agreement for antifuse Field Programmable
Gate Array ("FPGA") products and the execution of a new foundry agreement. Under
the new agreement, the Company will cease to develop, market and sell
antifuse-based FPGA products. In return, the Company's equity position in the
privately held QuickLogic will grow to greater than 20%. The Company also
entered into a five-year wafer-supply agreement to provide FPGA products to
QuickLogic. The agreement is subject to the completion of definitive
documentation and obtaining necessary consents and approvals. The agreement is
expected to be finalized in March 1997.
In February 1997, the Company called for redemption of all of the 3.15%
Convertible Subordinated Notes that are due in 2001. The redemption will be
effective March 26, 1997. Approximately $110.0 million aggregate principal
amount at maturity of the notes were outstanding at the time the notes were
called for redemption with the aggregate redemption price of approximately $99.0
million. Prior to 5:00 P.M. EST, on March 25, 1997, holders have the option to
convert their notes into shares of Cypress common stock at a conversion rate of
72.1746 shares of stock per $1,000 principal amount at maturity of the note.
Alternatively, holders may have their notes redeemed at a total redemption price
of $900.25 per $1,000 amount at maturity of the notes. The redemption price
consists of: (a) an issue price of $839.03, plus (b) $60.26 of accrued original
issue discount, plus (c) accrued interest of $0.96, per $1,000 principal amount
at maturity of the notes. Any notes that are not converted on or before 5:00
P.M. EST, March 25, 1997 will automatically be redeemed on March 26, 1997.
RESULTS OF OPERATIONS
In 1996, the Company recorded revenues of $528.4 million, a decrease of
11.4% from the $596.1 million recorded in 1995 and a 30.0% increase over the
$406.4 million recorded in 1994. The decline in revenues was primarily due to a
significant decrease in average selling prices experienced in each of the
Company's four major product lines, particularly in the Memory Products Division
("MPD"), which includes the sale of Static Random Access Memory ("SRAM")
products. ASPs for SRAM products dropped 22.5% in
13
<PAGE> 14
comparing 1996 to 1995. The Company projects SRAM prices to continue to fall in
1997, but at a reduced rate from that experienced in 1996. Unit sales of SRAM
products in 1996 were 2.4% greater than in 1995 even though the number of units
sold in the second half of 1996 was significantly less than in the first half of
the year. A majority of the decline in sales volume towards the end of 1996 can
be attributed to the 256K and 1 meg line of products, where an over supply of
product and resulting inventory corrections by most customers slowed down demand
for the Company's products. The increase in number of units of SRAM products
sold in 1996 in comparison to 1995, was not enough to offset the effects of the
declining ASPs. A majority of the SRAM products are sold to the
telecommunication and data communication markets. Due to the decline in revenues
from its SRAM line of products, MPD's percentage of the Company's revenue
decreased to 51.3%, a 10.4% decrease from 1995 and a 0.6% decrease from 1994.
The Programmable Products Division ("PPD"), the Company's second largest
revenue producing product line, recorded 19.0% of the Company's revenue in 1996.
PPD's contribution to total revenue increased from the 14.9% recorded in 1995.
Although total Company revenues decreased 11.4% in comparing 1996 to 1995, PPD's
revenues remained relatively constant year-to-year. Like MPD, PPD also
experienced pressure from declining ASPs in 1996, dropping 10.7% in 1996
compared to 1995. Offsetting the drop in ASPs was increased sales volume as the
number of units sold grew 12.4% in 1996. Revenue growth in Non-Volatile Memory
("NVM") products, formerly the Programmable Read-Only Memory ("PROM") line of
products, offset revenue declines in other PPD products as NVM's revenues grew
14.0% in 1996 compared to 1995. Even though ASPs for the sale of NVM products
decreased 24.9% in comparing 1996 to 1995, the 51.7% increase in sales volume
more than offset the effects of declining ASPs. NVM products are primarily sold
to the personal computer and telecommunication markets.
Revenues generated by the Data Communications Division ("DCD") grew 13.8%
comparing 1996 to 1995. The growth was primarily in the Division's Channel line
of products where several products, including the HOTLink point-to-point
communication devices and Programmable Skew Clock Buffers ("RoboClock"), all
made significant contributions to revenues. The Channel product line's revenues
grew 37.8% in 1996 compared to 1995. Although ASPs decreased 13.7% year-to-year,
the sales volume increase of 59.6% more than offset the decline in the average
selling price. Specialty Memory products, which include Clocked First-in,
First-out ("FIFOs") and Dual Port products, remained relatively stable growing
3.2% in 1996 compared to 1995. Sales volume of such products increased 9.7% over
last year, which offset the 5.9% decline in ASPs. A majority of DCD products are
sold to the personal computer, telecommunication, and data communication
markets.
Last year, the Computation Products Division's ("CPD") revenues were
primarily generated from its Timing Technology line of products, which were
acquired through the acquisition of IC Designs, Inc. in 1993. In 1996, the
Company moved its Fast CMOS Technology ("FCT") Logic Device line of products
from PPD and its VME Communication-bus Device line of products from DCD into
CPD. CPD's revenues increased in 1996, growing 8.1% from 1995. The revenue
growth was primarily a result of increased volume as unit sales grew 41.3% over
last year, which more than offset the decrease in average selling price. The
revenue growth in CPD was primarily attributed to the Timing Technology line of
products as revenues from the sale of such products grew 19.4% in 1996. Like the
Company's other divisions, Timing Technology's ASPs in 1996 dropped, falling
32.6% in comparison to 1995; however, sales volume grew 77.0% comparing the same
periods. Timing Technology products are primarily sold to the personal computer
and PC peripheral markets.
As noted above, the Company continued to experience reductions in ASPs,
particularly in its SRAM products. The decrease in ASPs was caused by overall
market demand softness, mainly attributable to over supply in the industry and
the resulting inventory corrections by customers, particularly in the
telecommunication and data communication markets which are the Company's primary
markets. Even though end consumption continues to grow in these two markets, the
Company believes some customers have built above normal levels of inventory
which they are in the process of drawing down. The greater availability of
products due to excess supply has also shortened the ordering cycle of customers
due to their expectation of product availability. The Company continues to build
certain levels of inventory for select core products despite the overall market
softness because the Company wants to position itself to have sufficient levels
of inventory of these products for the anticipated demand improvements. The
Company's inventory levels have increased and
14
<PAGE> 15
may continue to increase in the future resulting in potential exposure to
obsolescence, excess quantities, aged inventory, and lower-of-cost-or-market
write-down if demand were to not improve as expected by the industry and the
Company. The continuation of these factors, which have adversely impacted the
industry and the Company, in the future, could have a material adverse effect on
the Company's results of operations.
The Company's cost of revenues as a percentage of revenues for 1996
increased to 58% compared with 46% in 1995 and 55% in 1994. The increase in
manufacturing costs as a percent of revenues was a reflection of falling ASPs,
particularly in the SRAM market. Although revenues declined steadily throughout
most of 1996, unit sales increased in many of the Company's product lines. For
the sale of SRAM products, the Company recorded a decrease in revenues of over
20% in comparing 1996 to 1995. Even though revenue generated from the sale of
SRAM products decreased significantly, the Company sold approximately 2.4
million more units in 1996. The PPD product line's revenue in 1996 remained
relatively constant from 1995; however, unit sales increased over 12%. Future
ASP erosion could have a material adverse effect on the Company's gross margin,
and drive cost of revenues as a percentage of revenues higher. The Company is
continuing to explore new methods of reducing manufacturing costs in order to
mitigate the effects of declining ASPs. In the fourth quarter of 1996, the
Company began production in its new assembly and test manufacturing plant in the
Philippines. As expected, the Philippines plant recorded a loss in its first
quarter of operations due to the under utilization of the facility and other
costs in excess of those normally incurred due to its start-up status. At the
end of 1996, the Philippines plant was operating at less than 50% of capacity.
Once fully utilized, this new plant is expected to increase assembly and test
manufacturing capacity by 300 million units per year and is expected to assist
in lowering the Company's backend manufacturing costs in the future.
Research and development ("R&D") expenses increased to 16% of revenues in
1996 compared to 12% in 1995 and 13% in 1994. Actual spending in R&D increased
significantly in 1996, growing to $84.3 million compared to $71.7 million and
$53.2 million in 1995 and 1994, respectively. The growth in R&D expenses as a
percent of revenues is the result of both an increase in actual R&D spending and
a decrease in revenues. The Company made a conscious decision to increase
spending in R&D in order to accelerate the development of new products and
enhance its design and process technologies. With the Company's enhanced design
capabilities from its worldwide design centers and the transformation of its San
Jose wafer fabrication facility into a predominantly R&D wafer facility, actual
R&D spending may continue to increase in the future as the Company explores new
markets and improves its design and process technologies in an effort to
increase revenues and lower costs.
Selling, general and administrative ("SG&A") expenses in 1996 were 12% of
revenues. This was comparable to 1995 and 1994 when the Company recorded SG&A
expenses of 12% and 13% of revenues, respectively. Absolute spending for SG&A
expenses for 1996 was $64.3 million, a decrease from the $71.3 million spent in
1995 and an increase from the $52.8 million spent in 1994. The decease in actual
sales and marketing expenses in 1996 in comparison to 1995 was primarily a
result of lower revenues. Variable costs, such as commission expense, decreased
significantly in 1996 due to the decline in revenues. General and administrative
expenses also decreased in 1996 compared to 1995. In 1995, the Company recorded
legal expenses in excess of those normally incurred due to the Texas Instruments
("TI") patent infringement lawsuit and a securities class-action lawsuit.
In the third quarter of 1996, the Company recorded a one-time, pre-tax
restructuring and other non-recurring benefit of $7.0 million. A majority of the
benefit was derived from the reversal of the $17.8 million reserve established
in 1995 related to the Texas Instruments ("TI") patent infringement lawsuit. In
July 1996, the Federal Circuit Court of Appeals affirmed the earlier decision of
the trial court that the Company did not infringe on either of the patents in
suit. In September 1996 the Court decided that it would not hear any appeal
filed by the plaintiff regarding this matter. In December 1996, TI filed a
petition of certiorari in the United States Supreme Court. If the petition is
granted, the Supreme Court would review on appeal the decision of the Federal
Circuit Court of Appeals. Litigation counsel for the Company considers the
possibility that the Supreme Court will grant the petition and hear the appeal
to be remote, given the small percentage of such petitions that are granted and
the fact that the case does not appear to present issues of significant national
interest. During the same quarter, the Company also announced a restructuring of
its San Jose wafer
15
<PAGE> 16
fabrication facility, from a production wafer fabrication plant to predominantly
a research and development wafer fabrication facility. As a result of this
restructuring, the Company recorded a one-time, pre-tax charge of $9.1 million,
$5.9 million relating to the write-down of certain excess equipment and the
transfer of certain other equipment to its Texas and Minnesota production wafer
fabrication facilities and $3.2 million relating to severance and other cash
related restructuring charges. In September, the Company also recorded a
one-time, pre-tax credit of $3.3 million related to the insurance reimbursement
of defense costs incurred in conjunction with the securities class-action
lawsuit. This credit was approximately offset by other non-recurring charges
related to agreements with certain companies regarding cross-licensing and other
matters.
Income from operations in 1996 was $81.6 million, a significant decrease
from the $159.2 million recorded in 1995, and slightly better than the $77.8
million, recorded in 1994. The decrease in operating income, compared to 1995,
can be attributed to the significant decrease in revenues and gross margin
resulting from lower ASPs in 1996. Partially offsetting the effects of lower
revenues and lower margins was the $7.0 million one-time, pre-tax benefit from
restructuring and other non-recurring costs related to the reversal of the $17.8
million TI lawsuit reserve and the recording of the $9.1 million fab
restructuring.
Net interest and other income in 1996 was $1.9 million, a slight decrease
from the $2.2 million recorded in 1995 and the $2.3 million recorded in 1994. In
1996, the Company recorded $6.9 million in interest expense, an increase of $0.7
million from 1995 and $2.9 million from 1994. Higher interest expense related to
the convertible bonds, coupled with interest expense recorded on the $49.0
million borrowing from the short-term line of credit, increased interest expense
in 1996.
The Company recorded income tax expense of $30.5 million in 1996, compared
to $58.9 million in 1995 and $29.6 million in 1994. The effective tax rates in
1996, 1995, and 1994 were 36.5%, 36.5%, and 37.0%, respectively.
In 1996, the Company's net income decreased to $53.0 million, a significant
decline from the $102.5 million recorded in 1995 and slightly better that the
$50.5 million recorded in 1994.
FACTORS AFFECTING FUTURE RESULTS
The Company believes that, notwithstanding the various objectives,
projections, estimates, and other forward-looking statements set forth in this
Annual Report, its future operating results will continue to be subject to
variations based on a wide variety of factors, which could lead the Company's
operating results to be materially different from those projected in such
forward-looking statements. Such factors include, but are not limited to:
general economic conditions, the cyclical nature of both the semiconductor
industry and the markets addressed by the Company's products such as the
networking, computer, and telecommunications markets, failure of expected growth
in demand for, or areas of expected new demand for, semiconductor products to
materialize, the availability and extent of utilization of manufacturing
capacity, fluctuations in manufacturing yields, price erosion, competitive
factors, the timing of new product introductions, product obsolescence, the
successful ramp up of the Philippines plant, and the ability to develop and
implement new technologies including the ramp of our 0.5 micron process to full
commercial production. The Company is also dependent on subcontract vendors for
a portion of the assembly and test manufacturing of its products, which presents
risks including the lack of guaranteed production capacity, delays in delivery,
susceptibility to disruption in supply, and reduced control over product costs,
adverse weather conditions, and manufacturing yields. The Company's operating
results could also be impacted by sudden fluctuations in customer requirements,
currency exchange rate fluctuations, and other economic conditions affecting
customer demand and the cost of operations in one or more of the global markets
in which the Company does business. Typically, the Company requires new orders,
in addition to its existing backlog, to meet each quarter's revenue plan.
As a participant in the semiconductor industry, the Company operates in a
technologically advanced, rapidly changing and highly competitive environment.
While the Company cannot predict what effect these and other factors will have
on the Company, they could result in significant volatility in the Company's
future performance. To the extent the Company's performance may not meet
expectations published by external
16
<PAGE> 17
sources, public reaction could result in a sudden and significantly adverse
impact on the market price of the Company's securities, particularly on a
short-term basis.
The Company's corporate headquarters and some manufacturing facilities are
located near major earthquake faults. As a result, in the event of a major
earthquake, the Company could suffer damages that could materially and adversely
affect the operating results and financial condition of the Company.
Current pending litigation and claims are set forth in Note 6 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 resolution
of these matters will not have a material adverse impact on the Company's
financial position or results of operations. 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 or results of operations. In addition, the Company could be
required to alter certain of its production processes or products as a result of
these matters.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents, and short-term investments totaled
$93.8 million at the end of fiscal year 1996, a $67.8 million decrease from the
end of fiscal year 1995. The decrease in cash, cash equivalents, and short-term
investments was primarily a result of lower revenues and lower net income
recorded in fiscal year 1996 compared to fiscal year 1995.
Cash from operating activities decreased to $112.2 million in 1996 compared
to $190.3 million in 1995. This decrease of $78.1 million was primarily due to
the decline in net income from $102.5 million in 1995 to $53.0 million recorded
this year. The decline in net income was primarily a result of lower revenues
caused by a drop in the Company's ASPs.
Cash used for investing activities in 1996 was $116.8 million, a $70.2
million decrease from the $187.0 million used for investing activities in 1995.
In 1996, the Company's investment in short-term securities decreased $78.5
million. Cash was required to fund operations, repurchase the Company's common
stock in the open market, and purchase capital equipment. The Company purchased
$195.3 million in capital equipment, which was comparable to the $194.9 million
purchased the year before. The Company continued to purchase capital equipment
in order to increase capacity and capability in its domestic wafer fabrication
facilities in Texas and Minnesota, and to bring its new assembly and test
facility in the Philippines into production. The Company expects to invest
approximately $134.0 million in capital expenditures in 1997 and had committed
approximately $57.0 million as of December 30, 1996.
In 1996, the Company recorded cash generated from financing activities of
$15.2 million compared to cash used for financing activities of $27.1 million in
1995. During the first quarter of 1996, the Company completed its stock
repurchase program that began at the end of 1995 by repurchasing 2.8 million
shares of treasury stock for $32.9 million. This was in comparison to the $37.9
million of treasury stock purchased in 1995. The shares repurchased will be used
for the Company's 1994 Stock Option Plan and its Employee Stock Purchase Plan.
In September 1996, the Company borrowed $49.0 million against its revolving
line of credit established in July 1996. This agreement, with certain banks, is
for a three-year, unsecured, $100.0 million line of credit. The applicable
interest rate for usage under this agreement will be over a graduated scale of
LIBOR, plus a spread. The agreement contains certain financial and other
restrictive covenants.
In 1994 and 1995, the Company entered into three operating lease agreements
with respect to its office and manufacturing facilities in San Jose and
Minnesota, respectively. In April 1996, the Company entered into an additional
lease agreement related to two office facilities in San Jose. These agreements
require that the Company maintain a specific level of restricted cash or
investments to serve as collateral for these leases and maintain compliance with
certain financial covenants. In 1996, the Company recorded $22.4 million in
restricted investments compared to $20.7 million in 1995. All restricted
investments are classified as non-current assets on the balance sheet.
17
<PAGE> 18
In February 1997, the Company called for redemption of all of the 3.15%
Convertible Subordinated Notes that are due in 2001. The redemption will be
effective March 26, 1997. Approximately $110.0 million aggregate principal
amount at maturity of the notes were outstanding at the time the notes were
called for redemption with the aggregate redemption price of approximately $99.0
million. Prior to 5:00 P.M. EST, on March 25, 1997, holders have the option to
convert their notes into shares of Cypress common stock at a conversion rate of
72.1746 shares of stock per $1,000 principal amount at maturity of the note.
Alternatively, holders may have their notes redeemed at a total redemption price
of $900.25 per $1,000 amount at maturity of the notes. The redemption price
consists of: (a) an issue price of $839.03, plus (b) $60.26 of accrued original
issue discount, plus (c) accrued interest of $0.96, per $1,000 principal amount
at maturity of the notes. Any notes that are not converted on or before 5:00
P.M. EST, March 25, 1997 will automatically be redeemed on March 26, 1997. The
Company is reviewing different alternatives for funding should a majority of the
bondholders elect not to convert to equity.
Although the Company believes that existing cash together with cash from
operations, supplemented as necessary with borrowing under its revolving line of
credit agreement, will provide sufficient resources to meet present and future
working capital requirements and other cash needs for the next year, in the
event that ASPs continue to decline at rates above normal industry levels and
increased demand continues to be insufficient to offset the effects of such
declines, the Company may be required to raise additional capital through a debt
or equity financing. Although additional funding may be required, there can be
no assurance that it would be available at terms the Company deems satisfactory.
18
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CYPRESS SEMICONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER-SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1,
1996 1996
------------ ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 20,119 $ 9,487
Short-term investments............................................. 73,667 152,131
Total cash, cash equivalents, and short-term investments........... 93,786 161,618
Accounts receivable, net of allowances for doubtful accounts and
customer returns of $3,887 in 1996 and $2,828 in 1995........... 71,440 108,587
Other receivables.................................................. 11,971 8,335
Inventories........................................................ 53,107 28,978
Other current assets............................................... 51,108 44,119
--------- --------
Total current assets............................................ 281,412 351,637
Property, plant and equipment, net................................... 437,566 335,593
Other assets, including restricted investments of $61,612 in 1996 and
$39,257 in 1995.................................................... 75,069 62,498
--------- --------
$ 794,047 $ 750,728
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 72,309 $ 82,315
Accrued compensation and employee benefits......................... 14,374 21,353
Other accrued liabilities.......................................... 4,821 25,447
Line of credit..................................................... 49,000 --
Deferred income on sales to distributors........................... 14,902 13,190
Income taxes payable............................................... -- 18,752
--------- --------
Total current liabilities....................................... 155,406 161,057
Convertible subordinated notes....................................... 98,241 95,879
Deferred income taxes................................................ 21,288 15,653
Other long-term liabilities.......................................... 8,366 6,040
--------- --------
Total liabilities............................................... $ 283,301 $ 278,629
========= ========
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; none
issued and outstanding.......................................... -- --
Common stock, $.01 par value, 250,000,000 shares authorized;
91,358,000 and 88,924,000 issued; 81,098,000 and 81,501,000
outstanding..................................................... 914 889
Additional paid-in capital......................................... 311,184 292,713
Retained earnings.................................................. 315,491 262,462
--------- --------
627,589 556,064
Less shares of common stock held in treasury, at cost; 10,260,000
shares at December 30, 1996 and 7,423,000 at January 1, 1996.... (116,843) (83,965)
--------- --------
Total stockholders' equity...................................... 510,746 472,099
--------- --------
$ 794,047 $ 750,728
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 20
CYPRESS SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 30, JANUARY 1, JANUARY 2,
1996 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Revenues............................................ $ 528,385 $ 596,071 $ 406,359
----------- ----------- -----------
Costs and expenses:
Cost of revenues.................................. 305,174 276,160 222,620
Research and development.......................... 84,334 71,667 53,188
Selling, general and administrative............... 64,301 71,273 52,759
Restructuring and other non-recurring costs
(benefits)..................................... (7,018) 17,800 --
----------- ----------- -----------
Total operating costs and expenses................ 446,791 436,900 328,567
----------- ----------- -----------
Operating income.................................... 81,594 159,171 77,792
Interest expense.................................... (6,895) (6,239) (4,041)
Interest income and other........................... 8,806 8,452 6,364
----------- ----------- -----------
Income before income taxes.......................... 83,505 161,384 80,115
Provision for income taxes.......................... (30,476) (58,907) (29,643)
----------- ----------- -----------
Net income.......................................... $ 53,029 $ 102,477 $ 50,472
----------- ----------- -----------
Net income per share:
Primary........................................... $ 0.63 $ 1.15 $ 0.61
----------- ----------- -----------
Fully diluted..................................... $ 0.62 $ 1.09 $ 0.60
----------- ----------- -----------
Weighted average common and common equivalent shares
outstanding:
Primary........................................... 83,661,000 89,347,000 82,313,000
Fully diluted..................................... 92,016,000 97,583,000 88,602,000
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 21
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 January 3, 1994......... 72,401 $772 $ 207,484 $109,513 $ (46,084) $271,685
Issuance of common stock under
employee stock plans and other.... 5,420 54 24,448 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......... 77,821 826 238,272 159,985 (46,084) 352,999
Issuance of common stock under
employee stock plans and other.... 6,330 63 31,460 31,523
Tax benefit resulting from stock
option transactions............... 22,981 22,981
Repurchase of common stock under
share repurchase program.......... (2,650) (37,881) (37,881)
Net income for the year............. 102,477 102,477
------ ---- -------- -------- --------- --------
Balances at January 1, 1996......... 81,501 889 292,713 262,462 (83,965) 472,099
Issuance of common stock under
employee stock plans and other.... 2,434 25 14,577 14,602
Tax benefit resulting from stock
option transactions............... 3,894 3,894
Repurchase of common stock under
share repurchase program.......... (2,837) (32,878) (32,878)
Net income for the year............. 53,029 53,029
------ ---- -------- -------- --------- --------
Balances at December 30, 1996....... 81,098 $914 $ 311,184 $315,491 $(116,843) $510,746
====== ==== ======== ======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 22
CYPRESS SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 30, JANUARY 1, JANUARY 2,
1996 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income........................................... $ 53,029 $ 102,477 $ 50,472
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 97,606 64,733 45,039
Non-cash interest and amortization of debt
issuance costs.................................. 2,774 2,639 1,639
Provision for restructuring and other
non-recurring costs............................. (12,943) 17,800 --
Deferred income taxes............................. 6,216 (8,464) 1,258
Changes in operating assets and liabilities:
Receivables..................................... 36,811 (46,733) (15,985)
Inventories..................................... (24,129) (606) 913
Other assets.................................... (7,130) (20,407) (3,909)
Accounts payable and accrued liabilities........ (28,604) 32,644 31,999
Deferred income................................. 1,712 3,502 837
Income taxes payable and deferred income
taxes........................................ (13,117) 42,738 9,885
--------- --------- ---------
Net cash flow generated from operating activities...... 112,225 190,323 122,148
--------- --------- ---------
Cash flow from investing activities:
Decrease (increase) in short-term investments........ 78,464 7,836 (117,034)
Acquisition of property, plant, and equipment........ (195,280) (194,878) (112,370)
Sale of equipment.................................... -- -- 7,918
Other................................................ -- -- (969)
--------- --------- ---------
Net cash flow used for investing activities............ (116,816) (187,042) (222,455)
--------- --------- ---------
Cash flow from financing activities:
Borrowing from line of credit.......................... 49,000 -- --
Issuance of convertible subordinated notes, net of
insurance costs................................... -- -- 89,443
Restricted investments related to building lease
agreements........................................ (22,355) (20,744) (18,513)
Repurchase of common stock........................... (32,878) (37,881) --
Issuance of capital stock............................ 18,496 31,523 24,502
Other................................................ 2,960 -- 526
--------- --------- ---------
Net cash flow generated (used) for financing
activities........................................... 15,223 (27,102) 95,958
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents... 110,632 (23,821) (4,349)
Cash and cash equivalents, beginning of year........... 9,487 33,308 37,657
--------- --------- ---------
Cash and cash equivalents, end of year................. $ 20,119 $ 9,487 $ 33,308
========= ========= =========
Supplemental disclosures:
Cash paid during the year for:
Interest.......................................... $ 4,982 $ 4,014 $ 1,677
Income taxes...................................... $ 45,271 $ 30,744 $ 24,214
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 23
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. expanded in 1996 with the
addition of its new test and assembly plant in the Philippines. The Company's
other foreign operations include several sales offices and design centers
located in various parts of the world. Export revenues, principally to customers
in Europe and Japan, were 27%, 34%, and 32% of total revenues in 1996, 1995, and
1994, respectively. As of December 30, 1996, 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 a fixed amount of wafer fab
capacity for its investment.
No one customer accounted for greater than 10% of revenues in 1996, 1995,
or 1994. Sales to one distributor accounted for 10% of total revenues in 1994.
No one distributor accounted for greater than 10% of revenues in 1996 or 1995.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
Fiscal years 1996, 1995, and 1994 ended December 30, 1996, January 1, 1996,
and January 2, 1995, respectively. The Company operates on a 52- or 53-week
fiscal year, ending on the Monday closest to December 31. Fiscal years 1996,
1995 and 1994 each comprised 52 weeks. Certain prior year amounts have been
adjusted to conform to current year presentation.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 domestic distributors. Accordingly, the Company defers recognition
of sales and profit on such sales until the merchandise is sold by the domestic
distributors. In 1997, the Company will sell to certain international
distributors on certain select parts, under agreements having rights of return
and price protections, which are substantially similar to those contained in
agreements with domestic distributors.
The Company also has inventory at certain customers on a consignment basis.
Revenue is not recorded until the time the title transfers per the consignment
agreement.
23
<PAGE> 24
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments, including cash and cash equivalents, trade accounts
receivable, accounts payable, and accrued expenses, the carrying amounts
approximate fair value due to their short maturities. The amounts shown for
long-term debt also approximate fair value.
Cash Equivalents and Short-Term Investments -- The Company accounts for
investments in accordance with Statement of Financial Accounting Standards No.
115 ("SFAS 115"), "Accounting for Certain Investments in Debt and Equity
Securities." All highly liquid investments purchased with an original maturity
of three months or less are considered to be cash equivalents. The Company
classifies 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. A summary of the carrying amounts of the investments are as
follows:
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1,
1996 1996
------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Corporate debt securities............................ $ 2,000 $ 6,125
State and municipal obligations...................... 50,171 130,606
Other................................................ 21,496 15,400
------- -------
Total................................................ $ 73,667 $ 152,131
======= =======
</TABLE>
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist principally of cash equivalents, short-term
investments, long-term restricted cash, and trade accounts receivable. The
Company places its cash equivalents, short-term investments and long-term
restricted cash in a variety of financial instruments such as municipal
securities and U.S. Government securities. The Company further limits its
exposure to these investments by placing such investments with various financial
institutions. The Company routinely performs credit evaluations of these
financial institutions.
The Company sells its product to original equipment manufacturers and
distributors throughout the world. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no
collateral from its customers. The Company maintains an allowance for
uncollectible accounts receivable based upon expected collectibility of all
accounts receivable.
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>
DECEMBER 30, JANUARY 1,
1996 1996
------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials........................................ $ 12,214 $ 9,859
Work-in-process...................................... 27,765 12,682
Finished goods....................................... 13,128 6,437
------- -------
Total................................................ $ 53,107 $ 28,978
======= =======
</TABLE>
24
<PAGE> 25
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 DECEMBER JANUARY
IN YEARS 30, 1996 1, 1996
------------ --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Land.................................... $ 12,546 $ 8,850
Machinery and equipment................. 3 to 5 641,612 501,377
Buildings and leasehold improvements.... 7 to 10 70,673 38,821
Furniture and fixtures.................. 5 7,568 5,384
--------- ---------
732,399 554,432
Accumulated depreciation and
amortization.......................... (294,833) (217,839)
--------- ---------
Total................................... $ 437,566 $ 336,593
========= =========
</TABLE>
Preproduction Costs
Incremental costs incurred in connection with developing major production
capability at new manufacturing plants, including depreciation, amortization,
and cost of qualification of equipment and production processes, are
capitalized.
Preproduction costs totaling $4.1 million and $3.1 million, which are net
of accumulated amortization of $1.4 million and $1.2 million in 1996 and 1995,
respectively, are included in other assets at December 30, 1996 and January 1,
1996, respectively. Such costs are being amortized over five years at a rate
based on estimated units to be manufactured during that period. Costs charged to
operations for amortization of preproduction costs were $217,000 in 1996,
$142,000 in 1995, and $567,000 in 1994.
Income Taxes
The Company accounts for income taxes in accordance with 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 basis
of assets and liabilities.
Net Income Per Share
Net income 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 notes into
common shares and the elimination of the related interest requirements (net of
income taxes).
Transaction of Foreign Currencies
The Company accounts for foreign currency translation under Statement of
Financial Accounting Standards No. 52 ("SFAS 52"), "Foreign Currency
Translation." In accordance with SFAS 52, the Company's new test and assembly
operation in the Philippines uses the Philippine peso as its functional
currency, while the Company's other operations use the U.S. dollar as its
functional currency. Sales to
25
<PAGE> 26
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
customers are primarily denominated in U.S. dollars, and foreign currency
translation gains and losses have not been material in any year.
Accounting For Stock-based Compensation
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. The Company's policy is
to grant options with an exercise price equal to the quoted market price of the
Company's stock on the grant date. Accordingly, no compensation cost has been
recognized in the Company's statements of operations. The Company provides
additional pro forma disclosures as required under Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation." See Note 4.
NOTE 2: RESTRUCTURING AND OTHER NON-RECURRING COSTS
In the third quarter of 1996, the Company recorded a pre-tax restructuring
and other non-recurring benefit of $7.0 million. A majority of the benefit was
derived from the reversal of the $17.8 million reserve established in 1995
related to the Texas Instruments ("TI") patent infringement lawsuit. In July
1996, the Federal Circuit Court of Appeals affirmed the earlier decision of the
trial court that the Company did not infringe on either of the patents in the
suit. In September 1996 the Court decided that it would not hear any appeal
filed by the plaintiff regarding this matter. In December 1996, TI filed a
petition of certiorari in the United States Supreme Court. If the petition is
granted, the Supreme Court would review on appeal the decision of the Federal
Circuit Court of Appeals. Litigation counsel for the Company considers the
possibility to be remote that the Supreme Court will grant the petition and hear
the appeal, given the small percentage of such petitions that are granted and
the fact that the case does not appear to present issues of significant national
interest. During the same quarter, the Company also announced a restructuring of
its San Jose wafer fabrication facility, from a production wafer fabrication
plant to predominantly a research and development wafer fabrication facility. As
a result of this restructuring, the Company recorded a pre-tax charge of $9.1
million, $5.9 million relating to the write-down of certain excess equipment and
the transfer of certain other equipment to its Texas and Minnesota production
wafer fabrication facilities, and $3.2 million relating to severance and other
cash related restructuring charges. Costs charged against the restructuring
reserve in the fourth quarter of 1996 were immaterial. In September, the Company
also recorded a one-time, pre-tax credit of $3.3 million related to the
insurance reimbursement of defense costs incurred in conjunction with the
securities class-action lawsuit. This credit was approximately offset by other
non-recurring charges related to agreements with certain companies regarding
cross-licensing and other matters.
NOTE 3: 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 7,940,000 shares of common
stock and are callable by the Company three years after 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. At year-end, the amount of the convertible subordinated notes
required to be reflected as a liability on the Company's balance sheet totaled
$98.2 million, which approximates fair market value. See Note 8 for related
subsequent events.
26
<PAGE> 27
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4: COMMON STOCK OPTION AND OTHER EMPLOYEE BENEFIT PLANS
1994 STOCK OPTION PLAN
In 1994, the Company adopted the 1994 Stock Option Plan, which 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 the
terms of the 1994 Stock Option 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 1994
Stock Option Plan is typically equal to the fair market value of the common
stock at the date of grant. The 1994 Stock Option 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.
In October 1996, substantially all outstanding options with a share price
in excess of $11.00 were canceled and repriced with new options having an
exercise price of $11.00 per share, the fair market value as of the date the
repricing was announced. A total of 7,083,312 options were repriced. The
following table summarizes the Company's shares available for grant and stock
option activity for the years ended December 30, 1996, January 1, 1996, and
January 2, 1995. The weighted average exercise price for each category presented
is also shown in the table below.
SHARES UNDER OPTION AND AVAILABLE FOR GRANT
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
----------------------------------------------------
SHARES AVAILABLE NUMBER WEIGHTED AVERAGE
FOR GRANT OF SHARES EXERCISE PRICE
---------------- ---------- ----------------
<S> <C> <C> <C>
Balance, January 3, 1994......... 911,582 18,705,510 $ 4.79
Options authorized............. 6,000,000 -- --
Options granted................ (5,548,722) 5,548,722 $ 8.71
Options exercised.............. -- (3,915,126) $ 4.61
Options canceled............... 1,367,318 (1,367,318) $ 5.29
----------- ----------
Balance, January 2, 1995......... 2,730,178 18,971,788 $ 5.92
Options authorized............. 3,502,026 -- --
Options granted................ (7,504,204) 7,504,204 $16.82
Options exercised.............. -- (5,735,670) $ 4.81
Options canceled............... 1,292,221 (1,292,221) $16.05
----------- ----------
Balance, January 1, 1996......... 20,221 19,448,101 $ 9.81
Options authorized............. 3,680,864 -- --
Options granted................ (12,202,297) 12,202,297 $11.23
Options exercised.............. -- (1,781,980) $ 5.38
Options canceled............... 8,855,197 (8,855,197) $14.71
----------- ----------
Balance, December 30, 1996....... 353,985 21,013,221 $ 8.94
=========== ==========
Options exercisable on December
30, 1996....................... 9,375,526 $ 7.03
==========
</TABLE>
All options were granted at an exercise price equal to the market value of
the Company's stock at the date of grant. The weighted average estimated fair
value at the date of grant, as defined by SFAS 123, for options granted in 1996
and 1995 was $11.23 and $16.82 per option, respectively. The estimated grant
date fair value disclosed by the Company is calculated using the Black-Scholes
model. The Black-Scholes model, as well as
27
<PAGE> 28
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
other currently accepted option valuation models, was developed to estimate the
fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option awards.
These models also require highly subjective assumptions, including future stock
price volatility and expected time until exercise, which greatly affect the
calculated grant date fair value.
The following weighted average assumptions are included in the estimated
grant date fair value calculations for the Company's stock option awards.
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Expected Life........................................... 6 years 6 years
Risk-free Interest Rate................................. 6.04% 6.28%
Volatility.............................................. .5582 .5559
Dividend Yield.......................................... 0.00% 0.00%
</TABLE>
Significant option groups outstanding as of December 30, 1996 and the
related weighted average exercise price and contractual life information are as
follows (share information in thousands):
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
OPTIONS WITH EXERCISE ----------------- ----------------- REMAINING
PRICES RANGE FROM SHARES PRICE SHARES PRICE LIFE (YEARS)
----------------------------- ------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
$ 1.00 - $ 4.75.............. 3,188 $ 4.41 3,150 $ 4.41 3.98
$ 4.76 - $ 7.13.............. 2,731 $ 5.52 2,149 $ 5.44 6.56
$ 7.14 - $ 9.25.............. 3,544 $ 8.40 1,922 $ 8.44 7.33
$ 9.26 - $10.88.............. 1,978 $10.45 95 $10.28 9.66
$10.89 - $17.75.............. 9,572 $11.32 2,060 $11.22 9.02
</TABLE>
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
In 1986, the Company approved an Employee Qualified Stock Purchase Plan
("ESPP"), which allows eligible employees of the Company and its subsidiaries to
purchase shares of common stock through payroll deductions. The ESPP 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 7,600,000 shares
authorized under the ESPP, 5,889,091 shares were issued through 1996 including,
652,157, 582,432, and 900,496 shares in 1996, 1995, and 1994, respectively.
Compensation costs (included in pro forma net income and net income per
share amounts) for the grant date fair value, as defined by SFAS 123, of the
purchase rights granted under the ESPP were calculated using the Black-Scholes
model. The following weighted average assumptions are included in the estimated
grant date fair value calculations for rights to purchase stock under the ESPP:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Expected Life......................................... 6 months 6 months
Risk-free Interest Rate............................... 5.98% 5.45%
Volatility............................................ .5882 .5275
Dividend Yield........................................ 0.00% 0.00%
</TABLE>
The weighted average estimated grant date fair value, as defined by SFAS
123, or rights to purchase stock under the ESPP granted in 1996 and 1995 were
$12.96 and $16.12 per share, respectively.
28
<PAGE> 29
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PRO FORMA NET INCOME AND NET INCOME PER SHARE
Had the Company recorded compensation costs based on the estimated grant
date fair value, as defined by SFAS 123, for awards granted under its 1994 Stock
Option Plan and its Employee Stock Purchase Plan, the Company's pro forma net
income and earnings per share for the years ended December 30, 1996 and January
1, 1996 would have been as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Pro forma net income:
Primary................................................ $33,243 $92,814
Fully Diluted.......................................... $32,561 $92,814
Pro forma net income per share:
Primary................................................ $ 0.40 $ 1.06
Fully Diluted.......................................... $ 0.37 $ 1.00
</TABLE>
The pro forma effect on net income and net income per share for 1996 and
1995 is not representative of the pro forma effect on net income in the future
years because it does not take into consideration pro forma compensation expense
related to grants prior to 1995.
TREASURY STOCK
In November 1995, the Board of Directors authorized the repurchase of $50.0
million of the Company's common stock. In the first quarter of 1996, the Board
approved to increase the amount authorized to approximately $70.0 million. The
Company completed the stock purchase program by purchasing 2.8 million shares
for $32.9 million in 1996 and 2.7 million shares for $37.9 million in 1995. The
shares purchased are expected to be used in conjunction with the Company's 1994
Stock Option Plan and ESPP.
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 1995 and 1994, $7,575,000 and
$5,241,000 respectively, were charged to operations in connection with the
Profit Sharing Plan. In 1996, no charges to operations were made 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 1995 and 1994, $4,937,000 and $1,902,000,
respectively, were charged to operations in connection with this Plan. In 1996,
there were no charges to operations in connection with this plan.
29
<PAGE> 30
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5: INCOME TAXES
The components of the provision for income taxes are summarized below. Income
before taxes is principally attributed to domestic operations.
COMPONENTS OF THE PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 30, JANUARY 1, JANUARY 2,
1996 1996 1995
------------ ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Income before provision for taxes........ $ 83,505 $161,384 $ 80,115
Current tax expense:
U.S. Federal........................... $ 21,481 $ 60,163 $ 24,998
State and local........................ 1,706 6,988 3,286
Foreign................................ 1,073 220 101
------- -------- -------
Total current............................ 24,260 67,371 28,385
------- -------- -------
Deferred tax expense (benefit):
U.S. Federal........................... 5,559 (7,849) 709
State and local........................ 657 (615) 549
------- -------- -------
Total deferred........................... 6,216 (8,464) 1,258
------- -------- -------
Total.................................... $ 30,476 $ 58,907 $ 29,643
======= ======== =======
</TABLE>
The tax provision differs from the amounts obtained by applying the
statutory U.S. Federal Income Tax Rate to income before taxes as shown below.
TAX PROVISION DIFFERENCE
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 30, JANUARY 1, JANUARY 2,
1996 1996 1995
------------ ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Statutory rate........................... 35% 35% 35%
Tax at U.S. statutory rate............... $ 29,227 $ 56,487 $ 28,040
State income taxes, net of federal
benefit................................ 1,536 4,142 2,492
Tax credits.............................. -- (1,013) (300)
Net Foreign Sales Corporation (FSC)
benefit................................ (1,548) (479) (427)
Benefit of tax free investments.......... (998) (2,259) (1,324)
Other, net............................... 2,259 2,029 1,162
------- ------- -------
Total.................................... $ 30,476 $ 58,907 $ 29,643
======= ======= =======
</TABLE>
30
<PAGE> 31
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The components of the net deferred tax assets at December 30, 1996, and
January 1, 1996, under SFAS 109 were as follows:
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1,
1996 1996
------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Deferred income on sales to distributors..... $ 9,667 $ 5,654
Inventory reserves and basis differences..... 13,794 7,677
Restructuring and legal reserves............. 1,167 11,027
Asset valuation and other reserves........... 13,511 10,822
State tax, net of federal tax................ 522 455
Other, net................................... 1,472 2,388
-------- --------
Total deferred tax assets.................... 40,133 38,023
-------- --------
Deferred tax liabilities:
Excess of tax over book depreciation......... (25,568) (17,294)
Other, net................................... (1,184) (1,271)
-------- --------
Total deferred tax liabilities............... (26,752) (18,565)
-------- --------
Net deferred tax assets...................... $ 13,381 $ 19,458
======== ========
</TABLE>
The net deferred tax asset at December 30, 1996, is substantially
realizable through carry-back to prior years' taxable income. Other current
assets include current deferred tax assets of $34,900,000 at December 30, 1996,
and $35,111,000 at January 1, 1996, respectively.
The tax benefits associated with disqualifying dispositions of stock
options or employee stock purchase plan shares reduce taxes currently payable by
$3.9 million.
NOTE 6: 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 1994 and 1995, the Company entered into three operating lease agreements
with respect to its office and manufacturing facilities in San Jose and
Minnesota, respectively. In April 1996, the Company entered into an additional
lease agreement related to two office facilities in San Jose. These agreements
require quarterly payments that vary based on the London interbank offering rate
("LIBOR"), plus a spread. All leases provide the Company with the option of
either acquiring the property at its 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 $55.5 million at
December 30, 1996. Based on management's estimate of the fair value of the
properties, no liability was recorded at December 30, 1996. Furthermore, the
Company is required to maintain a specific level of restricted cash or
investments to serve as collateral for these leases and maintain compliance with
certain financial covenants. As of December 30, 1996, the amount of restricted
cash or investments recorded was $61.6 million, which is in compliance with
these agreements. These restricted cash or investments are classified as
non-current assets on the balance sheet.
31
<PAGE> 32
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The aggregate annual rental commitments under noncancelable operating
leases as of December 30, 1996, are:
<TABLE>
<CAPTION>
(DOLLARS IN
FISCAL YEAR THOUSANDS)
---------------------------------------------------------- -----------
<S> <C>
1997...................................................... $ 7,432
1998...................................................... 6,046
1999...................................................... 5,100
2000...................................................... 4,555
2001...................................................... 2,848
2002 and thereafter....................................... 7,313
-------
Total..................................................... $33,294
=======
</TABLE>
Rental expense was approximately $7,708,000 in 1996, $5,995,000 in 1995,
and $4,954,000 in 1994.
LINE OF CREDIT
In July 1996, the Company established a three-year, $100-million unsecured
revolving credit facility with Bank of America National Trust and Savings
Association as agent on behalf of certain banks. The applicable interest rate
for usage under this agreement is a graduated scale of LIBOR, plus a spread. The
agreement contains certain financial and other covenants including limitation on
indebtedness, liens, disposition of assets, consolidations and mergers,
investments and contingent obligations, and maintenance of a leverage ratio,
consolidated tangible net worth, quick ratio and adjusted EBIT/fixed charge
coverage ratio. In September 1996, the Company borrowed $49.0 million against
the line of credit which remained outstanding at year end. The balance borrowed
will be due three years from the date of the agreement. The borrowings from the
line of credit are recorded on the balance sheet as current liabilities.
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.
In May 1995, in a case before the U.S. District Court in Dallas, Texas, a
jury delivered a verdict of $17.8 million against the Company in a patent
infringement lawsuit filed by Texas Instruments ("TI"). In August 1995, the
judge reversed the decision stating that TI failed to prove that Cypress
infringed on TI's patents covering the plastic encapsulation process used to
package semiconductor devices. In July 1996, the Federal Court of Appeals
affirmed the decision of the trial court that the Company did not infringe on
either of the patents in the suit. In September 1996 the Court denied TI's
motion for reconsideration, and as a result of that ruling, Cypress reversed the
$17.8 million reserve recorded in March 1995 with respect to this lawsuit. In
December 1996, TI filed a petition of certiorari in the United States Supreme
Court. If the petition is granted, the Supreme Court would review on appeal the
decision of the Federal Circuit Court of Appeals. Litigation counsel for the
Company considers the possibility that the Supreme Court will grant the petition
and hear the appeal to be remote, given the small percentage of such petitions
that are granted and the fact that the case does not appear to present issues of
significant national interest.
In June 1995, Advanced Micro Devices ("AMD") charged the Company with
patent infringement and filed suit in the U.S. District Court in Delaware. The
suit claimed that the Company infringed on several of AMD's Programmable Logic
Patents. In November 1995, the Company filed a patent infringement action
against AMD in the U.S. District Court for the District of Minnesota. The
Company alleged infringement by AMD of a number of the Company's patents in this
action. In April 1996, the Company and AMD signed a
32
<PAGE> 33
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
cross-licensing agreement terminating the patent litigation between the two
companies. The agreement allows each company to continue to produce its own
products with no threat of future patent lawsuits by the other company.
In June 1995, the U.S. District Court of Northern California dismissed by a
summary judgment a class-action lawsuit filed against the Company and certain of
its officers. The suit filed was for alleged violations of the Securities
Exchange Act of 1934 and certain provisions of state law regarding disclosure of
short-term business prospects. The plaintiffs have filed an appeal. The Company
will vigorously defend itself in this matter and, subject to the inherent
uncertainties of litigation and based upon discovery completed to date,
management believes that the resolution of this matter will not have a material
adverse impact on the Company's financial position or results of operations.
However, should the outcome of this action 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 and results of operations.
PURCHASE COMMITMENTS
At December 30, 1996, the Company had purchase commitments aggregating
$57.0 million, principally for manufacturing equipment and facilities. These
commitments were made for purchases in 1997.
NOTE 7: 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 initial public offering) and guaranteed an
equipment lease line of credit for Vitesse, of $3.5 million, maturing on August
31, 1997. There was no outstanding principal balance related to the lease line
as of December 30, 1996. In May 1996, the Company recorded a gain on the sale of
25% of its investment in Vitesse. As of December 30, 1996, the Company's
cost-basis investment is $750,000. The Company's chairman, a board member, and
its president are members of the Vitesse Board of Directors.
Between 1992 and 1995, the Company made cost-basis investments totaling
$3.2 million in QuickLogic Series D and E preferred stock. No additional
investment was made in 1996. The Company also recorded sales to QuickLogic of
$8,206,000, $5,769,000, and $1,972,000 in 1996, 1995, and 1994, respectively,
and at fiscal year-end 1996, 1995, and 1994, the Company had a receivable due
from QuickLogic of $1,374,000, $717,000, and $787,000, respectively. In the
second quarter of 1996, QuickLogic exercised its right under the 1993 agreement
to receive additional wafer capacity by paying the Company $4.5 million.
Subsequent to year end, the Company and QuickLogic signed a letter of intent to
terminate this agreement and enter into a new agreement. See Note 8 for related
subsequent events. Under certain circumstances, the Company may make additional
investments in QuickLogic. The Company's chairman's venture capital firm is an
investor in QuickLogic and is represented on the Board of Directors.
NOTE 8: SUBSEQUENT EVENTS
In February 1997, the Company signed a letter of intent with QuickLogic to
terminate an existing joint development, licensing, and foundry agreement for
antifuse Field Programmable Gate Array ("FPGA") products and planned to execute
a new foundry agreement. Under the new agreement, Cypress will cease to develop,
market, and sell antifuse-based FPGA products. In return, the Company's equity
position in the privately held QuickLogic will grow to greater than 20%. The
Company also entered into a five-year wafer-supply agreement to provide FPGA
products to QuickLogic. The agreement is subject to the completion of definitive
documentation and necessary consents and approvals. The agreement is expected to
be finalized in March 1997.
33
<PAGE> 34
CYPRESS SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In February 1997, the Company called for redemption of all of the 3.15%
Convertible Subordinated Notes that are due in 2001. The redemption will be
effective March 26, 1997. Approximately $110.0 million aggregate principal
amount at maturity of the notes were outstanding at the time the notes were
called for redemption with the aggregate redemption price of approximately $99.0
million. Prior to 5:00 P.M. EST, on March 25, 1997, holders have the option to
convert their notes into shares of Cypress common stock at a conversion rate of
72.1746 shares of stock per $1,000 principal amount at maturity of the note.
Alternatively, holders may have their notes redeemed at a total redemption price
of $900.25 per $1,000 amount at maturity of the notes. The redemption price
consists of: (a) an issue price of $839.03, plus (b) $60.26 of accrued original
issue discount, plus (c) accrued interest of $0.96, per $1,000 principal amount
at maturity of the notes. Any notes that are not converted on or before 5:00
P.M. EST, March 25, 1997 will automatically be redeemed on March 26, 1997.
In February 1997, the Company sold its remaining $750,000 investment in
Vitesse Semiconductor. The Company sold 83,333 shares and recorded a gain of
$3.8 million.
34
<PAGE> 35
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
CYPRESS SEMICONDUCTOR CORPORATION:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 37 present fairly, in all material
respects, the financial position of Cypress Semiconductor Corporation and its
subsidiaries at December 30, 1996 and January 1, 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 30, 1996, 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, 1997, except as to Note 8,
which is as of February 25, 1997
35
<PAGE> 36
QUARTERLY FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------
DECEMBER 30, SEPTEMBER 30, JULY 1, APRIL 1,
1996 1996 1996 1996
------------ ------------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues.................... $113,103 $ 109,647 $135,464 $170,171
Gross profit................ 37,880 28,572 63,449 93,310
Net income.................. 1,304 583 16,865 34,277
Net income per share
Primary................... $ 0.02 $ 0.01 $ 0.20 $ 0.41
======== ======== ======== ========
Fully diluted............. $ -- $ -- $ 0.20 $ 0.39
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JANUARY 1, OCTOBER 2, JULY 3, APRIL 3,
1996 1995 1995 1995
---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues........................ $ 177,279 $ 161,155 $134,273 $123,365
Gross profit.................... 96,712 87,295 73,374 62,531
Net income...................... 35,550 32,219 25,602 9,105
Net income per share
Primary....................... $ 0.40 $ 0.35 $ 0.29 $ 0.11
======== ======== ======== ========
Fully diluted................. $ 0.38 $ 0.33 $ 0.27 $ 0.11
======== ======== ======== ========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Certain information required by Part III is omitted from this Report in
that the registrant will file 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.
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.
36
<PAGE> 37
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>
PAGE
----
<S> <C>
(1) FINANCIAL STATEMENTS
Consolidated Balance Sheets at December 30, 1996 and January 1, 1996.................. 19
Consolidated Statements of Operations for the three years ended December 30, 1996..... 20
Consolidated Statements of Stockholders' Equity for the three years ended December 30,
1996................................................................................ 21
Consolidated Statements of Cash Flows for the three years ended December 30, 1996..... 22
Notes to Consolidated Financial Statements............................................ 23
Report of Independent Accountants..................................................... 35
(2) FINANCIAL STATEMENT SCHEDULE
Valuation and qualifying accounts and reserves........................................ 39
</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>
4.1 Lease dated April 12, 1996 between the Company and BNP Leasing
Corporation.
4.20 Credit Agreement dated July 24, 1996 between the Company and Bank of
America National Trust.
4.21 First Amendment to Credit Agreement dated October 10, 1996 between the
Company and Bank of America National Trust.
4.22 Second Amendment to Credit Agreement dated March 21, 1997 between the
Company and Bank of America National Trust.
4.3 Letter of Intent dated February 7, 1997 between the Company and
Quicklogic Corporation.
10.1(2) Bialek consulting agreement, dated April 1, 1996.
10.2(1)(2) Cypress Semiconductor Corporation 1996 Key Employee Bonus Plan
Agreement.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Accountants.
24.1 Power of Attorney (see page 38).
27.1 Financial Data Schedule.
(1) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended January 1, 1996.
(2) Management compensatory plan, contract or arrangement.
</TABLE>
37
<PAGE> 38
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
28th day of March 1997.
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. RODGERS President, Chief Executive March 28,1997
- ----------------------------------------------- Officer and Director
T.J. Rodgers (Principal Executive Officer)
/s/ EMMANUEL HERNANDEZ Chief Financial Officer, March 28,1997
- ----------------------------------------------- Vice-President, Finance and
Emmanuel Hernandez Administration (Principal
Financial and Accounting
Officer)
/s/ PIERRE R. LAMOND Chairman of the Board of March 28,1997
- ----------------------------------------------- Directors
Pierre R. Lamond
/s/ FRED B. BIALEK Director March 28, 1997
- -----------------------------------------------
Fred B. Bialek
/s/ ERIC BENHAMOU Director March 28, 1997
- -----------------------------------------------
Eric Benhamou
/s/ JOHN C. LEWIS Director March 28, 1997
- -----------------------------------------------
John C. Lewis
</TABLE>
38
<PAGE> 39
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>
1994
Allowance for sales returns
and doubtful accounts...... $1,347,000 $ 610,000 $ -- $(564,000) $1,393,000
1995
Allowance for sales returns
and doubtful accounts...... $1,393,000 $1,400,000 $ 85,000 $ (50,000) $2,828,000
1996
Allowance for sales returns
and doubtful accounts...... $2,828,000 $1,779,000 $ -- $(720,000) $3,887,000
</TABLE>
39
<PAGE> 1
EXHIBIT 4.1
EXECUTION
$18,200,000.00
LEASE AGREEMENT
BETWEEN
BNP LEASING CORPORATION,
AS LANDLORD
AND
CYPRESS SEMICONDUCTOR CORPORATION,
AS TENANT
EFFECTIVE AS OF APRIL 12, 1996
(BUILDINGS #3 AND #4, NORTH FIRST STREET, SAN JOSE, CALIFORNIA)
PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN SUBPARAGRAPH 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 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
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DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE TO THE OWNER.
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TABLE OF CONTENTS
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1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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(a) Active Negligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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(b) Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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(c) Advance Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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(d) Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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(e) Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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(f) Applicable Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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(g) Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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(h) Banking Rules Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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(i) Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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(j) Base Rental Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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(k) Base Rental Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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(l) Base Rental Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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(m) Breakage Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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(n) Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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(o) Capital Adequacy Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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(p) Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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(q) Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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(r) Construction Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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(s) Construction Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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(t) Construction Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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(u) Construction Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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(z) Custodial Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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(v) Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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(w) Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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(x) Designated Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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(y) Effective Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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(z) Environmental Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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(aa) Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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(ab) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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(ac) Environmental Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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(ad) Environmental Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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(ae) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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(af) ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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(ag) ERISA Termination Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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(ah) Escrowed Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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(ai) Eurocurrency Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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(aj) Eurodollar Rate Reserve Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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(ak) Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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(al) Excluded Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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(am) Fed Funds Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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(an) Funding Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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(ao) GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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(i)
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(ap) Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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(aq) Hazardous Substance Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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(ar) Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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(as) Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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(at) Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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(au) Initial Funding Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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(av) Landlord's Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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(aw) Landlord's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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(ax) LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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(ay) Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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(az) Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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(ba) Maximum Construction Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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(bb) Misconduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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(bc) Outstanding Construction Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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(bd) Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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(be) Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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(bf) Permitted Hazardous Substance Use . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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(bg) Permitted Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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(bh) Permitted Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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(bi) Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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(bj) Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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(bk) Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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(bl) Potential Lien Claimants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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(bm) Prime Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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(bn) Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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(bo) Purchase Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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(bp) Qualified Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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(bq) Remaining Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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(br) Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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(bs) Responsible Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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(bt) Scope Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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(bu) Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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(bv) Stipulated Loss Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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(bw) Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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(bx) Tenant's Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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(by) Trade Fixture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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(bz) Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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(ca) Unfunded Benefit Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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(cb) Other Terms and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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2. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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3. Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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(a) Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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(b) Upfront Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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(c) Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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(d) Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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(e) Interest and Order of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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(f) Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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(g) Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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(h) No Demand or Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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4. Insurance and Condemnation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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5. No Lease Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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(a) Status of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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(b) Waiver By Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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6. Construction Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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(a) Advances; Outstanding Construction Allowance . . . . . . . . . . . . . . . . . . . . . . . 23
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(b) Construction Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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(i) Preconstruction Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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(ii) Scope Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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(iii) Responsibility for Construction. . . . . . . . . . . . . . . . . . . . . . . . . 25
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(iv) Value Added. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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(v) Advances Not a Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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(c) Conditions to Construction Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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(i) Prior Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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(ii) Amount of the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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(iii) Other Restrictions on the Amount of Advances . . . . . . . . . . . . . . . . . . 27
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(iv) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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a) Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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b) Builder's Risk Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 27
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(v) Progress of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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(vi) Evidence of Costs and Expenses to be Reimbursed . . . . . . . . . . . . . . . . . 28
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(vii) No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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(viii) No Sale of Landlord's Interest . . . . . . . . . . . . . . . . . . . . . . . . . 28
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(ix) Certificate of No Default and Other Matters . . . . . . . . . . . . . . . . . . . 28
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7. Purchase Documents and Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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8. Use and Condition of Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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(a) Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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(b) Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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(c) Consideration of and Scope of Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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9. Other Representations, Warranties and Covenants of Tenant . . . . . . . . . . . . . . . . . . . . 29
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(a) Financial Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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(b) Existing Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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(c) No Default or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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(d) Compliance with Covenants and Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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(e) Environmental Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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(f) No Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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(g) Condition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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(h) Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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(i) Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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(j) Not a Foreign Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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(k) Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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(l) Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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(m) Tenant Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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(n) Operation of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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(o) Debts for Operation of Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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(p) Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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(q) Repair, Maintenance, Alterations and Additions . . . . . . . . . . . . . . . . . . . . . . 34
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(r) Insurance and Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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(s) Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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(t) Protection and Defense of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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(u) No Liens on the Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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(v) Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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(w) Financial Statements; Required Notices; Certificates as to Default . . . . . . . . . . . . 37
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(x) Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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(y) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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(z) Fees and Expenses; General Indemnification; Increased Costs; and Capital Adequacy Charges 39
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(aa) Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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(ab) Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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(ac) Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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(ad) [SUBPARAGRAPH INTENTIONALLY DELETED.] . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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(ae) Affirmative Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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(i) Quick Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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(ii) Minimum Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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(af) Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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(ag) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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10. Other Representations, Warranties and Covenants of Landlord . . . . . . . . . . . . . . . . . . . . 46
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(a) Removal of Landlord's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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(b) Actions Required of the Title Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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(c) No Default or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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(d) No Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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(e) Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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(f) Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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(g) Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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(h) Not a Foreign Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
--------------------
11. Assignment and Subletting by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
-----------------------------------
(a) Landlord's Consent Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
---------------------------
(b) Transfers in Violation of ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
-------------------------------
(c) Standard for Landlord's Consent to Assignments and Certain Other Matters . . . . . . . . . . 48
------------------------------------------------------------------------
(d) Consent Not a Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
--------------------
12. Assignment by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
----------------------
(a) Landlord's Assignment Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
-------------------------------
(b) Restrictions on Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
-------------------------
</TABLE>
(iv)
<PAGE> 7
<TABLE>
<S> <C>
13. Environmental Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
-----------------------------
(a) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
---------
(b) Assumption of Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
---------------------
(c) Notice of Environmental Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
------------------------------
(d) Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
-----------------
(e) Survival of the Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
-------------------------
14. Landlord's Right of Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
--------------------------
15. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
-----------------
(a) Definition of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
------------------------------
(b) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
--------
(c) Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
--------------
(d) Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
-------------------
(e) Waiver by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
----------------
(f) No Implied Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
-----------------
16. Default by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
-------------------
17. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
---------------
18. Surrender Upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
--------------------------
19. Holding Over by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
----------------------
20. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
-------------
(a) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
-------
(b) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
------------
(c) No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
---------
(d) NO IMPLIED REPRESENTATIONS BY LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
--------------------------------------
(e) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
----------------
(f) Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
--------------
(g) Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
----------------------
(h) Termination of Prior Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
---------------------------
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
-------------
(j) Waiver of a Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
----------------------
(k) Income Tax Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
--------------------
Exhibits and Schedules
Exhibit A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Description
- ---------
Exhibit B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Encumbrance List
- ---------
Exhibit C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Permitted Hazardous Substances
- ---------
Exhibit D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Existing Trade Fixtures
- ---------
</TABLE>
(v)
<PAGE> 8
<TABLE>
<S> <C>
Exhibit E . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction Advance Request Forms
- ---------
Exhibit F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Covenant Compliance Certificate
- ---------
Exhibit G. . . . . . . . . . . . . . . . . . Notice of Reduction in Maximum Construction Allowance
- ---------
Schedule 1 . . . . . . . . . . . . . . . . . . . . . . Description of initial Construction Project
</TABLE>
(vi)
<PAGE> 9
LEASE AGREEMENT
This LEASE AGREEMENT (hereinafter called this "LEASE"), made to be
effective as of April 12, 1996 (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 March 22,
1996 (hereinafter called the "EXISTING CONTRACT") covering the land described
in Exhibit A attached hereto (hereinafter called the "LAND") and any
improvements thereon, Landlord is acquiring the Land and any improvements
thereon from R.N.D. Funding Company, Inc. (hereinafter called "SELLER")
contemporaneously with the execution of this Lease;
WHEREAS, pursuant to an existing lease dated as of November 22, 1989,
originally between OSJ Properties Partners I, as lessor, and Tenant, as lessee
(the "EXISTING LEASE"), 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 Lease 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.
The Land and all of the property described in items i through iii above are
hereinafter referred to collectively as the "REAL PROPERTY".
<PAGE> 10
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:
2. Definitions. As used herein, the terms "Landlord,"
"Tenant," "Existing Contract," "Seller," "Existing Lease," "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 been 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.
(b) Additional Rent. "ADDITIONAL RENT" shall
have the meaning assigned to it in subparagraph d below.
(c) Advance Date. "ADVANCE DATE" means,
regardless of whether any Construction Advance shall actually be made thereon,
the first Business Day of every calendar month, beginning with May 1, 1996 and
continuing regularly thereafter to and including the Base Rent Commencement
Date; provided, that if Landlord sells its interest in the Leased Property
pursuant to
-2-
<PAGE> 11
the Purchase Agreement before the Base Rental Commencement Date, the last
Advance Date shall be the Designated Payment Date.
(d) 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.
(e) Applicable Laws. "APPLICABLE LAWS" shall
have the meaning assigned to it in subparagraph d below.
(f) 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.
(g) 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 an
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.
(h) 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).
(i) Base Rent. "BASE RENT" means the rent
payable by Tenant pursuant to subparagraph a below.
(j) Base Rental Commencement Date. "BASE RENTAL
COMMENCEMENT DATE" means the earlier of the first Business Day in May, 1997 or
the first Business Day of the first calendar month upon which or after which
any of the following shall have occurred: (1) Tenant shall have substantially
completed the initial Construction Project described in subparagraph i and any
subsequent Construction Projects commenced before completion of the initial
Construction Project, or (2) the then Outstanding Construction Allowance
(including any Construction Advance and Carrying Costs added to the Outstanding
Construction Advance on that Business Day) shall equal or exceed the Maximum
-3-
<PAGE> 12
Construction Allowance available under this Lease. For example, if on the
first Business Day of December, 1996 construction of the initial Construction
Project is continuing, the Outstanding Construction Allowance is $2,099,999
(before adding any Carrying Costs for the preceding month) and the Maximum
Construction Allowance is $2,100,000 (assuming the Initial Funding Advance is
$16,100,000), and if Carrying Costs of $100,000 would be added to the
Outstanding Construction Allowance on such day if the Construction Allowance
were not limited to the Maximum Construction Allowance, then such day shall be
the Base Rental Commencement Date and on such day $1 will be added to the
Outstanding Construction Allowance as Carrying Cost and $99,999 will be payable
as Base Rent pursuant to Paragraph a.
(k) Base Rental Date. "BASE RENTAL DATE" means
the first Business Day of each calendar month, beginning with first Business
Day of the first calendar month after the Base Rental Commencement Date and
continuing regularly thereafter to and including the Designated Payment Date.
(l) Base Rental Period. "BASE RENTAL PERIOD"
means each successive period of approximately one (1) month, with the first
Base Rental Period beginning on and including the Base Rental Commencement Date
and ending on but not including the first Base Rental Date. Each successive
Base Rental Period after the first Base Rental Period 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.
(m) Breakage Costs. "BREAKAGE COSTS" means any
and all costs, losses or expenses incurred or sustained by Landlord's Parent or
any Participant, for which Landlord's Parent 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 Parent 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 Parent of
Breakage Costs shall, in the absence of clear and demonstrable error, be
conclusive and binding upon Landlord and Tenant.
(n) 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).
-4-
<PAGE> 13
(o) Capital Adequacy Charges. "CAPITAL ADEQUACY
CHARGES" means any additional amounts Landlord's Parent requires Landlord to
pay as compensation for an increase in required capital as provided in
subparagraph iv.
(p) Closing Costs. "CLOSING COSTS" means the
excess of $16,100,000 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 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, with the understanding that
Tenant shall use any such amount advanced for one or more of the following
purposes: (1) the payment or reimbursement of expenses incurred by Tenant in
connection with the preparation and negotiation of this Lease, the Purchase
Documents, the Environmental Indemnity and related documents; (2) the payment
or reimbursement of expenses incurred by Tenant in connections with anticipated
Construction Projects, including subdivision, demolition and grading
activities, as appropriate, the planning, design, engineering and permitting of
the Improvements; (3) the maintenance of the Leased Property; or (4) the
payment of Rents next due.
(q) Code. "CODE" means the Internal Revenue Code
of 1986, as amended from time to time.
(r) Construction Advances. "CONSTRUCTION
ADVANCES" means actual advances of funds made by or on behalf of Landlord to
Tenant pursuant to Paragraph 7 below for Construction Projects.
(s) Construction Allowance. "CONSTRUCTION
ALLOWANCE" means the allowance which is to be provided by Landlord for
Construction Projects as more particularly described in Paragraph 7 below.
(t) Construction Period. "CONSTRUCTION PERIOD"
means each successive period of approximately one (1) month, except that the
first Construction Period shall be a shorter period beginning on and including
the effective date hereof and ending on but not including the first Advance
Date. Each successive Construction Period after the first Construction Period
shall begin on and include the day on which the preceding Construction Period
ends and shall end on but not include the next following Advance Date.
(u) Construction Project. "CONSTRUCTION
PROJECTS" include (1) the "initial Construction Project" which means the
construction of the improvements described in Schedule 1 and contemplated by
the plans, renderings and budgets referenced therein, consistent with the uses
permitted by this Lease, and (2) "subsequent Construction Projects" which means
any other project to be undertaken by Tenant during the term of this Lease for
the construction of new Improvements or for the alteration of then existing
Improvements. A subsequent Construction Project may involve demolition of then
existing Improvements which are no longer needed or which must be removed to
accommodate new Improvements, subject to the requirements of Paragraph b below.
All construction work planned or done contemporaneously shall constitute a
single Construction Project for purposes of
-5-
<PAGE> 14
this Lease, notwithstanding that such work may be done in stages or performed
by more than one general contractor. However, it is understood that any number
of distinct Construction Projects may be undertaken by Tenant during the term
of (and in accordance with the provisions of) this Lease.
(z) 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.
(v) 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.
(w) 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.
(x) Designated Payment Date. "DESIGNATED PAYMENT
DATE" shall have the meaning assigned to it in the Purchase Agreement.
(y) Effective Rate. "EFFECTIVE RATE" means:
(i) for the short first Construction Period
ending May 1, 1996, the per annum rate which equals the Spread plus
the per annum rate charged to Landlord by Landlord's Parent on the
Initial Funding Advance for such Construction Period, it being
understood that the rate charged to Landlord by Landlord's Parent
during such period will be equal to the average daily rate for such
period established internally by Landlord's Parent as its marginal
cost of funds; and
(ii) for each subsequent Construction Period and
for each Base Rental Period, the per annum rate which equals the
Spread plus the per annum rate determined by dividing (A) LIBOR for
such Construction Period or Base Rental Period by (B) 100% minus the
Eurodollar Rate Reserve Percentage for such Construction Period or
Base Rental Period. When "LIBOR" or the "Eurodollar Rate Reserve
Percentage" changes upon the commencement of a new Construction Period
or 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 commencement of such
period. If for any reason Landlord determines that it is impossible
or impractical to determine the Effective Rate with respect to a given
Construction Period or Base Rental Period in accordance with the
preceding sentences, then the "EFFECTIVE RATE" for that period shall
equal the Spread plus any published index or per annum interest rate
determined in good faith by Landlord's Parent 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 Parent's
-6-
<PAGE> 15
comparison of past eurodollar market rates to past yields on such
Treasury obligations. Any determination by Landlord's Parent of the
Effective Rate hereunder shall, in the absence of clear and
demonstrable error, be conclusive and binding.
(z) Environmental Cutoff Date. "ENVIRONMENTAL
CUTOFF DATE" means the later of the dates upon which (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.
(aa) 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.
(bb) 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").
(cc) 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 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
cc, or any allegation of any such matters. For purposes of determining whether
Losses constitute "Environmental Losses," 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 cc, 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
-7-
<PAGE> 16
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.
(dd) Environmental Report. "ENVIRONMENTAL REPORT"
means the following certain reports: Environmental Baseline Investigation
Building Three and Four Cypress Semiconductor Corporation 3939 and 4001 N.
First Street, San Jose, California, prepared for Tenant by Associated Terra
consultants, Inc., dated March 27, 1996, file no. 125175 and Appendices
thereto.
(ee) 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.
(ff) ERISA Affiliate. "ERISA AFFILIATE" means any
Person who for purposes of Title IV of ERISA is a member of Tenant's controlled
group, or under common control with Tenant, within the meaning of Section 414
of the Code, and the regulations promulgated and rulings issued thereunder.
(gg) 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.
(hh) Escrowed 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
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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 5 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 5 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.
(ii) 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.
(jj) Eurodollar Rate Reserve Percentage. "EURODOLLAR RATE
RESERVE PERCENTAGE" means, for purposes of determining the Effective Rate for
any Construction Period or Base Rental Period, the reserve percentage
applicable two Business Days before the first day of such 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 Parent 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 period.
(kk) Event of Default. "EVENT OF DEFAULT" shall
have the meaning assigned to it in subparagraph a below.
(ll) Excluded Taxes. "EXCLUDED TAXES" shall mean
(1) all Federal, state and local income taxes upon Base Rent, the Upfront Fee,
Commitment Fees, any interest paid to Landlord pursuant to subparagraph e and
any additional compensation claimed by Landlord pursuant to subparagraph 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 conveyance to any third party of Landlord's
rights or interests 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 or California Bank and Corporation Tax Law as well as Texas
corporate franchise taxes.
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(mm) 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, the average of the quotations for such day on such transactions
received by the Landlord's Parent from three Federal funds brokers of
recognized standing selected by Landlord's Parent. All determinations of the
Fed Funds Rate by Landlord's Parent shall, in the absence of clear and
demonstrable error, be binding and conclusive upon Landlord and Tenant.
(nn) Funding Advances. "FUNDING ADVANCES" means
(1) the Initial Funding Advance and (2) all future advances (which, together
with Initial Funding Advance, are expected to total but in no event exceed
$18,200,000) made by Landlord's Parent or any Participant to or on behalf of
Landlord to allow Landlord to provide the Construction Allowance hereunder.
(oo) 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 used in the preparation of the
financial statements referred to in subparagraph w (except for changes
concurred in by Tenant's independent public accountants).
(pp) 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, any Environmental Laws as a "hazardous substance," "hazardous
material," "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
gas, natural gas liquids, liquified natural gas, synthetic gas usable for fuel
(or mixtures of natural gas and such synthetic gas), and ash produced by a
resource recovery facility utilizing a municipal solid 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 (with the exception of
non-hazardous waste as defined under federal law); 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.
(qq) 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, generation,
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 any
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body 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 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.
(rr) Impositions. "IMPOSITIONS" shall have the
meaning assigned to it in subparagraph p below.
(ss) 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, but also any new improvements
or changes to existing improvements made by Tenant and any replacements,
substitutions or restorations thereof.
(tt) 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.
(uu) Initial Funding Advance. "INITIAL FUNDING
ADVANCE" means the advance of $16,100,000 made by Landlord's Parent (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 cover the cost of Landlord's acquisition of
the Leased Property and Closing Costs.
(vv) Landlord's Parent. "LANDLORD'S PARENT" means
Landlord's Affiliate, Banque Nationale de Paris, a bank organized and existing
under the laws of France and any successors of such bank.
(ww) 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 b below or any written request made by Tenant, or (F) Liens
securing the payment of property taxes or other amounts
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<PAGE> 20
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.
(xx) LIBOR. "LIBOR" means, for purposes of
determining the Effective Rate for each Construction Period or Base Rental
Period, the rate determined by Landlord's Parent 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
Parent in the London interbank market at approximately 11:00 a.m. (London time)
on the second Business Day preceding the first day of such Construction Period
or Base Rental Period. Landlord shall instruct Landlord's Parent 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
Construction Period or Base Rental Period, (ii) in an amount equal or
comparable to the total (projected on the applicable date of determination by
Landlord's Parent) Stipulated Loss Value on the first day of such period, and
(iii) for a period of time equal or comparable to the length of such period.
If Landlord's Parent 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 Parent determines that it is impossible or impractical to determine
LIBOR with respect to a given Construction Period or Base Rental Period in
accordance with the preceding sentences, or if Landlord's Parent shall
determine that it is unlawful (or any central bank or governmental authority
shall assert that it is unlawful) for Landlord's Parent to fund or maintain
advances to Landlord in connection with the Leased Property during any
Construction Period or Base Rental Period for which Carrying Costs or Base Rent
is computed by reference to LIBOR, then "LIBOR" for that Construction Period or
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 Parent shall, in the absence of clear anddemonstrable error, be
binding and conclusive upon Landlord and Tenant.
(yy) Lien. "LIEN" 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 letter 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.
(zz) 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
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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.
(aaa) Maximum Construction Allowance. "MAXIMUM
CONSTRUCTION ALLOWANCE" means an amount equal to $18,200,000, less the Initial
Funding Advance, or such lesser amount to which the Maximum Construction
Allowance may be reduced by Tenant pursuant to Paragraph 6.(d).
(bbb) 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 that continues beyond any period for cure
provided herein, and (2) any Active Negligence, gross negligence or wilful
misconduct of such Person or its Affiliates or of the officers, employees or
employers of such Person or its Affiliates. Misconduct of one Indemnified
Party shall not be attributed to a second Indemnified Party if the second
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.
(ccc) Outstanding Construction Allowance.
"Outstanding Construction Allowance" shall have the meaning assigned to it in
subparagraph i.
(ddd) Participant. "PARTICIPANT" means any 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
may after the date of this Lease agree with Landlord to participate in all or
some of the risks and rewards to Landlord of this Lease and the Purchase
Documents.
(eee) 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 written
consent of Tenant.
(fff) 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, nor shall such scope and
nature:
(1) exceed that reasonably required for the operation of the Leased
Property for the purposes permitted under subparagraph 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
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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 RCRA treatment, storage or disposal facility permit,
including but not limited to a landfill, incinerator or other waste disposal
facility.
(ggg) 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 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.
(hhh) Permitted Transfer. "PERMITTED TRANSFER"
means any one or 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 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;
(3) any agreement to exercise or refrain from exercising rights or
remedies hereunder or under the Purchase Agreement made by Landlord
with any Participant;
(4) any assignment or conveyance requested in writing by Tenant or
required by the Existing Contract, by any Permitted Encumbrance, by
the Purchase Documents or by Applicable Laws; or
(5) 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.
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(iii) Person. "PERSON" means an individual, a
corporation, a partnership, an unincorporated organization, an association, a
joint stock company, a joint venture, a trust, an estate, a government or
agency or political subdivision thereof or other entity, whether acting in an
individual, fiduciary or other capacity.
(jjj) 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.
(kkk) 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.
(lll) Potential Lien Claimants. "POTENTIAL LIEN
CLAIMANTS" means general contractors or other parties who have filed a
statutory Preliminary Notice to preserve their right to a mechanic's or
materialman's lien against the Leased Property in connection with any
Construction Project.
(mmm) Prime Rate. "PRIME RATE" means the prime
interest rate or equivalent charged by Landlord's Parent in the United States
as announced or published by Landlord's Parent from time to time, which need
not be the lowest interest rate charged by Landlord's Parent. If for any
reason Landlord's Parent 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 describe 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.
(nnn) 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, amended, restated or otherwise modified from
time to time in accordance with its terms.
(ooo) Purchase Documents. "PURCHASE DOCUMENTS"
means collectively the Purchase Agreement, the Pledge Agreement and the
Custodial Agreement.
(ppp) 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
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<PAGE> 24
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, 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 c.
(qqq) Remaining Proceeds. "REMAINING PROCEEDS"
shall have the meaning assigned to it in subparagraph ii.
(rrr) Rent. "RENT" means the Base Rent and all
Additional Rent.
(sss) Responsible Financial Officer. "RESPONSIBLE
FINANCIAL OFFICER" means the chief financial officer, the controller, the
treasurer or the assistant treasurer of Tenant.
(ttt) Scope Change. "SCOPE CHANGE" means a change to a
Construction Project that, if implemented, will make the quality, function or
capacity of the Improvements affected by such Construction Project "materially
different" (as defined below in this paragraph) than as described or inferred
by plans and other items submitted to Landlord by Tenant as described in
subparagraph i. Notwithstanding the foregoing, "Scope Change" shall not
include refinement, correction and detailing of plans or other items submitted
to Landlord by Tenant. As used in this definition, a "material difference"
means a difference that (a) could (after completion of the applicable
Construction Project and the funding of any Construction Advances required in
connection therewith) significantly reduce any excess of the fair market value
of the Leased Property over Stipulated Loss Value or significantly increase any
excess of Stipulated Loss Value over the fair market value of the Leased
Property, or (b) will change the general character of the Improvements from
that needed to accommodate the uses permitted by subparagraph a.
(uuu) Spread. "SPREAD" means, 0.25% per annum.
(vvv) Stipulated Loss Value. "STIPULATED LOSS
VALUE" as of any date means an amount equal to the sum of the Initial Funding
Advances, plus the sum of all Construction Advances and Carrying Costs added to
the Outstanding Construction Allowance on or prior to such date, minus all
funds received by Landlord and applied as Qualified Payments on or prior to
such date. Under no circumstances will any payment of Base Rent, the Upfront
Fee or Commitment Fees reduce Stipulated Loss Value.
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(www) 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.
(xxx) 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 Financial Officer; and, Chris
Field, 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.
(yyy) 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.
(zzz) Term. "TERM" shall have the meaning assigned
to it in Paragraph 3 below.
(aaa) 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 valuation 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.
(bbb) 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 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 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 or of which Landlord is an intended beneficiary,
without the consent of Landlord. All accounting terms not specifically defined
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 a whole and not to any particular subdivision unless expressly so
limited. The phrases "THIS PARAGRAPH"
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and "THIS SUBPARAGRAPH" and similar phrases refer only to the Paragraphs or
subparagraphs hereof in which the phrase occurs. The word "OR" is not
exclusive. Other capitalized terms are defined in the provisions that follow.
3. 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 the first Business Day in May, 2001, 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.
4. 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 monthly 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 rent
allocable to the Construction Period or 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 the Construction Period ending on the Base Rental
Commencement Date (if any) and for each Base Rental Period at least three (3)
days prior to the Base Rent Commencement Date or 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 month (or shorter
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
payable on the Base Rental Commencement Date shall equal the difference (if
any) between (a) total Carrying Costs that would have been added to the
Outstanding Construction Allowance on such date if the Construction Allowance
available hereunder were not limited to the Maximum Construction Allowance, and
(b) the Carrying Costs actually added on such date to the Outstanding
Construction Allowance. The Base Rent for each Base Rental Period shall equal
(A) Stipulated Loss Value on the first 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 thirty (30) days; that on the first day of such
Base Rental Period, after the entire Construction Allowance had been funded,
and after deducting a total of $13,200,000 of Qualified Payments received by
Landlord, the resulting Stipulated Loss Value is
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$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:
$5,000,000 x 6% x 30/360, or $25,000.
(b) Upfront Fee. 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 March 4, 1996 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 Construction Period.
(c) Commitment Fees. For each Construction
Period Tenant shall pay Landlord a fee (a "COMMITMENT FEE") equal to (1)
twenty-five basis points (25/100 of 1%), times (2) the difference at the end of
the first day of such Construction Period between (A) the Maximum Construction
Allowance and (B) the sum (computed without deduction for any Qualified
Payments) of all Construction Advances made by or on behalf of Landlord and all
Carrying Costs added to and made a part of the Construction Allowance, times
(3) the number of days in such Construction Period, divided by (4) three
hundred sixty (360). Tenant shall pay Commitment Fees in arrears on the first
Business Day of April, July, October and January of each calendar year,
beginning with July 1, 1996 and continuing regularly throughout the Term so
long as Commitment Fees accrue because of a difference between the Maximum
Construction Allowance and the amount described in the preceding clause (B);
provided, if any Commitment Fees shall have accrued and remain unpaid on the
Designated Payment Date, such accrued unpaid Commitment Fees shall be due on
the Designated Payment Date.
(d) 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").
(e) 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.
(f) 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 taxes payable by virtue of Landlord's receipt of amounts paid to
or on behalf of Landlord in accordance with this subparagraph f; (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
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principles of comparative fault to) its own Misconduct, (2) Excluded Taxes, (3)
withholding taxes permitted by subsection g or (4) general overhead or internal
administrative expenses of Landlord, Landlord's Parent or any Participant,
except to the extent allowed by subparagraph iii because of changes described
in that subparagraph after the date of this Lease.
(g) Withholding Taxes. Subject to the provisions
of this subparagraph g, 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, Commitment Fees, Base Rent, any
interest payable pursuant to subparagraph e or any additional compensation
claimed by Landlord pursuant to subparagraph iv (collectively, "INCOME
PAYMENTS") from Income Payments, 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 g shall
excuse Tenant from its obligation under subparagraph iii to compensate Landlord
for increased costs attributable to any change in law relating to withholding
taxes after the date hereof.
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(h) 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.
5. Insurance and Condemnation Proceeds.
(a) Subject to Landlord's rights under this Paragraph 5,
and so long as no Event of Default shall have occurred and be continuing,
Tenant shall be entitled to use all 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 Attorneys'
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 for 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 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 replacement 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. Further, notwithstanding the inadequacy of the
Remaining Proceeds held by Landlord as Escrowed Proceeds, if any, or anything
herein to the contrary, Tenant must, after any 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 (computed after the application of any Remaining
Proceeds as a Qualified Payment) and to a reasonably safe and sightly
condition; or
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(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 5.
(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 a 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
Paragraph 3 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 Leased 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 Leased Property by condemnation exceeds the sum of the Remaining
Proceeds resulting from
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such condemnation, then Landlord shall be entitled to recover the excess from
Tenant upon demand as an additional Qualified Payment, whereupon this Lease
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 Leased Property, including Tenant's interest therein.
(f) Without limiting Landlord's obligations under the
other provisions of this Paragraph 5 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 Leased Property or to the personal property situated from
time to time in or on the Leased 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 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 Lease 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 Leased Property to be impaired.
6. 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 Leased
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 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 17 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
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this Lease by Landlord that Landlord fails to cure within the period provided
in Paragraph 17, (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 now 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.
7. Construction Allowance.
(a) Advances; Outstanding Construction Allowance.
(i) Subject to the conditions set forth below,
Landlord shall make advances (herein called "CONSTRUCTION ADVANCES")
on Advance Dates from time to time as requested by Tenant to reimburse
Tenant for the cost of Construction Projects or to pay Commitment Fees
then due. As used herein, references to the "OUTSTANDING CONSTRUCTION
ALLOWANCE" shall mean the difference on the date in question (but not
less than zero) of (A) the total Construction Advances made by
Landlord on or prior to the date in question, less (B) any Qualified
Payments received on or prior to the date in question; provided, that
Landlord will not be under any obligation to readvance any portion of
the Construction Allowance repaid by Qualified Payments.
Notwithstanding the foregoing, if for any reason Stipulated Loss Value
(and thus the Outstanding Construction Allowance included as a
component thereof) must be determined under this Lease as of any date
between Advance Dates, the Outstanding Construction Allowance
determined on such date shall equal the Outstanding Construction
Allowance on the immediately preceding Advance Date computed in
accordance with the preceding sentence, plus Carrying Costs (if any)
accruing on and after such preceding Advance Date to but not including
the date in question.
(ii) Charges accruing at the Effective Rate
(herein collectively called "CARRYING COSTS") for each Construction
Period will be added to (and thereafter be included in) the
Outstanding Construction Allowance on the last day of each such
Construction Period (i.e., on the Advance Date upon which such
Construction Period ends). The amount of Carrying Costs for each such
Construction Period shall be equal to (A) Stipulated Loss Value
(including Carrying Costs added with respect to every previous
Construction Period, if any) as of the first day of such Construction
Period, times (B) the Effective Rate with respect to such Construction
Period, times (C) the number of days in such Construction Period,
divided by (D) 360; provided, however, that because the Construction
Allowance available under this Lease is limited to the Maximum
Construction Allowance, Carrying Costs added to the Outstanding
Construction Allowance on the Base Rental Commencement Date shall not
exceed the amount that can be added without causing the Outstanding
Construction Allowance to exceed the Maximum Construction Allowance.
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(b) Construction Projects.
(i) Preconstruction Approvals. Prior to the execution of
this Lease, Tenant submitted and obtained Landlord's approval of plans
or renderings for, a construction budget for, and descriptions of the
initial Construction Project which Tenant expects to construct with the
Construction Allowance. Except as provided below in this subparagraph,
Tenant shall submit and obtain Landlord's written approval of plans or
renderings for any subsequent Construction Project prior to commencement
of the subsequent Construction Project. Landlord may disapprove of such
plans or other items if, but only if, Landlord believes in good faith
that the Construction Project proposed by Tenant will (1) fail to
satisfy the requirements set forth in subparagraph iv, (2) change the
general character of the Leased Property from that needed to accommodate
the uses permitted by subparagraph a or (3) cause Tenant or the Leased
Property to violate some other express provision of this Lease; but no
approval given by Landlord in connection with any Construction Project,
prior to or after the date hereof, shall constitute a waiver of
subparagraph iv or of any other provision of this Lease. Any items
hereafter submitted by Tenant to satisfy this subparagraph shall be
sufficiently detailed to allow Landlord to make a reasonable
determination of whether the applicable Construction Project will
satisfy subparagraph iv, but need not include all detailed construction
specifications and drawings of the work to be included in the
Construction Project. All Construction Projects commenced by Tenant,
including the initial Construction Project which is described in
Schedule 1, and all construction contracts and other agreements executed
or adopted by Tenant in connection therewith, must be substantially
consistent with the plans or other items heretofore or hereafter
submitted to and approved by Landlord as described above in this
subparagraph, except to the extent otherwise provided by any Scope
Changes approved as described below. Before commencing any Construction
Project subsequent to the initial Construction Project, Tenant shall
notify Landlord if Tenant believes that, upon completion of such
subsequent Construction Project, there will be a substantial likelihood
that the Leased Property will have a value of less than 60% of
Stipulated Loss Value.
(ii) Scope Changes. Before making a Scope Change to any
Construction Project, Tenant shall provide to Landlord a reasonably
detailed written description of the Scope Change, a revised construction
budget (only if such Scope Change will require an increase in the
existing construction budget) and a copy of any changes to the drawings,
plans and specifications for the Improvements required in connection
therewith, all of which must be approved in writing by Landlord (or by
any construction representative appointed by Landlord from time to time)
before the Scope Change is implemented. Landlord may disapprove of any
Scope Change if, but only if, Landlord believes in good faith that the
Construction Project proposed by Tenant, as modified by the Scope
Change, will (1) fail to satisfy the requirements set forth in
subparagraph iv, (2) change the general character of the Leased Property
from that needed to accommodate the uses permitted by subparagraph a or
(3) cause Tenant or the Leased Property to violate some other express
provision of this Lease; but Landlord's approval shall not constitute a
waiver of subparagraph iv or of any other provision of this Lease.
(iii) Responsibility for Construction. Tenant shall have
sole responsibility for contracting for and administering all
Construction Projects, it being understood that Landlord's
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obligation with respect to Construction Projects shall be limited to
the making of advances under and subject to the conditions set forth
in this Paragraph 7. No contractor or other third party shall be
entitled to require Landlord to make advances as a third party
beneficiary of this Lease or otherwise. Notwithstanding delays beyond
Tenant's control, and even if the Construction Allowance is not
sufficient to pay for completion of any Construction Project, Tenant
warrants that on the Designated Payment Date under the Purchase
Agreement it shall have caused the initial Construction Project and
any subsequent Construction Projects which are commenced during the
Term to be completed in a good and workmanlike manner, substantially
in accordance with Applicable Laws, and otherwise in compliance with
the provisions of this Lease, unless Tenant or an Applicable Purchaser
has purchased the Leased Property pursuant to the Purchase Agreement
for a net price to Landlord (when taken together with any additional
payments made by Tenant pursuant to Paragraph 2(a)(ii) of the Purchase
Agreement, in the case of a purchase by an Applicable Purchaser) of
not less than Stipulated Loss Value.
(iv) Value Added. Each Construction Project, upon
completion and taken as a whole, must enhance the value of the Leased
Property by an amount commensurate with the Construction Advances made
for such Construction Project, and no Construction Project may
significantly reduce the fair market value of the Property; however:
(1) this subparagraph iv will not preclude Tenant
from obtaining Construction Advances for soft costs (such as
architectural fees and design and permitting costs),
demolition costs or other costs that do not, individually, add
value to the Leased Property but that are incurred in
connection with a Construction Project which will in the
aggregate satisfy this subparagraph iv;
(2) to address any concerns Landlord may express
about Tenant's ability to satisfy this subparagraph iv for a
Construction Project, Tenant may by a written notice to
Landlord stipulate a maximum amount of Construction Advances
that Landlord will be required to make for such Construction
Project, in which case Landlord shall not be required to make
Construction Advances for such project in excess of the amount
so stipulated;
(3) if Landlord invokes this subparagraph iv as
justification for disapproving of a Construction Project (or
Scope Change) or for declining to provide Construction
Advances for a Construction Project, then Tenant may satisfy
this subparagraph iv by (A) stipulating a maximum amount of
Construction Advances that Landlord will be required to make
for such Construction Project, and (B) establishing (by an
appraisal in form and scope satisfactory to Landlord from an
independent appraiser satisfactory to Landlord) that the value
of the Leased Property will be no less than 60% of Stipulated
Loss Value upon completion of the Construction Project and
after Landlord provides Construction Advances equal to the
maximum so stipulated;
(4) further, if Tenant ever does satisfy this
subparagraph iv for a particular Construction Project by
establishing a value of no less than 60% of Stipulated Loss
Value as described in the preceding clause (3), Landlord shall
have no further right,
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absent a subsequent Scope Change to such Construction Project,
to invoke this subparagraph iv as justification for
disapproving of such Construction Project or for withholding
Construction Advances requested within the limit of the
maximum Construction Advances stipulated by Tenant.
(v) Advances Not a Waiver. No funding of
Construction Advances and no failure of Landlord to object to any
Construction Project proposed or constructed by Tenant shall
constitute a waiver by Landlord of the requirements contained in this
subparagraph b.
(c) Conditions to Construction Advances.
Landlord's obligation to make Construction Advances from time to time under
this Paragraph 7 shall be subject to the following terms and conditions, all of
which are intended for the sole benefit of Landlord:
(i) Prior Notice. Tenant must make a request in
substantially the form attached to this Lease as Exhibit E for any
Construction Advance at least seven (7) Business Days prior to the
Advance Date upon which the advance is to be paid. Landlord shall
consider in good faith any changes to the Construction Advance request
forms attached hereto that Tenant may reasonably request for a
particular Construction Project, provided the requested changes do not
impair Landlord's rights or create or increase any liability Landlord
may have in connection with the applicable Construction Project.
(ii) Amount of the Advances. No Construction
Advance shall exceed the lesser of:
a) the Maximum Construction Allowance, less the
then Outstanding Construction Allowance (computed after adding
any Carrying Costs accrued for the month ending on the Advance
Date upon which such Construction Advance is to be made); or
b) (1) the actual costs and expenses previously
incurred or paid by Tenant (other than expenses already
included in Closing Costs) for the preparation, negotiation
and execution of this Lease, for Construction Projects
(including "soft costs") or for Commitment Fees, less (2) the
sum of all prior Construction Advances made under this
Paragraph 7 to Tenant as reimbursement for such costs and
expenses.
(iii) Other Restrictions on the Amount of Advances.
No Construction Advance shall be required that would cause the total
Construction Advances required to complete any Construction Project
previously commenced, as estimated by Landlord, to exceed the
difference computed by subtracting (1) the Carrying Costs then
projected by Landlord to be added to the Construction Allowance, from
(2) the Construction Allowance remaining to be advanced. Nor shall
any Construction Advance (other than the final Construction Advance)
be requested for an amount less than $100,000.
(iv) Insurance. Tenant shall have obtained and provided
certificates (or, in the case of clause a) below, title policies or
binders) reasonably satisfactory to Landlord evidencing insurance
covering the Leased Property as follows (in addition to the liability
insurance required under subparagraph aa below):
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a) Title Insurance. An owner's
title insurance policy (or binder committing the applicable
title insurer to issue an owner's title insurance policy,
without the payment of further premiums) in the amount of
$18,200,000, in form and substance reasonably satisfactory to
Landlord, written by Chicago Title Company or one or more
other title insurance companies reasonably satisfactory to
Landlord and insuring Landlord's ownership of fee title to the
Leased Property, including any new Improvements constructed by
Tenant; and
b) Builder's Risk Insurance.
Builder's Completed Value Risk and such other hazard insurance
as Landlord may require against all risks of physical loss
(including collapse and transit coverage, but not including
earthquake coverage) with deductibles not to exceed $500,000,
such insurance to be in amounts sufficient to cover the total
value of all Improvements under construction and to be
maintained in full force and effect at all times until
completion of the initial Construction Project or any
subsequent Construction Projects.
(v) Progress of Construction. Each Construction
Project which has commenced but not yet been completed shall be
progressing without any significant continuing interruption in a good
and workmanlike manner and substantially in accordance with Applicable
Laws and the requirements of this Lease, and Tenant shall be
diligently pursuing the correction of any significant defect in the
construction thereof.
(vi) Evidence of Costs and Expenses to be Reimbursed.
To the extent contemplated by the Construction Advance request forms
attached as Exhibit E and described in subparagraph i, or otherwise
reasonably required by Landlord at the time a Construction Advance is
to be made, Tenant shall have submitted invoices, requests for payment
from contractors and other evidence that all costs and expenses for
which Tenant requests reimbursement constitute actual costs and
expenses incurred by Tenant for a Construction Project.
(vii) No Event of Default. No Event of Default shall
have occurred and be continuing under this Lease.
(viii) No Sale of Landlord's Interest. No sale of
Landlord's interest in the Leased Property shall have occurred
pursuant to the Purchase Agreement.
(ix) Certificate of No Default and Other Matters.
Landlord shall have received, together with the notice requesting the
Construction Advance described in clause (i) above, a current
certificate of an officer of Tenant in the form included in Exhibit E.
Without limiting the foregoing, Landlord may decline to advance any
amount when Tenant is unable to truthfully certify, as contemplated in
Exhibit E, that no liens are being asserted (as defined in such
Certificate) against any part of or interest in the Leased Property
that in the aggregate secure or allegedly secure more that $500,000 of
claims by Potential Lien Claimants, regardless of whether any such
liens have caused an Event of Default to occur hereunder or are being
contested by Tenant as permitted by subparagraph o.
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(d) Reduction of Maximum Construction Allowance. So long
as the Maximum Construction Allowance exceeds the Outstanding Construction
Allowance, Tenant may reduce the Maximum Construction Allowance to any amount
in excess of the Outstanding Construction Allowance by delivering to Landlord a
notice in the form of Exhibit G hereto specifying the amount to which the
Maximum Construction Allowance is to be reduced. Such reduction shall be
effective on the date on which Landlord receives such notice, and once so
reduced, the Maximum Construction Allowance may not be increased by Tenant at
any time during the Term.
8. 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 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.
9. 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:
(i) manufacturing, assembly, warehousing
and laboratory-based research and development of semiconductor,
computer-related or other electronic products;
(ii) administrative and office space;
(iii) cafeteria, library, and other support
function uses that Tenant may provide to its employees; and
(iv) 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
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possession of any part thereof, except as set forth in subparagraph 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 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.
10. 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 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 December 31, 1995.
(b) Existing Contract. Except to the extent
required of Landlord under subparagraph 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 b) shall, for the purposes of this indemnity, be
deemed to be caused by the Misconduct
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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 or 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.
(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
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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
are 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 March 29, 1996, prepared by Sandis Humbar Jones,
Drawing No. 296123, which was delivered to Landlord at the request of Tenant.
The Leased Property is currently served by electric, gas, storm and sanitary
sewers, 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 (or will be after completion of the initial Construction Project) 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 after completion of the
initial Construction Project 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).
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(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.
(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 shall 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 materially lessened. Tenant shall
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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 t or 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 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
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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 t or 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 5, 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 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; provided, however, the
restrictions imposed upon Tenant by this subparagraph shall not be construed to
impair Tenant's right to undertake the initial or any subsequent Construction
Project permitted by other provisions of this Lease. 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
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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 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 5 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 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 5,
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 5 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 b.
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(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 5 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 (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 o or subparagraph 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
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accordance with subparagraph o or subparagraph 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:
(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
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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 ii and i, a certificate of a Responsible
Financial Officer of Tenant in substantially the form attached hereto
as Exhibit F: (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 ee;
(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 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 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.
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(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 Landlord to enable Landlord or Landlord's
Parent 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 Parent and any Person claiming through Landlord by reason
of a Permitted Transfer from and against) all Losses incurred by
Landlord or Landlord's Parent (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 or (C) the making of
Funding Advances, including Attorneys' Fees or other costs or expenses
incurred to evaluate lien releases and other information submitted by
Tenant with requests for Construction Advances or (D) any breach by
Tenant of its obligations hereunder with respect to Construction
Projects, or (E) any claims asserted by third parties and any
out-of-pocket costs incurred by Landlord in connection with or because
of Construction Projects, 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 Parent or any
Participant, except to the extent allowed by subparagraph 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 Parent 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.
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(ii) Tenant shall also pay (and indemnify and hold
harmless Landlord, Landlord's Parent 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 Parent 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
Parent or any Participant except to the extent allowed by subparagraph
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 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 THE 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 WERE 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 Parent 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 Parent, or such
Participant, as the case may be, additional amounts sufficient to
compensate Landlord's Parent 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 Parent of the
Participant, shall be conclusive and binding for all purposes, absent
clear and demonstrable error.
(iv) Landlord's Parent or any Participant may demand
additional payments (herein called "CAPITAL ADEQUACY CHARGES") if
Landlord's Parent 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 Parent 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 Parent 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
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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 Parent and any
Participants (net of their costs of maintaining required capital) that
would have existed absent such increase.
(v) Any amount to be paid to Landlord, Landlord's Parent
or any Indemnified Party under this subparagraph z shall be a
demand obligation owing by Tenant. Tenant's indemnities and
obligations under this subparagraph 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 iii or iv within six (6) months after Tenant or
any Applicable Purchaser purchases the Leased Property
pursuant to the Purchase Agreement.
(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 14 concerning environmental matters), but such coverage or
the amount thereof shall in no way limit such indemnifications. The policy
evidencing such insurance shall name Landlord as an additional insured. 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 (15) days notice to Landlord. Not less than
fifteen (15) 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.
(bb) Permitted Encumbrances. Except to the extent
expressly required of Landlord by subparagraph 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.
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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.
(cc) 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 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 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 and eighty days (180) 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 and eighty days (180)
after Tenant is notified of the applicable breach of the covenants
listed above in this subparagraph i, the written approval of the
governmental authority with primary jurisdiction
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over the violation and with respect to which no other governmental
authority asserting jurisdiction has claimed such plan is inadequate.
(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 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 i. Tenant grants 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; (3)
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 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 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, 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
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thereto, if any, to bring the Leased Property into compliance with
Environmental Laws or to correct any breach by Tenant of the covenants
listed above in subparagraph 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, and such additional data, instruments, documents, agreements or
other materials or information as Landlord may reasonably request.
(dd) [SUBPARAGRAPH INTENTIONALLY DELETED.]
(ee) 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 1.10 to
1.00. As used in this Paragraph ee, "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:
(1) issued by the United States of
America or any agency thereof and fully
guaranteed by the United States Government;
or
(2) issued by any Person rated at
least (i) A (in the case of securities with
an original maturity greater than one year)
or A-2 (in the case of securities with an
original maturity of one year or less) or the
equivalent thereof by Standard and Poor's
Corporation, or (ii) A-2 (in the case of
securities with an original maturity greater
than one year) or P-2 (in the case of
securities with an original maturity of one
year or less) or the equivalent thereof by
Moody's Investor Service, Inc.;
(c) unencumbered certificates of deposit or banker's
acceptances 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 encumbered by the Pledge
Agreement;
provided, however, any assets described in the preceding clauses (b),
(c) or (e) that have a maturity in excess of one (1) year from the
date of a determination of Quick Assets will be included in Quick
Assets only to the extent that they are both (1) readily marketable
and (2) reported, for purposes of this subparagraph 8.(ae), in an
amount not in excess of their fair
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market value, regardless of whether GAAP would permit reporting at a
higher historical cost. (In contrast, any assets described in the
preceding clauses (b), (c) or (e) with a maturity of less than one (1)
year from the date of a determination of Quick Assets will be included
in Quick Assets, for purposes of this subparagraph ee, as reported by
Tenant on its books and records in accordance with GAAP, regardless of
whether GAAP requires reporting at cost or at market value.) As used
in this subparagraph ee, "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.
(ii) Minimum Tangible Net Worth. Throughout the Term Tenant shall
maintain a Consolidated Tangible Net Worth of not less than $467,000,000. As
used in this subparagraph ee, "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 ee,
"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 prepaid
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.
(ff) 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 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.
(gg) 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
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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 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 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 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 interest 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 to terminate any Plan of Tenant or any ERISA
Affiliate of Tenant or to cause the appointment of a trustee or
receiver to administer any such Plan.
11. 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 of 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 such monetary
obligations), (ii) Tenant requests the action to be taken by Landlord (which
request must be specific 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 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.
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(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 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).
12. 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 and subordinate to the terms
hereof, (ii) such
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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 before consummation of a transfer of title to all or
part of Tenant's leasehold interest 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 b.
(c) Standard for Landlord's Consent to
Assignments and Certain Other Matters. Consents and approvals of Landlord
which are required by this Paragraph 12 will not be unreasonably withheld, but
Tenant acknowledges 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 the 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 further sale, assignment, transfer,
mortgage, pledge or hypothecation of this Lease or any interest of Tenant
hereunder.
13. Assignment by Landlord.
(a) Landlord's Assignment Generally. Subject to
subparagraph 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
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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.)
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14. 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 c below.
(b) Assumption of Defense.
(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 14 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 Attorney's 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 14 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 continues 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 14 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 14, 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 14; 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
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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 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 14 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 14 shall survive the termination or expiration
of this Lease. All obligations of Tenant under this Paragraph 14 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.
15. 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 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, 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 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
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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 subtenants 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.
16. 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 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 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.
(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
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governing such payment). Payments covered by this clause 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 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
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(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 ff and that is not
approved in advance by Landlord.
Notwithstanding the foregoing, any Default that could become an Event of
Default under clause 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 z and the environmental indemnity set forth in Paragraph
14) shall survive the payment of such amounts by Tenant to Landlord and the
conveyance of Landlord's interest in the Leased Property to Tenant.
(b) Remedies. Upon the occurrence of an Event of
Default which is not cured within any applicable period expressly permitted by
subparagraph 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 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, alterations, 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:
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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.
The "WORTH AT THE TIME OF AWARD" of the amounts referred to in
subparagraph a and subparagraph 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 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 i hereof. The
following shall not constitute a termination of Tenant's right to
possession:
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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 16 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 Law 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 provisions of this Lease to be performed by Tenant, or to any
other remedy allowed to Landlord under Applicable Law 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
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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.
17. 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.
18. 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 6
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.
19. 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.
20. 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,
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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 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.
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21. 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 II
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
With a copy to:
Banque Nationale de Paris, San Francisco
180 Montgomery Street
San Francisco, California 94104
Attention: Rafael Lumanlan
Telecopy: (415) 296-8954
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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.
(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.
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(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 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 Lease 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 Lease. 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 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
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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 THE "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 k nor
the provisions referencing this subparagraph on the title page of this
Lease and in the Purchase Agreement are intended to affect the
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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IN WITNESS WHEREOF, this Lease is hereby executed in multiple
originals as of the effective date above set forth.
"Landlord"
BNP LEASING CORPORATION
By: _____________________________
Name: Lloyd G. Cox
Title: Vice President
"Tenant"
CYPRESS SEMICONDUCTOR CORPORATION
By:
Name: ___________________
Title:___________________
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<PAGE> 73
Exhibit A
PROPERTY DESCRIPTION
Real Property in the City of San Jose, County of Santa Clara, State of
California, described as follows:
<PAGE> 74
Exhibit B
PERMITTED ENCUMBRANCES
This conveyance is subject to the following matters, but only to the
extent the same are still valid and in full force and effect:
<PAGE> 75
Exhibit C
LIST OF PERMITTED HAZARDOUS SUBSTANCES
It is anticipated that the following Hazardous Substances, and others
reasonably necessary for the use of the Leased Property in accordance with the
express terms and conditions of this Lease, will be used by Tenant at the
Leased Property:
Description C.A.S.#
<PAGE> 76
Exhibit D
EXISTING TRADE FIXTURES
1. Signs or sign panels including the name "Cypress Semiconductor" or
other registered trade names or trademarks of Tenant or Tenant's Affiliates.
<PAGE> 77
Exhibit E
DRAW REQUEST FORMS
________, 199__
BNP Leasing Corporation
c/o Banque Nationale de Paris
180 Montgomery Street
San Francisco, California 94104
Attention: Ms. _________________
Re: Construction Advance Request No. __________ by Cypress Semiconductor
Corporation
Ladies and Gentlemen:
Reference is made to the Lease Agreement between BNP Leasing
Corporation (herein "LANDLORD") and Cypress Semiconductor Corporation (herein
"CYPRESS") dated as of April __, 1996 (herein "THE LEASE"). Capitalized terms
defined in the Lease and used but not defined in this letter are intended to
have the meanings assigned to them in the Lease.
Cypress hereby makes request for a Construction Advance in the amount
of $________________ (herein the "CURRENT ADVANCE"). Included herewith are:
1. An Application and Certificate for Payment based on AIA Form
G702 (herein the "CONTRACTOR'S APPLICATION") from Cypress's
general contractor or construction manager, attached to which
is a schedule listing all subcontractors, suppliers and other
parties to whom the general contractor or construction manager
has or will make payments from the draw requested in the
Contractor's Application and the amounts to be paid to each
one. The Contractor's Application evidences an obligation
incurred by (and previously paid by) Cypress for construction
of Improvements and for which Cypress is entitled to
reimbursement from the Current Advance.
2. A list of any costs paid by Cypress, other than to the general
contractor or construction manager, for which Cypress is
entitled to reimbursement from the proceeds of the Current
Advance (herein the "OTHER COSTS LIST").
[NOTE: DRAW REQUESTS NEED INCLUDE PARAGRAPH'S MARKED BELOW WITH AN ASTERISK,
AND THE INVOICES OR OTHER ITEMS DESCRIBED IN SUCH PARAGRAPHS, ONLY IF AND TO
THE EXTENT THAT LANDLORD MAY REQUEST IT AFTER THE LEASE IS EXECUTED]
Exhibit E-Page 1
<PAGE> 78
*3. Invoices and requests for payments from the subcontractors and
others entitled to payment from the general contractor or
construction manager for construction and related work covered
by the Contractor's Application; excluding, however, invoices
or requests from some or all subcontractors and others that,
according to the Contractor's Application, are to be paid less
than $200,000 from the draw requested in Contractor's
Application. Such invoices and requests for payments are
consistent with the detail shown in the schedule of values
attached to the Contractor's Application.
*4. Invoices or other evidence reasonably requested by Landlord of
the costs (if any) included in the Other Costs List.
*5. A list of any "checks on hold" (i.e., payments withheld from
subcontractors or suppliers by Tenant's general contractor or
construction manager because of some defect or deficiency in
the payee's request for payment or in the work or materials
provided by the payee) in excess of $100,000.
6. An up-to-date list of the names and addresses of any
contractors or subcontractors that have actually filed a claim
of lien against the Leased Property, together with, to the
extent not already provided with a prior request for a
Construction Advance, a copy of the claim of lien filed.
7. A certification of an officer of Cypress as required by
Paragraph ix of the Lease.
We hereby confirm that Landlord will not be responsible for the
application of any funds advanced to Cypress or to any other party at our
request.
Sincerely,
Cypress Semiconductor Corporation
By:________________________________
Name:___________________________
Title:__________________________
cc: BNP Leasing Corporation
717 North Harwood Street
Suite 2630
Dallas, Texas 75201
Attention: Lloyd Cox
Clint Shouse
Thompson & Knight,
a Professional Corporation
3300 First City Center
1700 Pacific Avenue
Dallas, Texas 75201
Exhibit E-Page 2
<PAGE> 79
CONSTRUCTION ADVANCE CERTIFICATE
Pursuant to Section ix of the Lease dated April __, 1996 (the "LEASE") between
Cypress Semiconductor Corporation ("CYPRESS") and BNP Leasing Corporation
("LANDLORD"), Cypress does hereby represent, warrant and certify to Landlord in
connection with Cypress's request for Construction Advance No. __________ that:
a) no Event of Default has occurred and is continuing,
b) the representations and warranties of Cypress contained in the
Lease are true and correct in all material respects on and as of the date
hereof as though made on and as of the date hereof, subject only to the
following exceptions:
[LIST EXCEPTIONS HERE, OR IF THERE ARE NO EXCEPTIONS, INSERT "NONE"]
c) each Construction Project which has commenced but not yet been
completed is progressing without any significant continuing interruption in a
good and workmanlike manner and substantially in accordance with the
requirements of the Lease and all Applicable Laws and Cypress is diligently
pursuing the correction of any significant defect in such construction,
d) all costs and expenses for which Cypress is requesting
reimbursement by the Construction Advance referenced above constitute actual
costs and expenses incurred by Cypress for a Construction Project, and
e) to the knowledge of Cypress, liens (if any) now being asserted
against the Leased Property by Potential Lien Claimants do not in the aggregate
secure or allegedly secure more that $500,000 of claims. (As used in this
certificate a lien will be considered as "being asserted" if a claim of lien
relating thereto shall have been recorded and not discharged by payment or
settlement or removed by statutory bond.)
Capitalized terms used herein which are defined in the Lease but not in this
Certificate shall have the meanings assigned to them in the Lease.
In witness whereof, this Certificate is executed by an officer of Cypress
Semiconductor Corporation as of ______________, 19___.
Cypress Semiconductor Corporation
By:________________________________
Name:___________________________
Title:__________________________
Exhibit E-Page 3
<PAGE> 80
LIST OF LIENS FOR WHICH A CLAIM OF LIEN HAS ACTUALLY BEEN FILED
(Construction Advance Request No. ________)
Liens for which a claim of lien has actually been filed are as follows [state
"NONE" if there are none]:
1.
2.
3.
Exhibit E-Page 4
<PAGE> 81
OTHER COSTS LIST
(Construction Advance Request No. ________)
Costs paid - other than to Cypress's general contractor or construction manager
- - by Cypress and for which Cypress is entitled to reimbursement from the
Current Advance being requested are as follows [state "NONE" if there are
none]:
1.
2.
3.
Exhibit E-Page 5
<PAGE> 82
Exhibit F
FINANCIAL COVENANT COMPLIANCE CERTIFICATE
BNP Leasing Corporation
c/o Banque Nationale de Paris, San Francisco
180 Montgomery Street
San Francisco, California 94104
Attention: Rafael Lumanlan
Re: Lease Agreement between BNP Leasing and Cypress Semiconductor
Gentlemen:
I, the undersigned, the [chief financial officer, controller,
treasurer or the assistant treasurer] of Cypress Semiconductor Corporation (the
"TENANT"), do hereby certify, represent and warrant that:
1. This Certificate is furnished pursuant to subparagraph iii of
that certain Lease Agreement dated as of April __, 1996 (the "LEASE AGREEMENT,"
the terms defined therein being used herein as therein defined) between the
Tenant and you.
2. Annex 1 attached hereto sets forth financial data and
computations evidencing the Tenant's compliance with certain covenants of the
Lease Agreement, all of which data and computations are complete, true and
correct.
3. To the Knowledge of Tenant (as defined in the Lease) no
Default or Event of Default under the Lease Agreement has occurred and is
continuing.
4. The representations of Tenant set forth in the Lease Agreement
are true and correct in all material respects as of the date hereof as though
made on and as of the date hereof.
Executed this _____ day of ______________, 19___.
______________________________
Name:_________________________
Title:________________________
<PAGE> 83
Annex 1 To Compliance Certificate
For the _________________ Ended ________________, 19___
<TABLE>
<S> <C> <C>
I. PARAGRAPH i: Quick Ratio
------------------------
A. Unencumbered Cash and
other "Quick Assets" as defined in
Paragraph i of the Lease: $_____________
-----------
B. "Current Liabilities" as defined in
Paragraph i of the Lease: $_____________
-----------
C. Ratio of A to B: _____ to 1.00
F. Minimum ratio computed as provided in
Paragraph i of the Lease: 1.10 to 1.00
-----------
II. PARAGRAPH 0: Minimum Tangible Net Worth
-----------
A. Reported stockholders equity: $_____________
B. "Intangible Assets" as
defined in Paragraph 0
-----------
of the Lease: $_____________
D. Consolidated Tangible Net Worth
(A - B): $_____________
E. Minimum computed as
provided in Paragraph 0
-----------
of the Lease: $467,000,000
</TABLE>
Exhibit F-Page 2
<PAGE> 84
Exhibit G
NOTICE OF REDUCTION OF MAXIMUM CONSTRUCTION ALLOWANCE
BNP Leasing Corporation
c/o Banque Nationale de Paris, San Francisco
180 Montgomery Street
San Francisco, California 94104
Attention: Rafael C. Lumanlan
Re: Lease Agreement dated April __, 1996, between Cypress
Semiconductor Corporation, as tenant, and BNP Leasing
Corporation, as landlord (the "Lease")
Gentlemen:
Capitalized terms used in this letter are intended to have the
meanings assigned to them in the Lease. This letter constitutes notice to you
that the Maximum Construction Allowance under the Lease shall be reduced to
$__________________(the "Reduced Maximum Construction Allowance"), effective on
the date you receive this notice (the "Reduction Date"); provided that in no
event shall the Reduced Maximum Construction Allowance be less than the
Outstanding Construction Allowance in effect on the Reduction Date.
Executed this _____ day of ______________, 19___.
CYPRESS SEMICONDUCTOR CORPORATION
Name:_________________________
Title:________________________
<PAGE> 85
EXECUTION
CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT (this "AGREEMENT") made as of April 12, 1996
among CYPRESS SEMICONDUCTOR CORPORATION, a California corporation ("CUSTOMER"),
BANQUE NATIONALE DE PARIS, New York Branch (with its successors duly appointed
hereunder, herein referred to as "CUSTODIAN"), and BNP LEASING CORPORATION
("SECURED PARTY").
W I T N E S E T H:
WHEREAS, Customer has established a custodial account, account number
826529 styled "Cypress Semiconductor A/C #2 held for the benefit of BNP Leasing
Corporation" and a related custodial cash account number 201678-002-69
(collectively, the "CUSTODIAL ACCOUNT"), to be held by Custodian on the terms
and conditions set forth herein; and
WHEREAS, pursuant to a Pledge and Security Agreement of even date
herewith between Customer and Secured Party (the "SECURITY AGREEMENT"), a true
and correct copy of which is attached hereto as Exhibit A, Customer has pledged
to Secured Party on the terms set forth in the Security Agreement, the
Custodial Account, all Treasury Securities and funds from time to time on
deposit in the Custodial Account or otherwise designated by Customer to be held
by Custodian subject to the pledge and security interest created by the
Security Agreement, all proceeds of maturity, collections, income,
replacements, substitutions, reinvestments, distributions and claims with
respect thereto and all proceeds of the foregoing, and all of Customer's right,
title and interest in to and under this Agreement (collectively, the
"COLLATERAL"); and
WHEREAS, Custodian has agreed to hold the Collateral on the terms set
forth herein and Customer and Secured Party wish to notify Custodian of the
pledge by Customer to Secured Party of the Collateral and the grant by Customer
to Secured Party of a security interest therein and direct Custodian to
identify such pledge and security interest on its books and records;
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<PAGE> 86
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, Customer, Custodian and Secured Party agree as follows:
I. DEFINITIONS
Section 1.1. Definitions. As used herein, the terms "Agreement",
"Customer", "Custodian", "Secured Party", "Custodial Account", "Collateral" and
"Security Agreement" shall have the meanings indicated above, and the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"Authorized Person" shall mean (i) with respect to Customer, any
person duly authorized by Customer in writing (certified by Customer's
corporate secretary) to give Written Instructions on behalf of Customer which
shall include the persons listed on Exhibit B hereto, and (ii) with respect to
Secured Party, any person duly authorized by Secured Party in writing to give
Written Instructions on behalf of Secured Party which shall include, without
limitation, the persons listed on Exhibit C hereto.
"Business Day" means any day that is (i) not a Saturday, Sunday or day
on which commercial banks are generally closed or required to be closed in San
Francisco, California or New York, New York, and (ii) 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 (i).
"CFR" means the United States Code of Federal Regulations, as from
time to time amended.
"Code" means the Uniform Commercial Code as adopted in the State of
New York.
"Execution Affidavit" means an affidavit in the form of Exhibit D
attached hereto, duly executed under oath by an Authorized Person of Secured
Party, attesting to the foreclosure of Secured Party's security interest in all
or any part of the Collateral.
"Foreclosure Event" has the meaning given it in the Pledge Agreement.
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<PAGE> 87
"Market Value" means with respect to the Collateral on any Valuation
Date, a dollar value determined as follows:
(1) cash shall be valued at its face amount on such Valuation
Date; and
(2) a Treasury Security shall be valued by multiplying the
Principal Balance thereof on such Valuation Date by the
closing bid price therefor as established pursuant to
Custodian's standard and customary pricing sources which it
believes to be reliable.
"Participant" means any Participant under the Lease described in the
Pledge Agreement designated as such to Custodian by Secured Party from time to
time.
"Release Period" means each period beginning on the last regularly
scheduled Valuation Date occurring in a calendar month and continuing for five
(5) consecutive Business Days.
"Treasury Securities" shall mean uncertificated, direct, noncallable
debt obligations of the United States of America maturing within three (3)
years of the date of pledge to Secured Party constituting Treasury bonds,
notes, certificates of indebtedness or bills issued under the Second Liberty
Bond Act, as amended, in the form of entry made on the records of the Federal
Reserve Bank of New York as prescribed under 31 CFR.
"Valuation Date" means any of the following dates:
(1) the first Business Day of each calendar month and the
fifteenth day of each calendar month (or if such day is not a
Business Day, the immediately following Business Day); and
(2) any other Business Day on which Customer or Secured Party
requests a valuation of the Collateral by a notice sent to the
other and to the Custodian, provided such designated day must
be at least one (1) Business Day after the date the Custodian
receives the notice unless Custodian is then willing to
consent to the designation of the date of receipt as a
Valuation Date.
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<PAGE> 88
"Written Instructions" shall mean a written notice actually received
by Custodian which Custodian reasonably believes to be from an Authorized
Person.
Section 1.2. Schedules and Exhibits. All schedules and exhibits
attached to this Agreement are a part hereof for all purposes.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document also refer to and
include all valid renewals, extensions, amendments, modifications, supplements
or restatements of any such agreement, instrument or document, provided that
nothing contained in this Section shall be construed to authorize any Person to
execute or enter into any such renewal, extension, amendment, modification,
supplement or restatement.
Section 1.4 References and Titles. All references in this
Agreement to Exhibits, Articles, Sections, subsections, and other subdivisions
refer to the Exhibits, Articles, Sections, subsections and other subdivisions
of this Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. The words "this Agreement", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited. The phrases "this Section" and "this subsection" and similar phrases
refer only to the Sections or subsections hereof in which the phrase occurs.
The word "or" is not exclusive, and the word "including" (in all of its forms)
means "including without limitation". Pronouns in masculine, feminine and
neuter gender shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa unless
the context otherwise requires.
II. APPOINTMENT OF CUSTODIAN
Section 2.1. Appointment of Custodian. Customer hereby
constitutes and appoints Custodian as custodian of the Collateral and Secured
Party hereby appoints custodian as its agent and bailee with respect to the
Collateral to
5
<PAGE> 89
act solely and with the sole responsibility in accordance with the terms
of this Agreement. Attached hereto as Exhibit B is a Certificate of
the Corporate Secretary of Customer certifying that Customer is authorized to
open the Custodial Account and setting forth the identity and authority of the
initial Authorized Persons of Customer and the officers of Customer authorized
to execute and deliver this Agreement on behalf of Customer. Attached hereto
as Exhibit C is an Officers' Certificate of Secured Party setting forth the
identity and authority of the initial Authorized Persons of Secured Party and
the officers of Secured Party authorized to execute and deliver this Agreement
on behalf of Secured Party. Custodian may rely on such Certificates as
conclusive evidence of the authority of such Authorized Persons and may
consider such Certificates to be in full force and effect until receipt by
Custodian of written designation of additional or substitute Authorized Persons
from Customer or Secured Party, as the case may be.
Section 2.2. Acceptance of Appointment. Custodian hereby accepts
appointment as custodian of the Collateral and agrees to perform the duties
thereof as hereinafter set forth with respect to the Collateral and (i) to act
as custodian solely in accordance with the terms of this Agreement and (ii) to
act as agent and bailee of Secured Party solely in accordance with the terms of
this Agreement. Custodian shall not have any obligations in respect of the
Collateral except as specifically set forth in this Agreement or in a separate
written agreement among the parties entered into after the date hereof.
III. CUSTODY OF PROPERTY
Section 3.1. Custodial Account.
(a) Custodian shall credit and hold the Collateral in the Custodial
Account, separate and apart from all other property and funds of Customer and
all other Persons, and no other property or funds shall be deposited in the
Custodial Account. Custodian shall hold all Treasury Securities deposited in
the Custodial Account in Custodian's name on the books of the Federal Reserve
Bank of New York; provided that the books and records of Custodian shall
reflect that all Treasury Securities deposited in the Custodial Account are
owned by Customer, subject to a pledge and security interest in favor of
Secured Party.
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<PAGE> 90
(b) Custodian shall only release Collateral from the Custodial
Account as provided in Section 3.3 or pursuant to an Execution Affidavit.
Section 3.2. Action by Custodian without Written Instructions.
Unless otherwise instructed to the contrary by Written Instructions from
Customer and Secured Party, Custodian shall with respect to all Collateral:
(a) Credit the Custodial Account for all dividends and
interest earned on all the Collateral;
(b) Present for payment and collect the amount payable
upon all Treasury Securities, which are part of the Collateral, that
may mature, be redeemed or retired, or otherwise become payable;
(c) Execute, as custodian, any necessary declaration or
certificates of ownership with respect to the Collateral under the
federal tax laws or the laws or regulations of any other taxing
authority now or hereafter in effect; and
(d) Hold for the account of Customer, subject to a pledge
and security interest in favor of Secured Party pursuant to the
Security Agreement, all securities or other rights issued with respect
to any Collateral.
Unless instructed otherwise, by Written Instructions from Customer and Secured
Party, Custodian will credit the proceeds of sales, redemptions, collections,
and other receipts, and dividend and interest income from the Collateral to the
Custodial Account in accordance with Custodian's standard procedures and the
other provisions of this Agreement.
Section 3.3. Action by Custodian upon Written Instructions from
Customer. Upon the receipt of Written Instructions from Customer alone as
provided below in this Section 3.3, but not otherwise, Custodian shall:
(a) Deposit funds delivered to Custodian by Customer in
the Custodial Account for the purchase of Treasury Securities
concurrently with and in accordance with the delivery of a Written
Instruction described in Section 3.3(b);
7
<PAGE> 91
(b) Purchase Treasury Securities with proceeds of matured
Treasury Securities or other cash that is part of the Collateral or
otherwise delivered by Customer to Custodian in accordance with a
Written Instruction, and make payment therefor on behalf of Customer
and deposit such additional Treasury Securities in the Custodial
Account; provided that (except as otherwise provided in Section 4.2)
such purchase and deposit shall be made only if (i) Custodian shall
have received Written Instructions from Customer in the form of
Exhibit E; (ii) Custodian shall have itself purchased such Treasury
Securities on behalf of Customer for full market value from the issuer
of the Treasury Securities or from a seller not a party hereto
selected by Custodian and shall have made payment therefor in full in
immediately available funds; and (iii) upon making such deposit
Custodian shall be able to and shall (and Custodian hereby agrees to)
execute and deliver to Secured Party a Certificate in the form of
Exhibit F and all statements to be made therein shall be true and
correct;
(c) During a Release Period, Substitute new Treasury
Securities (in this section called the "New Treasury Securities") for
Treasury Securities that are part of the Collateral (in this section
called the "Existing Treasury Securities"); provided that such
substitution shall be made only if (i) Custodian shall have received
Written Instructions from Customer in the form of Exhibit G; (ii)
Custodian shall have itself purchased such New Treasury Securities on
behalf of Customer for full market value from the issuer of the New
Treasury Securities or from a seller not a party hereto selected by
Custodian and shall have made payment therefor in full in immediately
available funds delivered to Custodian by Customer or resulting from
the liquidation of the Existing Securities, and (iii) the Market Value
of the New Treasury Securities equals or exceeds the Market Value of
the Existing Treasury Securities or additional cash equal to the
amount of any shortfall is delivered to Custodian by Customer for
deposit in the Custodial Account; in each case Market Value shall be
determined by Custodian based on the closing "bid" prices quoted on
the Business Day preceding the Business Day on which such Written
Instructions are to be executed, and (iv) upon making such
substitution Custodian shall be able to and shall (and Custodian
hereby agrees to) execute and deliver to Secured Party a Certificate
in the form of Exhibit H and all statements to be made therein shall
be true and correct;
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<PAGE> 92
(d) Release Collateral from the Custodial Account to Customer
without replacing it; provided that such a release shall be made only
if (i) Custodian shall have received Written Instructions from
Customer in the form of Exhibit I with the attachments required by the
terms thereof and (ii) the Market Value of the Collateral so released
is no greater than the amount by which (x) the Market Value of all
Collateral exceeds (y) 102% of the Minimum Collateral Value in each
case calculated as of the most recent Valuation Date.
(e) All Written Instructions regarding the purchase of
Treasury Securities shall be delivered to Custodian at least one
Business Day prior to the day on which such purchase is to be made.
(f) In complying with instructions for delivery of
eligible transactions, Custodian will make deliveries through the
Federal Reserve System, pursuant to Subpart O of the Treasury
Department Circular #300 (31 CFR Part 306), and operating circulars of
the Federal Reserve Bank of New York, both as amended from time to
time.
(g) Custodian shall be under no duty to Customer to take
any action with respect to any property held in any Custodial Account
except to the extent of any properly issued Written Instructions by
Customer.
(h) The parties hereto agree that the mere agreement of
the Secured Party and the Custodian to permit or cause the
substitution or release of Collateral if certain conditions are
satisfied as provided herein shall not constitute a termination of
Secured Party's security interest in any particular Collateral.
Section 3.4. Action by Custodian upon Written Instructions from
Customer and Secured Party. Custodian shall execute and deliver to such
persons as may be designated in any Written Instructions signed by both
Customer and Secured Party all notices, consents, authorizations, requests or
other announcements affecting or relating to the Collateral and any other
instruments whereby the authority of Customer as owner or Secured Party as
pledgee of any Collateral held hereunder may be exercised.
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<PAGE> 93
Section 3.5. Use of Cash Balances. Any cash balances in the
Custodial Account may be applied to the purchase price of additional Treasury
Securities purchased pursuant to Section 3.3(b), and any excess cash resulting
from interest paid on Treasury Securities or a sale of Treasury Securities
constituting Collateral shall be deposited in the Custodial Account and shall
be eligible to be released pursuant to Section 3.3(d).
IV. INVESTMENT OF FUNDS
Section 4.1. Management of Investments. Subject to Section
6.2(i), and subject to compliance by Customer with the terms of Article III,
Customer acting alone and without any prior written consent of Secured Party,
shall have the power as between Customer and Custodian, to manage the
investment of the Collateral as provided in Section 3.3 so long as Custodian
shall not have received written notice from Secured Party that a Foreclosure
Event has occurred and is continuing under the Security Agreement; provided,
however, that notwithstanding the occurrence or continuance of any such
Foreclosure Event or the delivery of any such notice by Secured Party, Customer
shall be permitted to exercise its rights under Sections 3.3(a), 3.3(b) and
3.3(c) hereof, subject, in the case of the purchase of new Treasury Securities,
whether or not in substitution of existing Collateral, to the limitation that
Customer shall instruct Custodian to purchase and deposit in the Custodial
Account Treasury Securities having a maturity of ninety (90) days or less from
the date of purchase thereof. Secured Party hereby agrees to deliver to
Custodian a rescission of any notice of any Foreclosure Event previously
delivered to Custodian promptly upon the cessation of such Foreclosure Event,
provided Customer notifies Secured Party of the cessation and with such notice
provides evidence of the cessation reasonably satisfactory to Secured Party.
Except as expressly provided herein, the Custodian is not under any duty to
supervise the investments or management of the Collateral. Custodian is not
under any duty to advise or make any recommendations in respect thereof.
Section 4.2. Investments by Custodian. Notwithstanding Section
3.3 or the foregoing provisions of Section 4.1, in the event that Custodian
does not receive Written Instructions as to the investment of cash balances
held by it one (1) Business Day in the Custodial Account, Custodian shall
invest such cash balances in Treasury Securities having a maturity of ninety
(90)
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<PAGE> 94
days from the date of purchase, in the name of Custodian for the benefit of
Customer and subject to the Lien of Secured Party.
Section 4.3. No Custodian Liability. It is understood and agreed
by the parties that while Custodian will perform certain ministerial and
custodial duties with respect to investment of the Collateral, such duties will
be performed in the normal course by officers and other employees of Custodian
who may be unfamiliar with investment management and that such duties will not
include the exercise of any discretionary authority or other authority to
manage and control the Collateral. Subject to Section 7.3 below, Custodian
shall have no liability or responsibility to Customer for acting without
question on Written Instructions of Customer and/or Secured Party as provided
hereunder, or for failure to act in the absence of Written Instruction from
Customer and Secured Party with respect to investment of the Collateral except
as provided otherwise in Sections 3.2 and 4.2. The parties hereto agree that
the Custodian does not have any obligation to extend credit, grant financial
accommodation or otherwise advance its own monies to the parties hereto.
V. VALUATION OF COLLATERAL; REPORTS AND ACCOUNTINGS
BY CUSTODIAN
Section 5.1. Valuation of Collateral.
(a) On each Valuation Date, the Custodian shall determine
the Market Value of the Collateral as of such Valuation Date; and
(b) On each Valuation Date, the Custodian shall:
(1) prepare a valuation report stating the Market Value
of the Collateral as of such Valuation Date and the
maturity of the Treasury Securities that are part of
the Collateral; and
(2) deliver a copy of the valuation report by facsimile
transmission, no later than two (2) Business Days
after such Valuation Date, to Customer and Secured
Party and to any Participants designated in writing
by Secured Party.
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<PAGE> 95
Section 5.2. Maintenance of Reports; Accountings. Custodian shall
maintain accurate and detailed records and accounts of all investments,
receipts, disbursements and other transactions hereunder; and all accounts,
books and records relating thereto shall be open, upon reasonable notice, at
all reasonable times to inspection and audit by such person or persons as
Customer or Secured Party may designate, subject to compliance with the
Custodian's obligation of confidentiality with respect to its other customers
and other assets of the Customer maintained with the Custodian. Custodian
shall submit to the auditors or other representatives of Customer or Secured
Party such valuations, reports or other information as they may reasonably
require upon receipt of reasonable notice. Custodian shall establish and
maintain for operational and account purposes such other accounts or records as
Customer and Custodian may from time to time consider necessary under this
Agreement.
Section 5.3. Statements.
(a) Custodian shall furnish Customer with monthly written
statements of transactions and statements of property held for the
account of Customer under this Agreement with copies thereof to
Secured Party. Custodian shall furnish Customer with such other
reports as may be agreed upon from time to time with copies thereof to
Secured Party and any Participant designated in writing by Secured
Party. Customer and Secured Party may approve such accounting by
written notice of approval delivered to Custodian or by failure to
express objection to such accounting in writing delivered to Custodian
within thirty (30) days from the date upon which the accounting was
delivered to Customer and Secured Party. Custodian agrees to provide
Customer with regular monthly reports of transactions and holdings in
the Custodial Account or at such more frequent intervals as Customer
and Custodian may mutually agree.
(b) In addition, Customer understands that Customer has
the option to elect to participate in Custodian's Remote Access
Service (an on-line system) which provides Customer, on a daily basis,
with the ability to view on-line or to print on hard copy of the
following: (i) all transactions involving the delivery in and out of
Custodian securities on a free or payment basis; (ii) payments of
principal and interest or dividends; (iii) pending transactions and
fails; and (iv) schedules of Custodian holdings plus the market
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<PAGE> 96
values thereof. Custodian has furnished Customer with a separate fee
schedule applicable to the Remote Access Service and, in the event
Customer subscribes thereto, Customer shall be fully responsible for
the security of Customer's connecting terminal, access thereto and the
proper and authorized use thereof and Customer's initiation and
application of continuing effective safeguards. In this connection,
except for any instance involving the negligence or misconduct of
Custodian or its officers, agents or employees, Customer agrees to
defend, indemnify Custodian and to hold Custodian harmless from and
against any and all liabilities, losses, damages, costs, including
attorneys' fees and every other expense of every nature incurred by
Custodian as a result of any improper or unauthorized use of such
terminal by Customer or by others on Customer's premises. To the
extent that the Remote Access Service shall include market values of
Customer's Custodian holdings, Customer acknowledges receipt from
Custodian of Custodian's advice that Custodian now obtains and will in
the future obtain such information from outside sources which
Custodian deems to be reliable and confirms that Custodian does not
verify nor represent or warrants either the accuracy or the
completeness of any such information furnished or transacted by or
through the Remote Access Service.
Section 5.4. Fees and Expenses. All costs and expenses incurred
by Custodian in connection with the Custodial Account, and all fees of
Custodian as may be agreed upon in writing from time to time between Customer
and Custodian (or in the absence of such an agreement, as are consistent with
Custodian's standard fee schedules for services required of Custodian
hereunder), shall be paid by Customer. Each of the parties hereto acknowledge
and agree that all such costs and expenses and all such fees are the sole
obligation of Customer and that in no event shall any such cost, charge or
expense due hereunder be or become an obligation of Secured Party or give rise
to a Lien against the Collateral. Custodian may charge any account of
Customer's in Custodian's possession, other than the Custodial Account and the
account created under the Custodial Agreement dated as of September 1, 1994
among the parties hereto, for such costs, expenses and fees. Custodian is not
obligated to effect any transaction or make any payment in connection therewith
unless there are sufficient available funds on deposit in the Custodial Account
or funds have otherwise been made available to Custodian to Custodian's
satisfaction. The amount by which
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<PAGE> 97
payments made by Custodian on Customer's behalf with respect to cash or
Treasury Securities in, or to be received for, the Custodial Account, or with
respect to other transactions pursuant to this Agreement, exceed available
funds and result in an account overdraft shall be deemed a loan from Custodian
to Customer in the amount of such overdraft, payable on demand and bearing
interest at the rate customarily charged by Custodian on similar loans, to the
extent permitted by applicable law. Customer confirms that all such loans
shall be based on Custodian's sole determination to make the underlying advance
in each case.
Section 5.5. Waiver of Right of Set-Off. Custodian hereby agrees
that all contractual, common law and other rights of set-off that Custodian may
have against the Collateral are hereby subordinated to any and all rights of
Secured Party in and to the Collateral. Subject to the foregoing
subordination, in order to secure the payment and performance of all Customer's
liabilities to Custodian at any time outstanding, Customer hereby grants
Custodian a lien and right of set-off as to the balance in any of Customer's
non-custodial accounts with Custodian, from time to time, and Custodian may, at
any time or from time to time, at Custodian's sole option and without notice,
appropriate and apply toward the payment of Customer's liabilities to
Custodian, the balance of each such account and/or take such other action(s) or
exercise any other options, powers and rights which Custodian now or hereafter
has as a secured party under the Code or any other applicable law. The phrase
"Customer's liabilities to Custodian" shall include all Customer's liabilities
arising hereunder, including, but not limited to loans, other advances,
interest, fees, charges, expenses and attorneys' fees.
Section 5.6. Authority Granted to Custodian by Customer.
Custodian is authorized and empowered in Customer's name and on Customer's
behalf to execute any certificates of ownership or other reports, declarations
or affidavits which Custodian is or may hereafter be required to execute and
furnish under any regulation of the Internal Revenue Service, or other
authority of the United States, to include, but not limited to non-resident tax
withholding and reporting, so far as the same are required in connection with
any property which is now or may hereafter be held in the Custodial Account.
Customer agrees to notify Custodian immediately in writing of any material
change in Customer's status which may impact on any such certificates, reports
or other required documents or on the contents thereof.
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VI. IDENTIFICATION OF PLEDGE AND SECURITY INTEREST
ON BOOKS AND RECORDS
Section 6.1. Identification of Pledge and Security Interest.
Secured Party and Customer hereby irrevocably order and direct Custodian to
identify on its books and records the ownership of the Collateral by Customer
and the pledge of, and the grant of the security interest in, the Collateral to
Secured Party.
Section 6.2. Representations, Warranties and Covenants of
Custodian. Custodian hereby represents, warrants, covenants and confirms to
Secured Party and Customer the following:
(a) Existence and Qualification. Custodian is (1) the
New York Branch of a French banking corporation, (2) a bank which is a
member of the Federal Reserve Bank of New York, and (3) eligible to
maintain custodial book entry accounts with the Federal Reserve Bank
of New York under Sections 306.117 through 306.122 of Title 31 of the
CFR. Custodian is a bank which, in the ordinary course of its
business, maintains security accounts for its customers, is acting in
that capacity in connection with the transactions contemplated by this
Agreement and is not a clearing corporation, as such term is used in
8.313(a) of the Code as in effect on the date hereof.
(b) Nature of Business. Custodian regularly accepts
Treasury Securities in the normal course of its business as an
authorized custodial agent, bailee, representative, nominee and
financial intermediary for its customers, and maintains in the
ordinary course of its business accounts in the names of such
customers, which accounts reflect the ownership interest of such
customers in the Treasury Securities held by Custodian in such
capacity.
(c) Custodial Status; Enforceability. Collateral is and
shall be held by Custodian as custodian for the benefit of Customer
and as agent and bailee of Secured Party pursuant to the terms hereof.
Custodian has duly taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement and to authorize
its participation in the transactions contemplated hereby and the
performance of its obligations hereunder. This
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<PAGE> 99
Agreement constitutes the valid, legal and binding agreement of
Custodian, enforceable in accordance with its terms.
(d) Nature of Collateral. Any Treasury Securities which
constitute the Collateral are registered in the name of Custodian and
for the account of Custodian in its capacity as authorized custodial
agent, bailee, representative, nominee and financial intermediary for
others, by means of an appropriate book entry made in accordance with
306.118(b) of Title 31 of the CFR (the "Fed Entry") on the books and
records maintained by the Federal Reserve Bank of New York with
respect to Treasury Securities pursuant to Section 306.117(a) of Title
31 of the CFR, and Custodian hereby represents, acknowledges, warrants
and confirms that effective as of the date hereof, pursuant to Section
306.118(b) of Title 31 of the CFR, it is holding any Collateral in the
Custodial Account as authorized custodial agent, bailee,
representative, nominee and financial intermediary for Customer and
Secured Party. Notwithstanding anything contained in this Agreement,
the Custodian does not make any representations as to the validity,
the value or genuineness of the Collateral purchased by Custodian in
accordance with this Agreement and makes no guarantee with respect to
the payment of interest or principal thereunder. Custodian has not
instructed the Federal Reserve Bank of New York to transfer any of the
Collateral to any other account maintained by the Federal Reserve Bank
of New York for Custodian. Except as contemplated by this Agreement
(including Sections 3.2, 3.3 and 4.2), Custodian will not cause or
permit to occur any change, alteration or modification of any kind in
the form of the Collateral from Treasury Securities including, without
limitation, any conversion of the Collateral or any part thereof to
certificated, bearer or any other form not expressly permitted by this
Agreement.
(e) Care of Collateral. Custodian shall give the
securities that come into Custodian's possession under this
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<PAGE> 100
Agreement the same physical care and safeguards as are afforded
similar property owned by Custodian; provided, however, Custodian's
responsibility hereunder is limited to losses occasioned directly by
the gross negligence or willful misconduct of Custodian's officers,
agents or employees, or by robbery, burglary or theft (while
securities are in Custodian's physical possession), to the extent of
the market value of the securities at the date of the discovery of
such loss. With respect to any securities which Custodian delivers
for Customer to a third party, and with respect to such delivery,
Custodian shall be deemed no more than an "intermediary" as defined in
Section 8-306(3) of the Code. Custodian may, at Custodian's option,
make arrangements for insuring Custodian against loss from any cause,
but Custodian shall not be under any obligation to insure for
Customer's benefit.
(f) Identification of Collateral. From the time of the
Fed Entry for each Treasury Security that is part of the Collateral
such Treasury Security has been identified on the appropriate books
and records maintained by Custodian with respect to Treasury
Securities as belonging to Customer and such Treasury Security has
been identified on such books and records as being subject to the Lien
granted to Secured Party pursuant to the Security Agreement. All
Collateral is and will be held in the Custodial Account and the books
and records of Custodian do and will during the term of this Agreement
reflect the pledge and security interest of Secured Party therein.
The Collateral has not been identified on such books and records of
Custodian as belonging to any other Person or as subject to any other
pledge, security interest or lien, since the Fed Entry was made with
respect to the Collateral.
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(g) Ownership and Liens. Custodian has not received,
acknowledged nor accepted any notice, order, registration or other
document which purports to constitute or suggests in any way the
existence of any pledge, claim, security interest, lien, encumbrance
or adverse claim of any kind with respect to the Collateral or any
part thereof, other than the pledge and security interest in favor of
Secured Party. Custodian has not been served with legal process with
respect to the Collateral except for the notice from Secured Party
with respect to the security interest of Secured Party therein.
Custodian has not sold, transferred, assigned, pledged or granted, and
after the date hereof Custodian will not, except as specified in
Article III, or Section 4.1 or 4.2 above and Section 6.2(i) below,
sell, transfer, assign, pledge or grant, a security interest in the
Collateral, or any part thereof, to any person, partnership,
corporation, association, trust, entity or governmental agency,
department or instrumentality, in each case, of any kind, including,
without limitation, the Federal Reserve Bank of New York, any other
Federal Reserve Bank, the United States Treasury or any other
transferee or pledgee eligible to maintain a book-entry account in its
name with a Federal Reserve Bank.
(h) Further Assurances. Subject to the provisions of
Section 6.2(i), Custodian will take any and all steps available to it
and necessary or appropriate to maintain custody of the Collateral in
the name of Custodian for the benefit of Customer and subject to the
Lien of Secured Party under the Security Agreement. Custodian will
promptly and fully respond to any and all inquiries and requests for
data submitted by Secured Party or Customer with respect to the
Collateral or any matter relating thereto.
(i) Transfer of Ownership to Person Designated by Secured
Party. Notwithstanding the provisions of Section 6.2 (a) through (h)
above, as authorized custodial agent, bailee, representative, nominee
and financial intermediary for Customer and Secured Party,
respectively, with respect to the Collateral, upon receipt of an
Execution Affidavit, Custodian will immediately register the transfer
of ownership of the Collateral described in such Execution Affidavit
on the appropriate books and records maintained by it to the person or
entity designated by Secured Party (which may be Secured Party), such
that such Collateral is identified on such books and records as
belonging to the
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<PAGE> 102
person or entity so designated by Secured Party. Notwithstanding any
other provision to the contrary in any Transaction Document, upon and
after such transfer, all prior and future directions, orders and
instructions of Customer with respect to the Collateral, including its
Written Instructions, described in such Execution Affidavit shall be
disregarded and Custodian shall accept and act upon instructions,
orders and directions relating to such Collateral solely from Secured
Party or the person or entity so designated by it in writing. The
Customer hereby agrees that, notwithstanding anything else contained
in this Agreement, the Custodian is hereby authorized to rely upon the
Execution Affidavit with respect to the Collateral described therein
and that in acting pursuant thereto, subject to Section 7.3 below, the
Custodian shall have no obligation to verify the accuracy of the
information contained therein. Secured party hereby agrees to send
Customer a copy of any Execution Affidavit at the same time it is sent
to Custodian.
VII. MISCELLANEOUS
Section 7.1. Amendments; Termination. The directions and
instructions of Customer and Secured Party contained in Section 6.1 hereof and
the representations, warranties and covenants contained in Section 6.2 are
irrevocable and may only be modified, amended or terminated with the prior
written consent of an Authorized Person of Customer and Secured Party. The
provisions of this Agreement may be changed or modified at any time solely by a
writing executed by each of the parties hereto.
Section 7.2. Reliance upon Instructions. Custodian shall be
entitled to rely upon Written Instructions actually received by Custodian as
specified in Section 7.12.
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Section 7.3. No Liability; Indemnity by Customer. Custodian shall
not be liable for any action taken or omitted by it hereunder in accordance
with the terms hereof. With respect to other performance or lack of
performance of Custodian hereunder Custodian shall be liable only for the
negligence or willful misconduct of Custodian or its officers, employees or
agents. Customer will indemnify Custodian and hold it harmless against any and
all claims, losses, liabilities, damages and expenses, including reasonable
counsel fees and expenses, howsoever arising from or in connection with this
Custodian Agreement or the performance of its duties hereunder, provided that
nothing contained herein shall require that Custodian be indemnified for the
negligence or willful misconduct of Custodian or its officers, employees or
agents. The provisions of this paragraph shall survive termination of this
Custodian Agreement.
Section 7.4. Successors and Assigns. This Agreement shall extend
to and shall be binding upon the parties hereto, and their respective
successors and assigns; provided, however, that this Agreement shall not be
assignable by Customer or Custodian without the written consent of each of the
other parties hereto and provided further, Secured Party may grant a
participation in or assign any of its rights hereunder in the same manner and
to the same extent that it is entitled to grant a participation in or assign it
rights under the Lease; provided that if there is more than one assignee under
an absolute assignment of the full rights of Secured Party under the Lease
executed after the date hereof, one of such assignees shall be selected by all
such assignees to serve as their agent hereunder. Each of Customer, Secured
Party and their respective agents and counsel are hereby entitled to rely upon
the representations, warranties and covenants made by Custodian under Section
6.2 hereof.
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Section 7.5. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York (without
regard to its conflicts of law provisions) and shall be binding upon Customer
and upon Customer's successors and assigns and shall inure to Custodian's
benefit and Custodian's successors and assigns and shall be deemed continuing
until terminated by Written Instruction to Custodian from both Customer and
Secured Party. Each party hereto irrevocably submits itself to the exclusive
jurisdiction of the state and federal courts of New York for purposes of this
Agreement and agrees and consents that service of process may be made upon it
in any legal proceeding relating to this Agreement by any means allowed under
federal or New York law. The parties hereto hereby waive and agree not to
assert, by way of motion, as a defense or otherwise, that any such proceeding
is brought in an inconvenient forum or that the venue thereof is improper.
Section 7.6. Other Agreements and Parties. Notwithstanding any
references in this Agreement to any other agreements and instruments, the
parties hereto recognize that the Custodian is not a party to any other
agreements in respect of the transactions contemplated thereby, and that the
rights, duties and obligations of the Custodian in respect of the transaction
contemplated by the Agreement are solely and exclusively stated herein. The
Custodian acknowledges that certain lenders may participate with Secured Party
in the Collateral. The Secured Party agrees that, notwithstanding the
foregoing, the Custodian shall have no obligations hereunder to any such
parties and that any duties and obligations under this Agreement are solely to
the Secured Party and Customer. Custodian shall be entitled to ignore any
notices received in respect of this Agreement and the transactions contemplated
herein from any party other than the Customer and the Secured Party.
Section 7.7. Resignation of Custodian. Custodian may at any time
resign and be discharged of the duties and obligations created by this
Agreement by giving not less than sixty (60) days' written notice to the
Customer and the Secured Party specifying the date when such resignation shall
take effect, and such resignation shall take effect upon the day specified in
such notice unless previously a successor shall have been appointed by the
Customer with the prior written consent of Secured Party, as provided in
Section 7.9 hereof, in which event such resignation shall take effect
immediately on the appointment of such
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<PAGE> 105
successor, provided, however, that no such resignation may take effect until a
successor has been appointed.
Section 7.8. Removal of Custodian. The Custodian may be removed
hereunder at any time by an instrument in writing, delivered to the Custodian
and signed by the Secured Party; provided, however, that such removal shall not
become effective until such time as a successor Custodian has been appointed in
accordance with Section 7.9 hereof and has duly accepted its appointment and
provided further, that such removal of the original Custodian shall not
terminate or otherwise impair the obligations and rights of any successor
Custodian hereunder or Secured Party's Lien on the Collateral which shall
continue in full force and effect under the terms of the Security Agreement.
Secured Party hereby agrees to so remove the Custodian upon written request of
Customer in the event that the Custodian is unable to execute a certificate in
the form of Exhibit H in connection with a substitution of Collateral pursuant
to Section 3.3(c) after receiving Written Instructions from Customer in the
form of Exhibit G so long as (i) Customer has complied with all of the terms
and conditions of Section 3.3(c) and delivered to Custodian any immediately
available funds required for such substitution, (ii) no Default or Event of
Default (both as defined in the Lease referred to in the Pledge Agreement) has
occurred and is continuing, (iii) the inability of Custodian to execute and
deliver such certificate is not due to a change in any applicable law, rule or
regulation, any action of the Federal Reserve Bank of New York or the failure
of the Market Value of the New Collateral (plus any additional cash delivered
to Custodian for deposit in the Custodial Account in connection therewith) to
equal or exceed the Market Value of the Replaced Collateral (as such terms are
defined in Exhibit H).
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<PAGE> 106
Section 7.9. Appointment of Successor Custodian.
(a) In case at any time the Custodian shall resign or
shall be removed hereunder or shall become incapable of acting or
shall be adjudged as bankrupt or insolvent, or if a receiver,
liquidator or conservator of the Custodian, or of its property, shall
be appointed, or if any public officer shall take charge or control of
the Custodian, or of its property or affairs, a successor to serve
hereunder shall be appointed by the Customer and the Secured Party to
serve hereunder pursuant to a duly executed written instrument signed
by an Authorized Person of the Customer and the Secured Party and
delivered to such successor and the predecessor custodian.
(b) Any Custodian appointed under the provisions of
Section 7.9(a) in succession to the Custodian shall be a bank or trust
company or banking association in good standing, within or without the
State of New York, which has a corporate trust office, in the State of
New York, and capital stock and surplus aggregating at least
$1,000,000,000, shall be authorized by law to perform all the duties
imposed upon it by this Agreement, and shall be able to make the
representations and warranties contained in Section 6.2(a) of this
Agreement.
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<PAGE> 107
Section 7.10. Transfer of Rights and Property to Successor
Custodian. Any successor custodian appointed under this Agreement to serve as
Custodian hereunder and under this Agreement shall execute, acknowledge and
deliver to its predecessor Custodian, and also to the Customer and Secured
Party, an instrument accepting such appointment, and thereupon such successor
custodian, without any further act, deed or conveyance, shall become fully
vested with all moneys, estates, properties, rights, powers, duties and
obligations of such predecessor Custodian hereunder, with like effect as if
originally named as Custodian hereunder; but the Custodian ceasing to act shall
nevertheless on the written request of the Customer or the Secured Party or of
the successor custodian, execute, acknowledge and deliver such instruments or
conveyance and further assurance and do such other things as may reasonably be
required for more fully and certainly vesting and confirming in such successor
custodian all the right, title and interest of the predecessor Custodian in and
to the Collateral, and shall pay over, transfer and/or assign and deliver, as
appropriate, to the successor custodian any money or other property subject to
the conditions set forth in this Agreement.
Section 7.11. Merger or Consolidation. Any company into which the
Custodian may be merged or converted or with which it may be consolidated or
any company resulting from any merger, conversion or consolidation to which it
shall be a party, or any company to which the Custodian may sell or transfer
all or substantially all of its custody business, provided such company shall
be a bank or trust company organized under the laws of any state of the United
States or a national or French banking association with offices in New York and
shall be authorized by law to perform all the duties imposed upon it by this
Agreement and shall meet the criteria stated in Section 7.9(b), shall be the
successor to the Custodian hereunder and under this Agreement without the
execution or filing of any paper or the performance of any further act.
Section 7.12. Notices; Written Instructions. All Written
Instructions, notices, demands and other instructions and 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) telecopying (if confirmed in writing sent by reputable overnight
courier service); (C) reputable overnight courier service; or (D) registered or
certified first class mail, return receipt requested. Such addresses may be
changed by notice to the
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<PAGE> 108
other parties given in the same manner as provided above. Any notice or other
communication sent pursuant to clause (A), (B) or (C) hereof shall be deemed
received upon such personal service, receipt of such telecopy or delivery by
such overnight courier service, and, if sent pursuant to clause (D) shall be
deemed received five (5) days following deposit in the mail. If the Custodian
receives conflicting instructions from the Customer and the Secured Party, the
Custodian shall notify both parties, but Custodian shall take no action for
thirty (30) days after giving such notice unless it receives consistent Written
Instructions from Customer and Secured Party during such thirty-day period and
if such consistent instructions are not received within such thirty-day period,
Custodian shall interplead the Collateral with a court having jurisdiction
pursuant to Section 7.5. A copy of each notice given to a party hereunder
shall be given to all parties listed below.
Address of Secured Party:
BNP Leasing Corporation
717 North Harwood Street
Suite 2630
Dallas, Texas 75201
Attention: Lloyd Cox
FAX (214) 969-0060
With a copy to:
Banque Nationale de Paris, San Francisco
180 Montgomery Street
San Francisco, California 94104
Attention: Rafael Lumanlan
FAX (415) 296-8954
And with a copy to:
Dorothy H. Bjorck, Esq.
Thompson & Knight, P.C.
3300 First City Center
1700 Pacific Avenue
Dallas, Texas 75201
FAX (214) 969-1751
Address of Customer:
Cypress Semiconductor corporation
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<PAGE> 109
3901 North First Street
San Jose, California 95134
FAX 408/943-2796
AND WITH A COPY TO:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill
Palo Alto, California 94304-1050
Attention: Real Estate Department
FAX: (415) 493-6811
Address of Custodian
200 Liberty Street
World Finance Center - Tower A
New York, New York 10281-1062
Attention: Securities Department
Section 7.13. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
such counterparts shall, together, constitute only one instrument.
Section 7.14. Severability. If any provision of this Agreement
is deemed to be invalid or unenforceable, such determination shall not affect
the validity or enforceability of any other provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 110
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
CUSTOMER:
CYPRESS SEMICONDUCTOR
CORPORATION
By:_____________________________________
Name:
Title:
CUSTODIAN:
BANQUE NATIONALE DE PARIS,
NEW YORK BRANCH
By:_____________________________________
Name:
Title:
Secured Party:
BNP LEASING CORPORATION
By:_____________________________________
Name: Lloyd G.
Cox Title: Vice President
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<PAGE> 111
EXHIBIT A - Copy of Security Agreement
EXHIBIT B - Secretary's Certificate of Customer
EXHIBIT C - Officers' Certificate of Secured Party
EXHIBIT D - Form of Execution Affidavit
EXHIBIT E - Form of Written Instruction for Reinvestment
EXHIBIT F - Form of Custodian Certificate for Reinvestment
EXHIBIT G - Form of Written Instruction for Substitution
EXHIBIT H - Form of Custodian Certificate for Substitution
EXHIBIT I - Form of Written Instruction for Release
28
<PAGE> 112
EXHIBIT A
REQUEST FOR RELEASE
Reference is made to that certain Pledge and Security Agreement dated
as of _______________, 1996 (as from time to time amended, the "Agreement"), by
and between Cypress Semiconductor Corporation ("Debtor") and BNP Leasing
Corporation ("Secured Party"). Terms which are defined in the Agreement are
used herein with the meanings given them in the Agreement.
Pursuant to the terms of the Agreement Debtor hereby requests that
Secured Party release the Collateral described below (the "Designated
Collateral"):
[Treasury Securities to be described here by Par Amount, Coupon and Maturity or
other Collateral to be described by dollar amount and type.]
To induce Secured Party to release such Collateral, Debtor hereby
represents, warrants, acknowledges, and agrees to and with Secured Party that:
(a) The person signing this instrument on behalf of
Debtor has all necessary authority to act for Debtor in making the
request herein contained.
(b) There does not exist on the date hereof any condition
or event which constitutes an Event of Default which has not been
cured or waived in writing by Secured Party.
(c) After giving effect to the release of the Designated
Collateral, the Market Value of the Collateral remaining encumbered
under the Agreement shall be at least equal to 102% of the Minimum
Collateral Value, in each case as determined as of the Valuation Date
most recently preceding the date of this Request for Release.
IN WITNESS WHEREOF, this instrument is executed as of
____________________, ____.
CYPRESS SEMICONDUCTOR CORPORATION
By:____________________________________
Name:
Title:
<PAGE> 113
BNP Leasing Corporation hereby releases the Designated Collateral
described above from the Agreement and authorizes Custodian to transfer the
Designated Collateral from the Custodial Account and to indicate such release
on its books and records.
BNP LEASING CORPORATION
By:____________________________________
Name:
Title:
-2-
<PAGE> 114
EXHIBIT B
SECRETARY'S CERTIFICATE OF CUSTOMER
Reference is made to (1) that certain Pledge and Security Agreement of
even date herewith (the "Pledge Agreement") between BNP Leasing Corporation, a
Delaware corporation ("Secured Party"), and Cypress Semiconductor Corporation,
a ___________ corporation ("Customer"), and (2) that certain Custodial
Agreement of even date herewith (the "Custodial Agreement") among Secured
Party, Customer and Banque de Nationale de Paris, New York ("Custodian"). The
undersigned, ________________________, does hereby certify as follows in
connection with such documents:
1. The undersigned is the duly elected, qualified, and acting
Secretary of Customer, and as such has the power and authority to certify as to
the matters addressed in this Certificate.
2. The capitalized terms used in this Certificate and not
otherwise defined shall have the meaning specified for such terms in the
Custodial Agreement.
3. The persons whose names, titles and signatures appear below are
each duly elected, qualified and acting officers of Customer, each holds on the
date hereof the office set forth opposite such officer's name below, and the
signature appearing below opposite such officer's name is such officer's
genuine signature. Messrs. ____________________________ ____________________
are each duly authorized to execute and deliver the Pledge Agreement and the
Custodial Agreement on behalf of Customer.
Name Office Signature
___________________ ___________________ __________________
___________________ ___________________ __________________
4. __________________________ and also any one of the persons
whose names, titles and signatures appear below are each duly authorized to
give instructions to Custodian under the Custodial Agreement.
<PAGE> 115
Name Office Signature
___________________ __________________ __________________
___________________ __________________ __________________
___________________ __________________ __________________
___________________ __________________ __________________
IN WITNESS WHEREOF, this instrument is executed by the undersigned as
of _____________________, 1996.
________________________________________
Name:
Title:
2
<PAGE> 116
EXHIBIT C
OFFICERS' CERTIFICATE OF
SECURED PARTY
Reference is made to (i) the Pledge and Security Agreement of even
date herewith between BNP Leasing Corporation ("Secured Party") Cypress
Semiconductor Corporation ("Customer"), and (ii) the Custodial Agreement of
even date herewith (the "Custodial Agreement") among Secured Party, Customer
and Banque de Nationale de Paris, New York ("Custodian"). The undersigned do
hereby certify as follows in connection with such agreements:
1. The undersigned, David C. Schad and Lloyd G. Cox, are the duly
authorized President and Vice President of Secured Party, respectively, and as
such have power and authority to certify as to the matters addressed in this
Certificate.
2. The capitalized terms used in this Certificate and not
otherwise defined shall have the meaning specified for such terms in the
Custodial Agreement.
3. Secured Party has duly authorized Lloyd G. Cox's execution and
delivery on behalf of Secured Party, of the Lease and Purchase Agreement
described in the Security Agreement, and other agreements, documents,
certificates and instruments contemplated to be executed and delivered by
Secured Party in connection therewith.
4. Lloyd G. Cox, Vice President of Secured Party, and Rafael
Lumnanlan, Vice President of Banque Nationale de Paris, whose genuine
signatures appear below, are duly authorized to give instructions to Custodian
under the Custodial Agreement, and execute and deliver the Execution Affidavit.
________________________________________
Lloyd G. Cox
________________________________________
Rafael Lumanlan
5. All the information contained in this Certificate is true and
correct on and as of the date hereof.
Executed as of _______________________, 1996.
________________________________________
David C. Schad
________________________________________
Lloyd G. Cox
<PAGE> 117
EXHIBIT D
EXECUTION AFFIDAVIT OF OFFICER OF
SECURED PARTY
(Name of Officer) , residing at (Address) ,
hereby deposes and states on behalf of BNP Leasing Corporation ("Secured
Party"):
1. I am currently (Title of Officer) of BNP Leasing
Corporation, 717 N. Harwood Street, Suite 2630, Dallas, Texas 75201.
2. Secured Party is a party to a Pledge and Security Agreement
with Cypress Semiconductor Corporation ("Customer") dated as
____________________, 1996 (the "Security Agreement"). Secured Party,
Customer and ____________________ ("Custodian") are parties to a Custodial
Agreement dated as of ____________________, 1996 (the "Custodial Agreement").
3. A Foreclosure Event has occurred and Secured Party has
foreclosed upon the following collateral covered by the Security Agreement:
[TREASURY SECURITIES DESCRIBED HERE BY PAR AMOUNT, COUPON AND
MATURITY]
The purchaser of such collateral at the foreclosure sale was
________________________________ (the "Purchaser") who is hereby designated by
Secured Party to deliver instructions, orders and directions relating to such
collateral pursuant to the Custodial Agreement. Secured Party gave Customer
notice of such foreclosure sale at least ten (10) days prior to the date
thereof as required by Section 5.2 of the Pledge Agreement.
4. Custodian is authorized to rely upon this Execution Affidavit
in complying with such instructions, orders and directions and in registering
the transfer of ownership of such collateral to Purchaser on Custodian's books
and records pursuant to the Custodial Agreement.
5. A copy of this Affidavit is being delivered to Customer
concurrently herewith.
________________________________________
Name of Officer, Office
BNP Leasing Corporation
SWORN AND SUBSCRIBED to me this _____ day of _____________________, 199____.
<PAGE> 118
________________________________________
Notary Public
My Commission Expires:
___________________________________
2
<PAGE> 119
EXHIBIT E
Re: Cypress Collateral Account held for the benefit of BNP Leasing
Corporation #_______________________.
WRITTEN INSTRUCTION FOR PURCHASE
OF TREASURY SECURITIES
Reference is made to that certain Custodial Agreement dated as of
____________________, 1996 (as from time to time amended, the "Agreement"), by
and among Cypress Semiconductor Corporation ("Customer"), Banque Nationale de
Paris, New York Branch ("Custodian") and BNP Leasing Corporation ("Secured
Party"). Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.
Pursuant to the terms of the Agreement, Customer hereby directs the
Custodian to purchase the Collateral described below (the "New Collateral")
with cash balances on deposit in the Custodial Account or otherwise provided by
Customer to Custodian and upon the purchase thereof, to deposit the New
Collateral in the Custodial Account. Upon such deposit, the New Collateral
shall be part of the Collateral subject to the Security Agreement.
NEW COLLATERAL: [TREASURY SECURITIES TO BE DESCRIBED HERE BY PAR
AMOUNT, COUPON AND MATURITY.]
To induce Custodian to make such purchase and deposit of the New
Collateral, Customer hereby represents, warrants and acknowledges to and agrees
with Custodian that:
(a) The person signing this instrument on behalf of
Customer has all necessary authority to act for Customer in making the
request herein contained. The New Collateral has not been owned by
Customer at any time prior to the date hereof.
(b) A copy of this Written Instruction is being delivered
to Secured Party concurrently herewith.
(c) The Security Agreement, the Agreement and pledge of
and grant of security interest by Customer in the New Collateral
pursuant to the Security Agreement to secure the Obligations are
hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, this instrument is executed as of
_____________________, 19____.
CYPRESS SEMICONDUCTOR CORPORATION
By_____________________________________
Name:
Title:
2
<PAGE> 120
EXHIBIT F
Re: Cypress Collateral Account held for the benefit of BNP Leasing
Corporation #____________.
CERTIFICATION OF CUSTODIAN FOR PURCHASE
OF TREASURY SECURITIES
Reference is made to that certain Custodial Agreement dated as of
____________________, 1996 (as from time to time amended, the "Agreement"), by
and among Cypress Semiconductor Corporation ("Customer"), Banque Nationale de
Paris, New York Branch ("Custodian") and BNP Leasing Corporation ("Secured
Party"). Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.
Pursuant to the terms of the Agreement, Custodian hereby represents
and warrants to Secured Party that:
(a) The person signing this instrument on behalf of
Custodian is the duly elected, qualified and acting officer of
Custodian as indicated below such officer's signature hereto having
all necessary authority to act for Custodian in making the
certification herein contained.
(b) The Treasury Securities described below (the "New
Collateral") have been purchased pursuant to those certain Written
Instructions for Purchase of Treasury Securities dated
___________________________ (the "Instructions") and held in the
Custodial Account pursuant to the Instructions:
[TREASURY SECURITIES TO BE DESCRIBED HERE BY PAR AMOUNT, COUPON AND
MATURITY.]
(c) The representations and warranties of Custodian set forth
in Section 6.2 of the Agreement are true and correct on and as of the
date hereof, with the same effect as though such representations and
warranties had been made on and as of the date hereof.
(d) Except to the extent waived in writing by Secured
Party, Custodian has performed and complied with all agreements and
conditions in the Agreement required to be performed or complied with
by Custodian on or prior to the date hereof.
(e) Custodian hereby confirms to Secured Party the
purchase of the Treasury Securities described above. Attached hereto
is a further confirmation of the transaction described above.
Custodian further confirms that the New Collateral is (i) registered
in the name of Custodian on the
<PAGE> 121
books and records of the Federal Reserve Bank of New York, (ii) held
by Custodian as authorized custodian and financial intermediary for
Customer and as agent, bailee and financial intermediary for Secured
Party, and (iii) identified on the appropriate books and records of
Custodian as belonging to Customer and being subject to the Lien of
Secured Party and has not been owned by Custodian previously.
(f) The New Collateral was purchased in the name of
Custodian or its nominee on behalf of Customer, acting upon
instructions of Custodian as financial intermediary for Customer,
against payment in full of immediately available funds and deposited
in the Custodial Account.
IN WITNESS WHEREOF, this instrument is executed as of _____________________,
19____.
CUSTODIAN
BANQUE NATIONAL DE PARIS,
NEW YORK BRANCH
By_____________________________________
Name:
Title:
2
<PAGE> 122
EXHIBIT G
Re: Cypress Collateral Account held for the benefit of BNP Leasing
Corporation #____________.
WRITTEN INSTRUCTION FOR SUBSTITUTION
OF TREASURY SECURITIES
Reference is made to that certain Custodial Agreement dated as of
____________________, 1996 (as from time to time amended, the "Agreement"), by
and among Cypress Semiconductor Corporation ("Customer"), Banque Nationale de
Paris, New York Branch ("Custodian") and BNP Leasing Corporation ("Secured
Party"). Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.
Pursuant to the terms of the Agreement, Customer hereby directs the
Custodian to [TRANSFER FROM THE CUSTODIAL ACCOUNT] [SELL] the Collateral
described below as Replaced Collateral (the "Replaced Collateral") and to
purchase and deposit in the Custodial Account the Collateral described below as
the New Collateral (the "New Collateral"). Upon such deposit, the New
Collateral shall be part of the Collateral subject to the Security Agreement.
REPLACED COLLATERAL: [TREASURY SECURITIES TO BE DESCRIBED HERE BY PAR
AMOUNT, COUPON AND MATURITY.]
NEW COLLATERAL: [TREASURY SECURITIES TO BE DESCRIBED HERE BY PAR
AMOUNT, COUPON AND MATURITY.]
To induce Custodian to make such [TRANSFER] [SALE] of the Replaced
Collateral and [PURCHASE AND] deposit of the New Collateral, Customer hereby
represents, warrants and acknowledges to and agrees with Custodian that:
(a) The person signing this instrument on behalf of
Customer has all necessary authority to act for Customer in making the
request herein contained. The New Collateral has not been owned by
Customer at any time prior to the date hereof.
(b) There does not exist on the date hereof any condition
or event which constitutes an Event of Default which has not been
waived in writing by Secured Party, excepting any Event of Default
which would be cured upon compliance by Custodian with Customer's
instructions herein.
(c) Custodian shall not execute these Instructions unless the
Market Value of the New Collateral is equal to or greater than the
Market Value of the Replaced Collateral, in
<PAGE> 123
each case calculated as of the Business Day prior to the Business Day
these Instructions are executed by Custodian, unless additional cash
in the amount by which the Market Value of the Replaced Collateral
exceeds the Market Value of the New Collateral is deposited by
Customer with Custodian to complete such transaction.
(d) A copy of this Written Instruction is being delivered
to Secured Party concurrently herewith.
(e) The Security Agreement, the Agreement and pledge of
and grant of security interest by Customer in the New Collateral
pursuant to the Security Agreement to secure the Obligations are
hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, this instrument is executed as of
_____________________, 19____.
CYPRESS SEMICONDUCTOR CORPORATION
By_____________________________________
Name:
Title:
2
<PAGE> 124
EXHIBIT H
Re: Cypress Collateral Account held for the benefit of BNP Leasing
Corporation #____________.
CERTIFICATION OF CUSTODIAN FOR SUBSTITUTION
OF TREASURY SECURITIES
Reference is made to that certain Custodial Agreement dated as of
____________________, 1996 (as from time to time amended, the "Agreement"), by
and among Cypress Semiconductor Corporation ("Customer"), Banque Nationale de
Paris, New York Branch ("Custodian") and BNP Leasing Corporation ("Secured
Party"). Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.
Pursuant to the terms of the Agreement, Custodian hereby represents
and warrants to Secured Party that:
(a) The officer signing this instrument on behalf of
Custodian is the duly elected, qualified and acting officer of
Custodian as indicated below such officer's signature hereto having
all necessary authority to act for Custodian in making the
certification herein contained.
(b) The Treasury Securities described below (the
"Replaced Collateral") have been [TRANSFERRED FROM THE CUSTODIAL
ACCOUNT] [SOLD] pursuant to those certain Written Instructions for
substitution from Customer dated _____________________, 1996 (the
"Instructions"):
REPLACED COLLATERAL: [TREASURY SECURITIES TO BE DESCRIBED HERE BY PAR
AMOUNT, COUPON AND MATURITY.]
(c) The representations and warranties of Custodian
set forth in Section 6.2 of the Agreement are true and correct on
and as of the date hereof, with the same effect as though such
representations and warranties had been made on and as of the date
hereof.
(d) Except to the extent waived in writing by Secured
Party, Custodian has performed and complied with all agreements and
conditions in the Agreement required to be performed or complied with
by Custodian on or prior to the date hereof.
(e) The Treasury Securities described below (the "New
Collateral") have been deposited in the Custodial Account pursuant to
the Instructions:
<PAGE> 125
NEW COLLATERAL: [TREASURY SECURITIES TO BE DESCRIBED HERE BY PAR
AMOUNT, COUPON AND MATURITY.]
(f) The Market Value of the New Collateral is equal to or
greater than the Market Value of the Replaced Collateral, in each case
calculated as of the close of business on
_________________________________, which was the Business Day prior to
the Business Day on which Custodian executed the Instructions, or
Customer deposited additional cash with Custodian sufficient to
complete such transaction in the amount by which the Market Value of
the Replaced Collateral exceeds the Market Value of the New
Collateral.
(g) Custodian hereby confirms to Secured Party the
purchase of the Treasury Securities described above. Attached hereto
is a further confirmation of the transaction described above.
Custodian further confirms that the New Collateral is (i) registered
in the name of Custodian on the books and records of the Federal
Reserve Bank of New York, (ii) held by Custodian as authorized
custodian and financial intermediary for Customer, and as agent,
bailee and financial intermediary for Secured Party, and (iii)
identified on the appropriate books and records of Custodian as
belonging to Customer and being subject to the Lien (as defined in the
Pledge Agreement) of Secured Party and has not been owned by Custodian
previously.
(h) The New Collateral was purchased in the name of Custodian
or its nominee on behalf of Customer, acting upon instructions of
Custodian as financial intermediary for Customer, against payment in
full of immediately available funds.
IN WITNESS WHEREOF, this instrument is executed as of _____________________,
19____.
CUSTODIAN
BANQUE NATIONALE DE PARIS,
NEW YORK BRANCH
By_____________________________________
Name:
Title:
2
<PAGE> 126
EXHIBIT I
Re: Cypress Collateral Account held for the benefit of BNP Leasing
Corporation #____________.
WRITTEN INSTRUCTION FOR RELEASE
Reference is made to that certain Custodial Agreement dated as of
____________________, 1996 (as from time to time amended, the "Agreement"), by
and among Cypress Semiconductor Corporation ("Customer"), _____________________
("Custodian") and BNP Leasing Corporation ("Secured Party"). Terms which are
defined in the Agreement are used herein with the meanings given them in the
Agreement.
Pursuant to the terms of the Agreement, Customer hereby directs the
Custodian to [transfer the Collateral described below (the "Designated
Collateral") from the Custodial Account to ___________________] [sell] the
Designated Collateral and deposit the sale proceeds in __
________________________________________:
[THE DESIGNATED COLLATERAL (TREASURY SECURITIES) TO BE DESCRIBED HERE
BY PAR AMOUNT, COUPON AND MATURITY; OTHER COLLATERAL TO BE DESCRIBED BY DOLLAR
AMOUNT AND TYPE.]
To induce Custodian to follow Customer's instructions with respect to
the Designated Collateral, Customer hereby represents, warrants and
acknowledges to and agrees with Custodian that:
(a) The person signing this instrument on behalf of
Customer has all necessary authority to act for Customer in making the
request herein contained.
(b) There does not exist on the date hereof any condition
or event which constitutes an Event of Default which has not been
waived in writing by Secured Party, excepting any Event of Default
which would be cured upon compliance by Custodian with Customer's
instructions herein.
(c) Attached hereto is a Release Request executed by Secured
Party pursuant to which Secured Party has released the Designated
Collateral from the Liens created by the Security Agreement.
(d) Custodian shall not execute these instructions unless the
Market Value of the Collateral remaining after the release of the
Designated Collateral pursuant hereto (as such Market Value has been
calculated on the most recent Valuation Date) is equal to or greater
than the 102% of the Minimum Collateral Value on such Valuation Date,
as designated by Secured Party.
<PAGE> 127
(e) A copy of this Written Instruction is being delivered
to Secured Party concurrently herewith.
(f) The Security Agreement, this Agreement and pledge of
and grant of security interest by Customer in the Collateral remaining
encumbered thereby pursuant to the Security Agreement after the
release of the Designated Collateral are hereby ratified and confirmed
in all respects.
IN WITNESS WHEREOF, this instrument is executed as of
_______________________, 19____.
CYPRESS SEMICONDUCTOR CORPORATION
By_____________________________________
Name:
Title:
2
<PAGE> 128
OFFICERS' CERTIFICATE OF
SECURED PARTY
Reference is made to (i) the Pledge and Security Agreement of even
date herewith between BNP Leasing Corporation ("Secured Party") Cypress
Semiconductor Corporation ("Customer"), and (ii) the Custodial Agreement of
even date herewith (the "Custodial Agreement") among Secured Party, Customer
and Banque de Nationale de Paris, New York ("Custodian"). The undersigned do
hereby certify as follows in connection with such agreements:
1. The undersigned, David C. Schad and Lloyd G. Cox, are the duly
authorized President and Vice President of Secured Party, respectively, and as
such have power and authority to certify as to the matters addressed in this
Certificate.
2. The capitalized terms used in this Certificate and not
otherwise defined shall have the meaning specified for such terms in the
Custodial Agreement.
3. Secured Party has duly authorized Lloyd G. Cox's execution and
delivery on behalf of Secured Party, of the Lease and Purchase Agreement
described in the Security Agreement, and other agreements, documents,
certificates and instruments contemplated to be executed and delivered by
Secured Party in connection therewith.
4. Lloyd G. Cox, Vice President of Secured Party, and Rafael
Lumanlan, Vice President of Banque Nationale de Paris, whose genuine signatures
appear below, are duly authorized to give instructions to Custodian under the
Custodial Agreement, and execute and deliver the Execution Affidavit.
________________________________________
Lloyd G. Cox
________________________________________
Rafael Lumanlan
5. All the information contained in this Certificate is true and
correct on and as of the date hereof.
Executed as of ____________________, 1996.
<PAGE> 129
________________________________________
David C. Schad
________________________________________
Lloyd G. Cox
EXECUTION
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made as of
April 12, 1996, by and between CYPRESS SEMICONDUCTOR CORPORATION, a California
corporation (herein called "Debtor"), and BNP LEASING CORPORATION, a Delaware
corporation (herein called "Secured Party").
W I T N E S E T H:
Debtor and Secured Party are parties to (i) a Lease Agreement dated of
even date herewith (herein called the "Lease") pursuant to which Secured Party
has agreed to lease certain property to Debtor; and (ii) a Purchase Agreement
dated of even date herewith (herein called the "Purchase Agreement") pursuant
to which Debtor has agreed to purchase such property from Secured Party upon
the occurrence of certain events or cause such property to be purchased; and
WHEREAS, to secure Debtor's obligations under the Purchase Agreement,
Debtor has agreed to execute and deliver to Secured Party this Agreement
granting to Secured Party a security interest in the Collateral as defined
herein;
WHEREAS, Debtor, Secured Party and Custodian (hereinafter defined) are
parties to a Custodial Agreement of even date herewith (herein called the
"Custodial Agreement") which provides that Custodian will hold the Collateral
on the terms set forth therein and that Debtor will manage the investment of
the Collateral on the terms set forth therein;
NOW, THEREFORE, in consideration of the premises and in order to
induce Secured Party to lease such property under the Lease, Debtor hereby
agrees with Secured Party as follows:
ARTICLE I
Definitions and References
2
<PAGE> 130
22. General Definitions. As used herein, the terms "Agreement",
"Debtor", "Secured Party", "Lease," "Purchase Agreement" and "Custodial
Agreement" shall have the meanings indicated above, and the following terms
shall have the following meanings:
"Applicable CFR Sections" has the meaning given it in Section 5.2(a).
"Business Day" means any day that is (i) not a Saturday, Sunday or day
on which commercial banks are generally closed or required to be closed in San
Francisco, California, or New York City, New York, and (ii) 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 (i).
"CFR" means the United States Code of Federal Regulations, as from
time to time amended.
"Code" means the Uniform Commercial Code in effect in the State of New
York on the date hereof.
"Collateral" means all property of whatever type, in which Secured
Party at any time has a security interest pursuant to Section 3.1.
"Collateral Percentage" means eighty-five percent (85%).
"Collateral Value" means as of any date, an amount equal to the sum
of the respective Market Values of all Treasury Securities, and cash on deposit
in the Custodial Account.
"Custodial Account" has the meaning given it in the Custodial
Agreement.
"Custodian" means Banque Nationale de Paris, New York Branch as
custodian under the Custodial Agreement, and any successor custodian thereunder
appointed in accordance with the terms thereof.
"Custodial Agreement" means the Custodial Agreement of even date
herewith among Debtor, Secured Party and Custodian.
"Designated Collateral" has the meaning given it in Section 2.3(c).
"Event of Default" means the occurrence of any of the following:
(a) the failure by Debtor to pay all or any part of the
Obligations when due, after giving effect to any applicable notice and
grace periods provided for in the Purchase Agreement;
(b) the failure by Debtor to comply with Section 2.3(a) or (b)
of this Agreement;
(c) the failure by Debtor to comply with any other term,
provision of condition of this Agreement if such failure is not cured
within thirty (30) days after Secured Party gives Debtor written
notice thereof;
(d) the failure of any representation or warranty made in
Section 4.1(a) or (c) of this Agreement to be true when made;
3
<PAGE> 131
(e) the failure of any other representation or warranty made
in this agreement to be true when made if such failure is not cured
within thirty (30) days after Secured Party gives Debtor notice
thereof; and
(f) the failure of the security interest of Secured Party in
the Collateral to be a valid, perfected, first priority security
interest, if such failure is not cured within three (3) Business Days
after Secured Party gives Debtor notice thereof.
"Foreclosure Event" means the failure of Debtor to pay or perform any
obligation under the Purchase Agreement when due or required under the Purchase
Agreement on or after the Designated Payment Date (after the giving of any
notice required thereunder).
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure indebtedness of any kind which is owed
to him or any other arrangement with such creditor which provides for the
payment of such indebtedness out of such property or assets or which allows him
to have such indebtedness satisfied out of such property or assets prior to the
general creditors of any owner thereof, including without limitation any lien,
mortgage, security interest, pledge, deposit, production payment, rights of a
vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien,
or any other charge or encumbrance for security purposes, whether arising by
law or agreement or otherwise, but excluding any right of offset which arises
without agreement in the ordinary course of business. "Lien" also means any
filed financing statement, any registration with an issuer of uncertificated
securities, or any other arrangement which would serve to perfect a Lien
described in the preceding sentence, regardless of whether such financing
statement is filed, such registration is made, or such arrangement is
undertaken before or after such Lien exists.
"Market Value" means with respect to the Collateral on any Valuation
Date, a dollar value determined as follows:
(a) cash shall be valued at its face amount on such Valuation
Date; and
(b) a Treasury Security shall be valued by multiplying the
Principal Balance thereof on such Valuation Date by the bid price therefor as
established pursuant to Custodian's standard and customary pricing sources
which it believes to be reliable.
"Minimum Collateral Value" means as of any date, an amount equal to
the Collateral Percentage multiplied by the Stipulated Loss Value on such date
as calculated in accordance with the Lease.
"Obligations" means all of Debtor's obligations under the Purchase
Agreement, including, but not limited to (i) Debtor's obligation to pay the
entire Purchase Price and Shortage Amount, if any, as the case may be, as
required under SECTION 2 of the Purchase Agreement if Secured Party elects
specific performance of the Purchase Agreement, and (ii) any damages incurred
by Secured Party because of (A) Debtor's breach of the Purchase Agreement, or
(B) the rejection by Debtor of the Purchase Agreement in any bankruptcy or
insolvency proceeding owing under or with respect to a judgement, writ, order
or other document issued by a court of competent jurisdiction or (C) for any
other reason.
4
<PAGE> 132
"Other Liable Party" means any Person, other than Debtor, who may now
or may at any time hereafter be primarily or secondarily liable for any of the
Obligations or who may now or may at any time hereafter have granted to Secured
Party a Lien upon any of the Collateral.
"Person" means an individual, corporation, partnership, association,
joint stock company, trust, unincorporated organization or joint venture, or a
court or governmental unit or any agency or subdivision thereof, or any other
legally recognizable entity.
"Principal Balance" means as of any date with respect to any Treasury
Security, the remaining unpaid principal balance of each Treasury Security.
"Release Period" has the meaning given it in the Custodial Agreement.
"Transaction Documents" means, collectively, this Agreement, the
Lease, the Purchase Agreement, the Environmental Indemnity and the Custodial
Agreement.
"Treasury Securities" shall mean uncertificated, direct, noncallable
debt obligations of the United States of America maturing within three (3)
years of the date of pledge to Secured Party constituting Treasury bonds,
notes, certificates of indebtedness or bills issued under the Second Liberty
Bond Act, as amended, in the form of entry made on the records of the Federal
Reserve Bank of New York as prescribed under 31 CFR.
"Valuation Date" has the meaning given it in the Custodial Agreement.
"Written Instruction" has the meaning given it in the Custodial
Agreement.
23. Other Definitions. Reference is hereby made to the Lease
and the Purchase Agreement for a statement of the terms thereof. All
capitalized terms used in this Agreement which are defined in the Lease or the
Purchase Agreement and not otherwise defined herein shall have the same
meanings herein as set forth therein. All terms used in this Agreement which
are defined in the Code and not otherwise defined herein or in the Purchase
Agreement or the Lease shall have the same meanings herein as set forth
therein, except where the context otherwise requires.
24. Exhibits. All exhibits attached to this Agreement are a
part hereof for all purposes.
25. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references to the Transaction Documents) also refer to and include
all valid renewals, extensions, amendments, modifications, supplements or
restatements of any such agreement, instrument or document, provided that
nothing contained in this Section shall be construed to authorize any Person to
execute or enter into any such renewal, extension, amendment, modification,
supplement or restatement.
26. References and Titles. All references in this Agreement to
Exhibits, Articles, Sections, subsections, and other subdivisions refer to the
Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. The words "this Agreement", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole
5
<PAGE> 133
and not to any particular subdivision unless expressly so limited. The phrases
"this Section" and "this subsection" and similar phrases refer only to the
Sections or subsections hereof in which the phrase occurs. The word "or" is
not exclusive, and the word "including" (in all of its forms) means "including
without limitation". Pronouns in masculine, feminine and neuter gender shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa unless the context otherwise
requires.
ARTICLE II
Custodial Account
27. Establishment of Custodial Account. Contemporaneously with
the execution of this Agreement, Debtor shall establish with Custodian the
Custodial Account.
Section 2.2. Valuation of Collateral.
(a) On each Valuation Date, the Custodian shall determine the
Market Value of the Collateral, prepare a report thereof and deliver such
report, all in the manner described in the Custodial Agreement.
(b) On each Valuation Date, Secured Party shall determine the
Stipulated Loss Value, the Minimum Collateral Value and 102% of the Minimum
Collateral Value as of such Valuation Date, and shall deliver written notice
thereof by facsimile transmission to Debtor and Custodian no later than three
Business Days after such Valuation Date. In making such determination with
respect to the last Valuation Date occurring in each calendar month, so long as
Secured Party has received the valuation report from Custodian for such
Valuation Date, such notice shall specify whether the Market Value of the
Collateral reflected in such valuation report is less or greater than 102% of
the Minimum Collateral Value and the amount of such deficiency or excess.
Section 2.3. Minimum Collateral Value.
(a) Maintenance of Greater Than Minimum Collateral Value. Debtor
agrees to deposit with Custodian and designate to be held in the Custodial
Account subject to the pledge and security interest created hereby, immediately
available funds in an amount equal to the Minimum Collateral Value on the date
of the Initial Funding Advance, and to deliver to Custodian together with such
funds Written Instructions pursuant to Section 3.3(b) of the Custodial
Agreement instructing Custodian to purchase Treasury Securities with such
funds.
(b) Decreases in Market Value of Collateral and/or Increases in
Stipulated Loss Value. If on any Valuation Date, the Market Value of the
Collateral is less than 100% of the Minimum Collateral Value for any reason
whatsoever (including any decrease in the Market Value of the Collateral or any
increase in the Stipulated Loss Value as reported by Secured Party under
Section 2.2(b) above), Debtor shall deposit with Custodian immediately
available funds in an amount sufficient to purchase Treasury Securities having
a Market Value that will cause the Market Value of the Collateral to equal or
exceed 102% of the Minimum Collateral Value. Debtor shall designate the
Treasury Securities to be purchased in a Written Instruction to Custodian
delivered to Custodian together with such funds. Such deposit of funds and
designation of additional Treasury Securities shall be made by Debtor not later
than three (3) Business Days after receipt of notice from Secured Party under
Section 2.2(b) above that the Market Value of the Collateral is less than the
100% of the Minimum Collateral Value.
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(c) Increases in Market Value of Collateral and/or Decreases in
Stipulated Loss Value. If on the Valuation Date which occurs at the beginning
of each Release Period, the Market Value of the Collateral is greater than 102%
of the Minimum Collateral Value for any reason whatsoever (including a decrease
in the Stipulated Loss Value or an increase in the Market Value of the
Collateral), Debtor may, during the Release Period for such Valuation Date so
long as no Event of Default then exists, request in writing in the form of
EXHIBIT A (herein called a "Release Request"), that Secured Party release from
the Custodial Account certain Treasury Securities or other Collateral as
designated by Debtor (the "Designated Collateral") so long as the remaining
Collateral has a Market Value equal to or greater than 102% of the Minimum
Collateral Value. If Secured Party actually receives a Release Request,
Secured Party shall (i) confirm to Debtor by facsimile its receipt of such
Release Request on the Business Day following the date on which it receives
such Release Request and (ii) within five (5) Business Days after the date on
which it receives such Release Request, give the release requested thereby in
writing by executing such Release Request and return the same to Debtor unless
Secured Party determines in good faith that the Designated Collateral is needed
to keep the Market Value of the Collateral equal to or greater than 102% of the
Minimum Collateral Value, in which case Secured Party shall notify Debtor in
writing that it objects to the release of the Designated Collateral and specify
the reasons therefor. All references to Stipulated Loss Value, Market Value of
Collateral and Minimum Collateral Value in this subsection (c) shall mean the
amounts determined in accordance with the terms of this Agreement and the
Custodial Agreement as of the most recent Valuation Date.
(d) Release of Collateral. Upon Secured Party's written release
of specific Designated Collateral, the pledge and security interest in such
Designated Collateral shall terminate and such Designated Collateral shall no
longer be part of the Collateral, and all rights to the Designated Collateral
shall revert to the Debtor. Debtor shall thereupon have the right to deliver
to the Custodian the instructions described in Section 3.3(d) of the Custodial
Agreement and Secured Party shall execute such documents as the Custodian may
reasonably request as a condition to the release of such Collateral.
ARTICLE III
Security Interest
Section 3.1. Grant of Security Interest. As collateral security for
all of the Obligations, Debtor hereby pledges and assigns to Secured Party and
grants to Secured Party a continuing security interest in all of the following:
(a) The Custodial Account, all funds from time to time on deposit in
the Custodial Account, all Treasury Securities from time to time on deposit in
the Custodial Account, all funds and Treasury Securities otherwise designated
to be held by Custodian as collateral for the Obligations subject to the pledge
and security interest created hereby, and all proceeds, collections, income,
replacements, substitutions, reinvestments, distributions and claims with
respect thereto, except as released pursuant to Sections 2.3(c) and (d).
(b) All of Debtor's right, title and interest in, to and under the
Custodial Agreement.
(c) All proceeds of any and all of the property described in
subsection (a) and (b) immediately above.
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In each case, the foregoing shall be covered by this Agreement, whether
Debtor's ownership or other rights therein are presently held or hereafter
acquired and howsoever Debtor's interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise).
Section 3.2. Obligations Secured. The security interest created
hereby in the Collateral constitutes continuing collateral security for the
payment and performance of the Obligations.
ARTICLE IV
Representations, Warranties and Covenants
28. Representations and Warranties. Debtor represents and
warrants as follows as of the date hereof and any future date on which new or
substitute Collateral is provided:
(a) Ownership and Liens. Debtor has good and marketable title
to the Collateral free and clear of all Liens, encumbrances or adverse claims,
except for the pledge and security interest created by this Agreement. None of
the Collateral has been acquired by Debtor through a clearing corporation (as
such term is defined in the Code). Debtor has not acknowledged or given to
Custodian notice of a Lien on the Collateral other than the Lien in favor of
Secured Party. No dispute, right of set-off, recoupment, counterclaim or
defense exists with respect to all or any part of the Collateral and no
effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording office except
such as may have been filed in favor of Secured Party relating to this
Agreement and Landlord's Liens.
(b) No Conflicts or Consents. To the best knowledge of the
Debtor, neither the ownership or the intended use of the Collateral by Debtor,
nor the grant of the security interest by Debtor to Secured Party herein, nor
the exercise by Secured Party of its rights or remedies hereunder, will (i)
violate any provision of (a) any domestic or foreign law, statute, rule or
regulation, (b) the articles or certificate of incorporation, charter or bylaws
of Debtor, or (c) any agreement, judgment, license, order or permit applicable
to or binding upon Debtor, or (ii) result in or require the creation of any
Lien, charge or encumbrance upon any assets or properties of Debtor except as
expressly contemplated in this Agreement or the Custodial Agreement. Except as
expressly contemplated in this Agreement and the Custodial Agreement, to the
best knowledge of Debtor no consent, approval, authorization or order of, and
no notice to or filing with any court, governmental authority or third party is
required in connection with the grant by Debtor of the security interest
herein, or the exercise by Secured Party of its rights and remedies hereunder.
(c) Security Interest. Debtor has and will have at all times
full right, power and authority to grant a security interest in the Collateral
to Secured Party in the manner provided herein, free and clear of any Lien,
adverse claim, or encumbrance. To the best knowledge of Debtor, this Agreement
creates a valid and binding security interest in favor of Secured Party in the
Collateral securing the Obligations.
(d) Location of Debtor and Records. Debtor's chief executive
office and principal place of business and the office where its records
concerning the Collateral are kept is located at its address set forth in the
Custodial Agreement or at such other location as Debtor shall specify to
Secured Party pursuant to Section 4.2(d).
29. Affirmative Covenants. Unless Secured Party shall otherwise
consent in writing, Debtor will at all times comply with the covenants
contained in this Section 4.2 from the date hereof and so long
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as any part of the Obligations is outstanding, subject to the other terms of
this Agreement and the Custodial Agreement.
(a) Ownership and Liens. Debtor will maintain good and
marketable title to all Collateral free and clear of all Liens, encumbrances or
adverse claims, except for the security interest created by this Agreement and
Landlord's Liens. Debtor will not permit any dispute, right of set-off,
counterclaim or defense to exist with respect to all or any part of the
Collateral except those arising with respect to Landlord's Liens. Debtor will
cause to be terminated any financing statement or other registration with
respect to the Collateral, except such as may exist or as may have been filed
in favor of Secured Party. Debtor will defend Secured Party's right, title and
special property and security interest in and to the Collateral against the
claims of any Person.
(b) Further Assurances. Debtor will, at its expense and at any
time and from time to time, promptly execute and deliver all further
instruments and documents and take all further action that may be reasonably
necessary or desirable and that Secured Party may request in order (i) to
perfect and protect the security interest created or purported to be created
hereby and the perfection and first priority of such security interest and
confirm that Collateral hereafter pledged by Debtor is subject to this
Agreement; (ii) to enable Secured Party to exercise and enforce its rights and
remedies hereunder in respect of the Collateral; or (iii) to otherwise effect
the purposes of this Agreement, including, without limitation, executing and
delivery to Secured Party financing statements covering the Collateral and
furnishing to Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Secured Party may reasonably request, all in reasonable
detail.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and its representatives
to inspect Debtor's books and records concerning the Collateral on the same
terms and conditions as set forth in the Lease with respect to books and
records concerning the property covered by the Lease.
(d) Information. Debtor will furnish to Secured Party any
information which Secured Party may from time to time reasonably request
concerning any covenant, provision or representation contained herein or any
other matter in connection with the Collateral. Debtor will notify Secured
Party of any change in the location of its chief executive office or principal
place of business.
(e) Delivery of Collateral. All instruments and writings, if
any, constituting Collateral shall be delivered to Secured Party or Custodian
promptly upon the receipt thereof by or on behalf of Debtor. All such
instruments and writings, if any, shall be held by Custodian on behalf of
Secured Party pursuant to the terms of the Custodian Agreement.
(f) Management of Investment of Collateral. So long as no Event of
Default has occurred and is continuing and subject to the other terms of this
Agreement and the Custodial Agreement, (including, without limitation, Section
4.1 thereof), Debtor shall have the right to deposit immediately available
funds in the Custodial Account to purchase Treasury Securities to be held
therein, substitute and/or sell Treasury Securities in the Custodial Account,
use cash balances in the Custodial Account to purchase additional Treasury
Securities to be held therein and otherwise manage the investment of the
Collateral on the terms set forth in this Agreement and the Custodial
Agreement.
30. Negative Covenants. Unless Secured Party shall otherwise
consent in writing, Debtor will at all times comply with the covenants
contained in this Section 4.3 from the date hereof and so long as any
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part of the Obligations is outstanding, subject to the other terms of this
Agreement and the Custodial Agreement:
(a) Transfer or Encumbrance. Except as expressly permitted
herein (including without limitation, in Section 4.2(f)) and in the Custodial
Agreement, Debtor will not sell, assign (by operation of law or otherwise),
transfer, exchange, lease or otherwise dispose of any of the Collateral, nor
will Debtor grant a Lien upon or execute, file or record any financing
statement with respect to the Collateral or otherwise identify the Collateral
as being subject to a pledge or security interest other than that created
hereby, nor will Debtor allow any such Lien, financing statement, or other
identification to exist or deliver actual or constructive possession of the
Collateral to any other Person, other than Secured Party or a bailee selected
by Secured Party, including without limitation Custodian, who is holding such
Collateral for the benefit of Secured Party. Debtor will not acquire any
Collateral through a clearing corporation (as such term is defined in the
Code).
(b) Impairment of Security Interest. Debtor will not take any
action which would in any manner impair the value or enforceability of Secured
Party's security interest in any Collateral, nor will Debtor fail to take any
action which is required to prevent (and which Debtor knows is required to
prevent) an impairment of the value or enforceability of Secured Party's
security interest in any Collateral.
(c) Possession of Certificates, etc. Evidencing Collateral.
Debtor will not cause or permit any document, instrument, or certificate
constituting or evidencing Collateral to at any time be in the actual or
constructive possession or control of any Person other than Debtor (to the
extent otherwise permitted hereunder), Secured Party, or a bailee selected by
Secured Party, including without limitation Custodian, who is holding such
Collateral for the benefit of Secured Party.
ARTICLE V
Remedies, Powers and Authorizations
31. Provisions Concerning the Collateral.
(a) Power of Attorney. Debtor hereby irrevocably appoints
Secured Party as Debtor's attorney-in-fact and proxy, with full authority in
the place and stead of Debtor and in the name of Debtor or otherwise, from time
to time in Secured Party's discretion upon the occurrence and during the
continuance of a Foreclosure Event, to take any action and to execute any
instrument which Secured Party may deem necessary or advisable to accomplish
the purposes of this Agreement including, without limitation: (i) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral; (ii) to receive, indorse and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) above;
and (iii) to file any claims or take any action or institute any proceedings
which Secured Party may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of Secured Party with
respect to any of the Collateral.
(b) Performance by Secured Party. If Debtor fails to perform
any agreement or obligation contained herein or in the Custodial Agreement,
Secured Party may itself perform, or cause performance of, such agreement or
obligation, and the expenses of Secured Party incurred in connection therewith
shall be payable by Debtor under Section 5.5.
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32. Remedies. If a Foreclosure Event shall have occurred and be
continuing, Secured Party may from time to time in its discretion, without
limitation and without notice except as expressly provided below, to the extent
permitted by applicable law:
(a) exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein, under the Transaction Documents or
otherwise available to it, all the rights and remedies of a secured party on
default under the Code (whether or not the Code applies to the affected
Collateral) and under 31 CFR Section Section 306.117 through 306.122 (herein
called the "Applicable CFR Sections");
(b) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest created hereby by any
available judicial procedure;
(c) buy the Collateral, or any part thereof, at any public sale;
(d) buy the Collateral, or any part thereof, at any private
sale, to the extent that the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
price quotations;
(e) apply by appropriate judicial proceedings for appointment of
a receiver for the Collateral, or any part thereof, and Debtor hereby consents
to any such appointment; and
(f) at its discretion, retain the Collateral in satisfaction of
the Obligations whenever the circumstances are such that Secured Party is
entitled to do so under the Code or the Applicable CFR Sections or otherwise.
Secured Party shall give at least ten (10) days' notice to Debtor of the time
and place of any public sale or the time after which any private sale is to be
made. Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Secured Party 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.
33. Application of Proceeds. If a Foreclosure Event shall have
occurred and be continuing, Secured Party may in its discretion apply any cash
held by Secured Party as Collateral, and any cash proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral, to any or all of the following in such order as
Secured Party may elect:
(a) To the payment or other satisfaction of any Liens,
encumbrances, or adverse claims upon or against any of the Collateral other
than Landlord's Liens;
(b) To the satisfaction of the Obligations; and
(c) By delivery to Debtor or to whomsoever shall be lawfully
entitled to receive the same or as a court of competent jurisdiction shall
direct.
34. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay the unpaid Obligations, Debtor shall, to the extent
permitted by applicable
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law, be liable for the deficiency, together with interest thereon as provided
in the Transaction Documents or (if no interest is so provided) at such other
rate as shall be fixed by applicable law, together with the costs of collection
and the Attorneys' Fees of Secured Party to collect such deficiency.
35. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or
judicial hearing, Debtor expressly waives, renounces and knowingly relinquishes
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process. In so providing for non-judicial remedies, Debtor
recognizes and concedes that such remedies are consistent with the usage of
trade, are responsive to commercial necessity, and are the result of a bargain
at arm's length. Nothing herein is intended to prevent Secured Party or Debtor
from resorting to judicial process at either party's option.
36. Other Recourse. To the fullest extent permitted by
applicable law, Debtor waives any right to require Secured Party to proceed
against any other Person, exhaust any Collateral or other security for the
Obligations, or to have any Other Liable Party joined with Debtor in any suit
arising out of the Obligations or this Agreement, or pursue any other remedy in
Secured Party's power. Debtor waives any and all notice of acceptance of this
Agreement. Debtor further waives notice of the creation, modification,
rearrangement, renewal or extension for any period of any of the Obligations of
any Other Liable Party from time to time and any defense arising by reason of
any disability or other defense of any Other Liable Party or by reason of the
cessation from any cause whatsoever of the liability of any Other Liable Party.
Until all of the Obligations shall have been paid in full, Debtor shall have no
right to subrogation, reimbursement, contribution or indemnity against any
Other Liable Party and Debtor waives the right to enforce any remedy which
Secured Party has or may hereafter have against any Other Liable Party, and
waives any benefit of and any right to participate in any other security
whatsoever now or hereafter held by Secured Party. Except as expressly
provided in the Transaction Documents, Debtor authorizes Secured Party, without
notice or demand and without any reservation of rights against Debtor and
without affecting Debtor's liability hereunder or on the Obligations, from time
to time to (a) take or hold any other property of any type from any other
Person as security for the Obligations, and exchange, enforce, waive and
release any or all of such other property, (b) apply the Collateral in
accordance with this Agreement or such other property and direct the order or
manner of sale thereof as Secured Party may in its discretion determine, (c)
renew, extend for any period, accelerate, modify, compromise, settle or release
any of the obligations of any Other Liable Party in respect to any or all of
the Obligations or other security for the Obligations, and (d) release or
substitute any Other Liable Party.
ARTICLE VI
Miscellaneous
37. Notices. Except as otherwise expressly provided herein, any
notice or communication required or permitted hereunder shall be given as
provided in the Custodial Agreement except that neither party hereto shall be
obligated to deliver to the Custodian a copy of any notice given by such party
to the other party hereunder, except as expressly required hereunder or under
the Custodial Agreement.
38. Amendments. No amendment of any provision of this Agreement
shall be effective unless it is in writing and signed by Debtor and Secured
Party, and no waiver of any provision of this Agreement, and no consent to any
departure by Debtor therefrom, shall be effective unless it is in writing and
signed by Secured Party, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given and
to the extent specified in such writing.
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39. Preservation of Rights. No failure on the part of either
party hereto to exercise, and no delay in exercising, any right hereunder or
under the Purchase Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. Neither the execution nor
the delivery of this Agreement shall in any manner impair or affect any other
security for the Obligations. The rights and remedies of the parties provided
herein and in the other Transaction Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law.
Nothing contained in this Agreement shall constitute a waiver of any right of
Debtor under the Purchase Agreement.
40. Unenforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or invalidity without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
41. Survival of Agreements. All representations and warranties
of Debtor herein, and all covenants and agreements herein shall survive the
execution and delivery of this Agreement, the execution and delivery of any
other Transaction Documents and the creation of the Obligations and continue
until terminated as provided in Section 6.8 or, in the case of specific
Collateral, until released or deemed released as provided in Section 2.3(c) and
(d).
42. Other Liable Party. Neither this Agreement nor the exercise
by Secured Party or the failure of Secured Party to exercise any right, power
or remedy conferred herein or by law shall be construed as relieving any Other
Liable Party from liability on the Obligations or any deficiency thereon. This
Agreement shall continue irrespective of the fact that the liability of any
Other Liable Party may have ceased or irrespective of the validity or
enforceability of any other Obligation Document to which Debtor or any Other
Liable Party may be a party, and notwithstanding the reorganization, death,
incapacity or bankruptcy of any Other Liable Party, or any other event or
proceeding affecting any Other Liable Party.
43. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and its successors and permitted assigns. Without limiting the
generality of the foregoing, Secured Party may grant a participation in or
assign its rights hereunder in the same manner and to the same extent that it
is entitled to grant a participation in or assign its rights under the Lease;
provided (as defined in the Purchase Agreement) that if there is more than one
assignee under an absolute assignment of the full rights of Secured Party under
the Lease executed after the date hereof, one of such assignees shall be
selected by all such assignees to serve as their agent hereunder. None of the
rights or duties of Debtor hereunder may be assigned or otherwise transferred
without the prior written consent of Secured Party; provided that, subject to
the terms and conditions of the Transaction Documents, Debtor's right to
receive Collateral upon the release thereof pursuant to the terms of this
Agreement and the Custodial Agreement may be assigned in connection with any
assignment of Debtor's rights to the Property (as defined in the Purchase
Agreement) under the other Transaction Documents so long as Debtor remains
liable for all of its duties and obligations under this Agreement and the
Custodial Agreement.
44. Termination. Following the Designated Payment Date, upon
satisfaction in full of all Obligations and upon written request for the
termination hereof delivered by Debtor to Secured Party, (i) this Agreement and
the security interest created hereby shall terminate and all rights to the
Collateral shall revert to Debtor and (ii) Secured Party will, upon Debtor's
request and at Debtor's expense, (a) return to Debtor such of the Collateral as
shall not have been sold or otherwise disposed of or applied
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pursuant to the terms hereof; and (b) execute and deliver to Debtor such
documents as Debtor shall reasonably request to evidence such termination and
release.
45. Governing Law. (a) This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of New York
(without regard to its conflicts of law provisions). Each party hereto
irrevocably submits itself to the non-exclusive jurisdiction of the state and
federal courts of New York for purposes of this Agreement and agrees and
consents that service of process may be made upon it in any legal proceeding
relating to this Agreement by any means allowed under federal or New York law.
The parties hereto hereby waive and agree not to assert, by way of motion, as a
defense or otherwise, that any such proceeding is brought in an inconvenient
forum or that the venue thereof is improper.
(b) Debtor hereby irrevocably designates CT Corporation Systems
located at 1633 Broadway, New York, New York 10019, as the Designee, Appointee
and Agent of Debtor to receive, for and on behalf of Debtor service of process
in such respective jurisdictions in any legal action or proceeding with respect
to this Agreement and the Custodial Agreement. It is understood that a copy of
such process served on such Agent will be promptly forwarded by overnight
courier to Debtor at its address set forth under its signature below, but the
failure of Debtor to receive such copy shall not affect in any way the service
of such process. Debtor further irrevocably consents to the service of process
of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
Debtor at its said address, such service to become effective thirty (30) days
after such mailing.
46. Counterparts. This Agreement may be separately executed in
any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
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IN WITNESS WHEREOF, Debtor and Secured Party have caused this
Agreement to be executed and delivered by their officers thereunto duly
authorized, as of the date first above written.
CYPRESS SEMICONDUCTOR CORPORATION
By:_____________________________________
Name: _______________________________
Title: ______________________________
BNP LEASING CORPORATION
By:_____________________________________
Name: Lloyd G. Cox
Title: Vice President
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EXHIBIT A
REQUEST FOR RELEASE
Reference is made to that certain Pledge and Security Agreement dated
as of _______________, 1996 (as from time to time amended, the "Agreement"), by
and between Cypress Semiconductor Corporation ("Debtor") and BNP Leasing
Corporation ("Secured Party"). Terms which are defined in the Agreement are
used herein with the meanings given them in the Agreement.
Pursuant to the terms of the Agreement Debtor hereby requests that
Secured Party release the Collateral described below (the "Designated
Collateral"):
[Treasury Securities to be described here by Par Amount, Coupon and Maturity or
other Collateral to be described by dollar amount and type.]
To induce Secured Party to release such Collateral, Debtor hereby
represents, warrants, acknowledges, and agrees to and with Secured Party that:
(a) The person signing this instrument on behalf of
Debtor has all necessary authority to act for Debtor in making the
request herein contained.
(b) There does not exist on the date hereof any condition
or event which constitutes an Event of Default which has not been
cured or waived in writing by Secured Party.
(c) After giving effect to the release of the Designated
Collateral, the Market Value of the Collateral remaining encumbered
under the Agreement shall be at least equal to 102% of the Minimum
Collateral Value, in each case as determined as of the Valuation Date
most recently preceding the date of this Request for Release.
IN WITNESS WHEREOF, this instrument is executed as of
____________________, ____.
CYPRESS SEMICONDUCTOR CORPORATION
By:____________________________________
Name:
Title:
<PAGE> 144
BNP Leasing Corporation hereby releases the Designated Collateral
described above from the Agreement and authorizes Custodian to transfer the
Designated Collateral from the Custodial Account and to indicate such release
on its books and records.
BNP LEASING CORPORATION
By:____________________________________
Name:
Title:
EXECUTION
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made as of
April 12, 1996, by and between CYPRESS SEMICONDUCTOR CORPORATION, a California
corporation (herein called "Debtor"), and BNP LEASING CORPORATION, a Delaware
corporation (herein called "Secured Party").
W I T N E S E T H:
Debtor and Secured Party are parties to (i) a Lease Agreement dated of
even date herewith (herein called the "Lease") pursuant to which Secured Party
has agreed to lease certain property to Debtor; and (ii) a Purchase Agreement
dated of even date herewith (herein called the "Purchase Agreement") pursuant
to which Debtor has agreed to purchase such property from Secured Party upon
the occurrence of certain events or cause such property to be purchased; and
WHEREAS, to secure Debtor's obligations under the Purchase Agreement,
Debtor has agreed to execute and deliver to Secured Party this Agreement
granting to Secured Party a security interest in the Collateral as defined
herein;
WHEREAS, Debtor, Secured Party and Custodian (hereinafter defined) are
parties to a Custodial Agreement of even date herewith (herein called the
"Custodial Agreement") which provides that Custodian will hold the Collateral
on the terms set forth therein and that Debtor will manage the investment of
the Collateral on the terms set forth therein;
NOW, THEREFORE, in consideration of the premises and in order to
induce Secured Party to lease such property under the Lease, Debtor hereby
agrees with Secured Party as follows:
ARTICLE I
Definitions and References
47. General Definitions. As used herein, the terms "Agreement",
"Debtor", "Secured Party", "Lease," "Purchase Agreement" and "Custodial
Agreement" shall have the meanings indicated above, and the following terms
shall have the following meanings:
"Applicable CFR Sections" has the meaning given it in Section 5.2(a).
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"Business Day" means any day that is (i) not a Saturday, Sunday or day
on which commercial banks are generally closed or required to be closed in San
Francisco, California, or New York City, New York, and (ii) 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 (i).
"CFR" means the United States Code of Federal Regulations, as from
time to time amended.
"Code" means the Uniform Commercial Code in effect in the State of New
York on the date hereof.
"Collateral" means all property of whatever type, in which Secured
Party at any time has a security interest pursuant to Section 3.1.
"Collateral Percentage" means eighty-five percent (85%).
"Collateral Value" means as of any date, an amount equal to the sum
of the respective Market Values of all Treasury Securities, and cash on deposit
in the Custodial Account.
"Custodial Account" has the meaning given it in the Custodial
Agreement.
"Custodian" means Banque Nationale de Paris, New York Branch as
custodian under the Custodial Agreement, and any successor custodian thereunder
appointed in accordance with the terms thereof.
"Custodial Agreement" means the Custodial Agreement of even date
herewith among Debtor, Secured Party and Custodian.
"Designated Collateral" has the meaning given it in Section 2.3(c).
"Event of Default" means the occurrence of any of the following:
(a) the failure by Debtor to pay all or any part of the
Obligations when due, after giving effect to any applicable notice and
grace periods provided for in the Purchase Agreement;
(b) the failure by Debtor to comply with Section 2.3(a) or (b)
of this Agreement;
(c) the failure by Debtor to comply with any other term,
provision of condition of this Agreement if such failure is not cured
within thirty (30) days after Secured Party gives Debtor written
notice thereof;
(d) the failure of any representation or warranty made in
Section 4.1(a) or (c) of this Agreement to be true when made;
(e) the failure of any other representation or warranty made
in this agreement to be true when made if such failure is not cured
within thirty (30) days after Secured Party gives Debtor notice
thereof; and
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(f) the failure of the security interest of Secured Party in
the Collateral to be a valid, perfected, first priority security
interest, if such failure is not cured within three (3) Business Days
after Secured Party gives Debtor notice thereof.
"Foreclosure Event" means the failure of Debtor to pay or perform any
obligation under the Purchase Agreement when due or required under the Purchase
Agreement on or after the Designated Payment Date (after the giving of any
notice required thereunder).
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure indebtedness of any kind which is owed
to him or any other arrangement with such creditor which provides for the
payment of such indebtedness out of such property or assets or which allows him
to have such indebtedness satisfied out of such property or assets prior to the
general creditors of any owner thereof, including without limitation any lien,
mortgage, security interest, pledge, deposit, production payment, rights of a
vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien,
or any other charge or encumbrance for security purposes, whether arising by
law or agreement or otherwise, but excluding any right of offset which arises
without agreement in the ordinary course of business. "Lien" also means any
filed financing statement, any registration with an issuer of uncertificated
securities, or any other arrangement which would serve to perfect a Lien
described in the preceding sentence, regardless of whether such financing
statement is filed, such registration is made, or such arrangement is
undertaken before or after such Lien exists.
"Market Value" means with respect to the Collateral on any Valuation
Date, a dollar value determined as follows:
(a) cash shall be valued at its face amount on such Valuation
Date; and
(b) a Treasury Security shall be valued by multiplying the
Principal Balance thereof on such Valuation Date by the bid price therefor as
established pursuant to Custodian's standard and customary pricing sources
which it believes to be reliable.
"Minimum Collateral Value" means as of any date, an amount equal to
the Collateral Percentage multiplied by the Stipulated Loss Value on such date
as calculated in accordance with the Lease.
"Obligations" means all of Debtor's obligations under the Purchase
Agreement, including, but not limited to (i) Debtor's obligation to pay the
entire Purchase Price and Shortage Amount, if any, as the case may be, as
required under SECTION 2 of the Purchase Agreement if Secured Party elects
specific performance of the Purchase Agreement, and (ii) any damages incurred
by Secured Party because of (A) Debtor's breach of the Purchase Agreement, or
(B) the rejection by Debtor of the Purchase Agreement in any bankruptcy or
insolvency proceeding owing under or with respect to a judgement, writ, order
or other document issued by a court of competent jurisdiction or (C) for any
other reason.
"Other Liable Party" means any Person, other than Debtor, who may now
or may at any time hereafter be primarily or secondarily liable for any of the
Obligations or who may now or may at any time hereafter have granted to Secured
Party a Lien upon any of the Collateral.
"Person" means an individual, corporation, partnership, association,
joint stock company, trust, unincorporated organization or joint venture, or a
court or governmental unit or any agency or subdivision thereof, or any other
legally recognizable entity.
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"Principal Balance" means as of any date with respect to any Treasury
Security, the remaining unpaid principal balance of each Treasury Security.
"Release Period" has the meaning given it in the Custodial Agreement.
"Transaction Documents" means, collectively, this Agreement, the
Lease, the Purchase Agreement, the Environmental Indemnity and the Custodial
Agreement.
"Treasury Securities" shall mean uncertificated, direct, noncallable
debt obligations of the United States of America maturing within three (3)
years of the date of pledge to Secured Party constituting Treasury bonds,
notes, certificates of indebtedness or bills issued under the Second Liberty
Bond Act, as amended, in the form of entry made on the records of the Federal
Reserve Bank of New York as prescribed under 31 CFR.
"Valuation Date" has the meaning given it in the Custodial Agreement.
"Written Instruction" has the meaning given it in the Custodial
Agreement.
48. Other Definitions. Reference is hereby made to the Lease
and the Purchase Agreement for a statement of the terms thereof. All
capitalized terms used in this Agreement which are defined in the Lease or the
Purchase Agreement and not otherwise defined herein shall have the same
meanings herein as set forth therein. All terms used in this Agreement which
are defined in the Code and not otherwise defined herein or in the Purchase
Agreement or the Lease shall have the same meanings herein as set forth
therein, except where the context otherwise requires.
49. Exhibits. All exhibits attached to this Agreement are a
part hereof for all purposes.
50. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references to the Transaction Documents) also refer to and include
all valid renewals, extensions, amendments, modifications, supplements or
restatements of any such agreement, instrument or document, provided that
nothing contained in this Section shall be construed to authorize any Person to
execute or enter into any such renewal, extension, amendment, modification,
supplement or restatement.
51. References and Titles. All references in this Agreement to
Exhibits, Articles, Sections, subsections, and other subdivisions refer to the
Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. The words "this Agreement", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited. The phrases "this Section" and "this subsection" and similar phrases
refer only to the Sections or subsections hereof in which the phrase occurs.
The word "or" is not exclusive, and the word "including" (in all of its forms)
means "including without limitation". Pronouns in masculine, feminine and
neuter gender shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa unless
the context otherwise requires.
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ARTICLE II
Custodial Account
52. Establishment of Custodial Account. Contemporaneously with
the execution of this Agreement, Debtor shall establish with Custodian the
Custodial Account.
Section 2.2. Valuation of Collateral.
(a) On each Valuation Date, the Custodian shall determine the
Market Value of the Collateral, prepare a report thereof and deliver such
report, all in the manner described in the Custodial Agreement.
(b) On each Valuation Date, Secured Party shall determine the
Stipulated Loss Value, the Minimum Collateral Value and 102% of the Minimum
Collateral Value as of such Valuation Date, and shall deliver written notice
thereof by facsimile transmission to Debtor and Custodian no later than three
Business Days after such Valuation Date. In making such determination with
respect to the last Valuation Date occurring in each calendar month, so long as
Secured Party has received the valuation report from Custodian for such
Valuation Date, such notice shall specify whether the Market Value of the
Collateral reflected in such valuation report is less or greater than 102% of
the Minimum Collateral Value and the amount of such deficiency or excess.
Section 2.3. Minimum Collateral Value.
(a) Maintenance of Greater Than Minimum Collateral Value. Debtor
agrees to deposit with Custodian and designate to be held in the Custodial
Account subject to the pledge and security interest created hereby, immediately
available funds in an amount equal to the Minimum Collateral Value on the date
of the Initial Funding Advance, and to deliver to Custodian together with such
funds Written Instructions pursuant to Section 3.3(b) of the Custodial
Agreement instructing Custodian to purchase Treasury Securities with such
funds.
(b) Decreases in Market Value of Collateral and/or Increases in
Stipulated Loss Value. If on any Valuation Date, the Market Value of the
Collateral is less than 100% of the Minimum Collateral Value for any reason
whatsoever (including any decrease in the Market Value of the Collateral or any
increase in the Stipulated Loss Value as reported by Secured Party under
Section 2.2(b) above), Debtor shall deposit with Custodian immediately
available funds in an amount sufficient to purchase Treasury Securities having
a Market Value that will cause the Market Value of the Collateral to equal or
exceed 102% of the Minimum Collateral Value. Debtor shall designate the
Treasury Securities to be purchased in a Written Instruction to Custodian
delivered to Custodian together with such funds. Such deposit of funds and
designation of additional Treasury Securities shall be made by Debtor not later
than three (3) Business Days after receipt of notice from Secured Party under
Section 2.2(b) above that the Market Value of the Collateral is less than the
100% of the Minimum Collateral Value.
(c) Increases in Market Value of Collateral and/or Decreases in
Stipulated Loss Value. If on the Valuation Date which occurs at the beginning
of each Release Period, the Market Value of the Collateral is greater than 102%
of the Minimum Collateral Value for any reason whatsoever (including a decrease
in the Stipulated Loss Value or an increase in the Market Value of the
Collateral), Debtor may, during the Release Period for such Valuation Date so
long as no Event of Default then exists, request in
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writing in the form of EXHIBIT A (herein called a "Release Request"), that
Secured Party release from the Custodial Account certain Treasury Securities or
other Collateral as designated by Debtor (the "Designated Collateral") so long
as the remaining Collateral has a Market Value equal to or greater than 102% of
the Minimum Collateral Value. If Secured Party actually receives a Release
Request, Secured Party shall (i) confirm to Debtor by facsimile its receipt of
such Release Request on the Business Day following the date on which it
receives such Release Request and (ii) within five (5) Business Days after the
date on which it receives such Release Request, give the release requested
thereby in writing by executing such Release Request and return the same to
Debtor unless Secured Party determines in good faith that the Designated
Collateral is needed to keep the Market Value of the Collateral equal to or
greater than 102% of the Minimum Collateral Value, in which case Secured Party
shall notify Debtor in writing that it objects to the release of the Designated
Collateral and specify the reasons therefor. All references to Stipulated Loss
Value, Market Value of Collateral and Minimum Collateral Value in this
subsection (c) shall mean the amounts determined in accordance with the terms
of this Agreement and the Custodial Agreement as of the most recent Valuation
Date.
(d) Release of Collateral. Upon Secured Party's written release
of specific Designated Collateral, the pledge and security interest in such
Designated Collateral shall terminate and such Designated Collateral shall no
longer be part of the Collateral, and all rights to the Designated Collateral
shall revert to the Debtor. Debtor shall thereupon have the right to deliver
to the Custodian the instructions described in Section 3.3(d) of the Custodial
Agreement and Secured Party shall execute such documents as the Custodian may
reasonably request as a condition to the release of such Collateral.
ARTICLE III
Security Interest
Section 3.1. Grant of Security Interest. As collateral security for
all of the Obligations, Debtor hereby pledges and assigns to Secured Party and
grants to Secured Party a continuing security interest in all of the following:
(a) The Custodial Account, all funds from time to time on deposit in
the Custodial Account, all Treasury Securities from time to time on deposit in
the Custodial Account, all funds and Treasury Securities otherwise designated
to be held by Custodian as collateral for the Obligations subject to the pledge
and security interest created hereby, and all proceeds, collections, income,
replacements, substitutions, reinvestments, distributions and claims with
respect thereto, except as released pursuant to Sections 2.3(c) and (d).
(b) All of Debtor's right, title and interest in, to and under the
Custodial Agreement.
(c) All proceeds of any and all of the property described in
subsection (a) and (b) immediately above.
In each case, the foregoing shall be covered by this Agreement, whether
Debtor's ownership or other rights therein are presently held or hereafter
acquired and howsoever Debtor's interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise).
Section 3.2. Obligations Secured. The security interest created
hereby in the Collateral constitutes continuing collateral security for the
payment and performance of the Obligations.
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ARTICLE IV
Representations, Warranties and Covenants
53. Representations and Warranties. Debtor represents and
warrants as follows as of the date hereof and any future date on which new or
substitute Collateral is provided:
(a) Ownership and Liens. Debtor has good and marketable title
to the Collateral free and clear of all Liens, encumbrances or adverse claims,
except for the pledge and security interest created by this Agreement. None of
the Collateral has been acquired by Debtor through a clearing corporation (as
such term is defined in the Code). Debtor has not acknowledged or given to
Custodian notice of a Lien on the Collateral other than the Lien in favor of
Secured Party. No dispute, right of set-off, recoupment, counterclaim or
defense exists with respect to all or any part of the Collateral and no
effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording office except
such as may have been filed in favor of Secured Party relating to this
Agreement and Landlord's Liens.
(b) No Conflicts or Consents. To the best knowledge of the
Debtor, neither the ownership or the intended use of the Collateral by Debtor,
nor the grant of the security interest by Debtor to Secured Party herein, nor
the exercise by Secured Party of its rights or remedies hereunder, will (i)
violate any provision of (a) any domestic or foreign law, statute, rule or
regulation, (b) the articles or certificate of incorporation, charter or bylaws
of Debtor, or (c) any agreement, judgment, license, order or permit applicable
to or binding upon Debtor, or (ii) result in or require the creation of any
Lien, charge or encumbrance upon any assets or properties of Debtor except as
expressly contemplated in this Agreement or the Custodial Agreement. Except as
expressly contemplated in this Agreement and the Custodial Agreement, to the
best knowledge of Debtor no consent, approval, authorization or order of, and
no notice to or filing with any court, governmental authority or third party is
required in connection with the grant by Debtor of the security interest
herein, or the exercise by Secured Party of its rights and remedies hereunder.
(c) Security Interest. Debtor has and will have at all times
full right, power and authority to grant a security interest in the Collateral
to Secured Party in the manner provided herein, free and clear of any Lien,
adverse claim, or encumbrance. To the best knowledge of Debtor, this Agreement
creates a valid and binding security interest in favor of Secured Party in the
Collateral securing the Obligations.
(d) Location of Debtor and Records. Debtor's chief executive
office and principal place of business and the office where its records
concerning the Collateral are kept is located at its address set forth in the
Custodial Agreement or at such other location as Debtor shall specify to
Secured Party pursuant to Section 4.2(d).
54. Affirmative Covenants. Unless Secured Party shall otherwise
consent in writing, Debtor will at all times comply with the covenants
contained in this Section 4.2 from the date hereof and so long as any part of
the Obligations is outstanding, subject to the other terms of this Agreement
and the Custodial Agreement.
(a) Ownership and Liens. Debtor will maintain good and
marketable title to all Collateral free and clear of all Liens, encumbrances or
adverse claims, except for the security interest created by this Agreement and
Landlord's Liens. Debtor will not permit any dispute, right of set-off,
counterclaim or
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defense to exist with respect to all or any part of the Collateral except those
arising with respect to Landlord's Liens. Debtor will cause to be terminated
any financing statement or other registration with respect to the Collateral,
except such as may exist or as may have been filed in favor of Secured Party.
Debtor will defend Secured Party's right, title and special property and
security interest in and to the Collateral against the claims of any Person.
(b) Further Assurances. Debtor will, at its expense and at any
time and from time to time, promptly execute and deliver all further
instruments and documents and take all further action that may be reasonably
necessary or desirable and that Secured Party may request in order (i) to
perfect and protect the security interest created or purported to be created
hereby and the perfection and first priority of such security interest and
confirm that Collateral hereafter pledged by Debtor is subject to this
Agreement; (ii) to enable Secured Party to exercise and enforce its rights and
remedies hereunder in respect of the Collateral; or (iii) to otherwise effect
the purposes of this Agreement, including, without limitation, executing and
delivery to Secured Party financing statements covering the Collateral and
furnishing to Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Secured Party may reasonably request, all in reasonable
detail.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and its representatives
to inspect Debtor's books and records concerning the Collateral on the same
terms and conditions as set forth in the Lease with respect to books and
records concerning the property covered by the Lease.
(d) Information. Debtor will furnish to Secured Party any
information which Secured Party may from time to time reasonably request
concerning any covenant, provision or representation contained herein or any
other matter in connection with the Collateral. Debtor will notify Secured
Party of any change in the location of its chief executive office or principal
place of business.
(e) Delivery of Collateral. All instruments and writings, if
any, constituting Collateral shall be delivered to Secured Party or Custodian
promptly upon the receipt thereof by or on behalf of Debtor. All such
instruments and writings, if any, shall be held by Custodian on behalf of
Secured Party pursuant to the terms of the Custodian Agreement.
(f) Management of Investment of Collateral. So long as no Event
of Default has occurred and is continuing and subject to the other terms of this
Agreement and the Custodial Agreement, (including, without limitation, Section
4.1 thereof), Debtor shall have the right to deposit immediately available funds
in the Custodial Account to purchase Treasury Securities to be held therein,
substitute and/or sell Treasury Securities in the Custodial Account, use cash
balances in the Custodial Account to purchase additional Treasury Securities to
be held therein and otherwise manage the investment of the Collateral on the
terms set forth in this Agreement and the Custodial Agreement.
55. Negative Covenants. Unless Secured Party shall otherwise
consent in writing, Debtor will at all times comply with the covenants
contained in this Section 4.3 from the date hereof and so long as any part of
the Obligations is outstanding, subject to the other terms of this Agreement
and the Custodial Agreement:
(a) Transfer or Encumbrance. Except as expressly permitted
herein (including without limitation, in Section 4.2(f)) and in the Custodial
Agreement, Debtor will not sell, assign (by operation of law or otherwise),
transfer, exchange, lease or otherwise dispose of any of the Collateral, nor
will Debtor
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grant a Lien upon or execute, file or record any financing statement with
respect to the Collateral or otherwise identify the Collateral as being subject
to a pledge or security interest other than that created hereby, nor will
Debtor allow any such Lien, financing statement, or other identification to
exist or deliver actual or constructive possession of the Collateral to any
other Person, other than Secured Party or a bailee selected by Secured Party,
including without limitation Custodian, who is holding such Collateral for the
benefit of Secured Party. Debtor will not acquire any Collateral through a
clearing corporation (as such term is defined in the Code).
(b) Impairment of Security Interest. Debtor will not take any
action which would in any manner impair the value or enforceability of Secured
Party's security interest in any Collateral, nor will Debtor fail to take any
action which is required to prevent (and which Debtor knows is required to
prevent) an impairment of the value or enforceability of Secured Party's
security interest in any Collateral.
(c) Possession of Certificates, etc. Evidencing Collateral.
Debtor will not cause or permit any document, instrument, or certificate
constituting or evidencing Collateral to at any time be in the actual or
constructive possession or control of any Person other than Debtor (to the
extent otherwise permitted hereunder), Secured Party, or a bailee selected by
Secured Party, including without limitation Custodian, who is holding such
Collateral for the benefit of Secured Party.
ARTICLE V
Remedies, Powers and Authorizations
56. Provisions Concerning the Collateral.
(a) Power of Attorney. Debtor hereby irrevocably appoints
Secured Party as Debtor's attorney-in-fact and proxy, with full authority in
the place and stead of Debtor and in the name of Debtor or otherwise, from time
to time in Secured Party's discretion upon the occurrence and during the
continuance of a Foreclosure Event, to take any action and to execute any
instrument which Secured Party may deem necessary or advisable to accomplish
the purposes of this Agreement including, without limitation: (i) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral; (ii) to receive, indorse and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i) above;
and (iii) to file any claims or take any action or institute any proceedings
which Secured Party may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of Secured Party with
respect to any of the Collateral.
(b) Performance by Secured Party. If Debtor fails to perform
any agreement or obligation contained herein or in the Custodial Agreement,
Secured Party may itself perform, or cause performance of, such agreement or
obligation, and the expenses of Secured Party incurred in connection therewith
shall be payable by Debtor under Section 5.5.
57. Remedies. If a Foreclosure Event shall have occurred and be
continuing, Secured Party may from time to time in its discretion, without
limitation and without notice except as expressly provided below, to the extent
permitted by applicable law:
(a) exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein, under the Transaction Documents or
otherwise available to it, all the rights and remedies of a
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secured party on default under the Code (whether or not the Code applies to the
affected Collateral) and under 31 CFR Section Section 306.117 through 306.122
(herein called the "Applicable CFR Sections");
(b) reduce its claim to judgment or foreclose or otherwise
enforce, in whole or in part, the security interest created hereby by any
available judicial procedure;
(c) buy the Collateral, or any part thereof, at any public sale;
(d) buy the Collateral, or any part thereof, at any private
sale, to the extent that the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
price quotations;
(e) apply by appropriate judicial proceedings for appointment of
a receiver for the Collateral, or any part thereof, and Debtor hereby consents
to any such appointment; and
(f) at its discretion, retain the Collateral in satisfaction of
the Obligations whenever the circumstances are such that Secured Party is
entitled to do so under the Code or the Applicable CFR Sections or otherwise.
Secured Party shall give at least ten (10) days' notice to Debtor of the time
and place of any public sale or the time after which any private sale is to be
made. Secured Party shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Secured Party 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.
58. Application of Proceeds. If a Foreclosure Event shall have
occurred and be continuing, Secured Party may in its discretion apply any cash
held by Secured Party as Collateral, and any cash proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral, to any or all of the following in such order as
Secured Party may elect:
(a) To the payment or other satisfaction of any Liens,
encumbrances, or adverse claims upon or against any of the Collateral other
than Landlord's Liens;
(b) To the satisfaction of the Obligations; and
(c) By delivery to Debtor or to whomsoever shall be lawfully
entitled to receive the same or as a court of competent jurisdiction shall
direct.
59. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay the unpaid Obligations, Debtor shall, to the extent
permitted by applicable law, be liable for the deficiency, together with
interest thereon as provided in the Transaction Documents or (if no interest is
so provided) at such other rate as shall be fixed by applicable law, together
with the costs of collection and the Attorneys' Fees of Secured Party to
collect such deficiency.
60. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or
judicial hearing, Debtor expressly waives, renounces and knowingly relinquishes
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process. In so providing for non-judicial remedies, Debtor
recognizes and concedes that such
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remedies are consistent with the usage of trade, are responsive to commercial
necessity, and are the result of a bargain at arm's length. Nothing herein is
intended to prevent Secured Party or Debtor from resorting to judicial process
at either party's option.
61. Other Recourse. To the fullest extent permitted by
applicable law, Debtor waives any right to require Secured Party to proceed
against any other Person, exhaust any Collateral or other security for the
Obligations, or to have any Other Liable Party joined with Debtor in any suit
arising out of the Obligations or this Agreement, or pursue any other remedy in
Secured Party's power. Debtor waives any and all notice of acceptance of this
Agreement. Debtor further waives notice of the creation, modification,
rearrangement, renewal or extension for any period of any of the Obligations of
any Other Liable Party from time to time and any defense arising by reason of
any disability or other defense of any Other Liable Party or by reason of the
cessation from any cause whatsoever of the liability of any Other Liable Party.
Until all of the Obligations shall have been paid in full, Debtor shall have no
right to subrogation, reimbursement, contribution or indemnity against any
Other Liable Party and Debtor waives the right to enforce any remedy which
Secured Party has or may hereafter have against any Other Liable Party, and
waives any benefit of and any right to participate in any other security
whatsoever now or hereafter held by Secured Party. Except as expressly
provided in the Transaction Documents, Debtor authorizes Secured Party, without
notice or demand and without any reservation of rights against Debtor and
without affecting Debtor's liability hereunder or on the Obligations, from time
to time to (a) take or hold any other property of any type from any other
Person as security for the Obligations, and exchange, enforce, waive and
release any or all of such other property, (b) apply the Collateral in
accordance with this Agreement or such other property and direct the order or
manner of sale thereof as Secured Party may in its discretion determine, (c)
renew, extend for any period, accelerate, modify, compromise, settle or release
any of the obligations of any Other Liable Party in respect to any or all of
the Obligations or other security for the Obligations, and (d) release or
substitute any Other Liable Party.
ARTICLE VI
Miscellaneous
62. Notices. Except as otherwise expressly provided herein, any
notice or communication required or permitted hereunder shall be given as
provided in the Custodial Agreement except that neither party hereto shall be
obligated to deliver to the Custodian a copy of any notice given by such party
to the other party hereunder, except as expressly required hereunder or under
the Custodial Agreement.
63. Amendments. No amendment of any provision of this Agreement
shall be effective unless it is in writing and signed by Debtor and Secured
Party, and no waiver of any provision of this Agreement, and no consent to any
departure by Debtor therefrom, shall be effective unless it is in writing and
signed by Secured Party, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given and
to the extent specified in such writing.
64. Preservation of Rights. No failure on the part of either
party hereto to exercise, and no delay in exercising, any right hereunder or
under the Purchase Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. Neither the execution nor
the delivery of this Agreement shall in any manner impair or affect any other
security for the Obligations. The rights and remedies of the parties provided
herein and in the other Transaction Documents are cumulative and are in
addition to, and not exclusive
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of, any rights or remedies provided by law. Nothing contained in this
Agreement shall constitute a waiver of any right of Debtor under the Purchase
Agreement.
65. Unenforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or invalidity without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
66. Survival of Agreements. All representations and warranties
of Debtor herein, and all covenants and agreements herein shall survive the
execution and delivery of this Agreement, the execution and delivery of any
other Transaction Documents and the creation of the Obligations and continue
until terminated as provided in Section 6.8 or, in the case of specific
Collateral, until released or deemed released as provided in Section 2.3(c) and
(d).
67. Other Liable Party. Neither this Agreement nor the exercise
by Secured Party or the failure of Secured Party to exercise any right, power
or remedy conferred herein or by law shall be construed as relieving any Other
Liable Party from liability on the Obligations or any deficiency thereon. This
Agreement shall continue irrespective of the fact that the liability of any
Other Liable Party may have ceased or irrespective of the validity or
enforceability of any other Obligation Document to which Debtor or any Other
Liable Party may be a party, and notwithstanding the reorganization, death,
incapacity or bankruptcy of any Other Liable Party, or any other event or
proceeding affecting any Other Liable Party.
68. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and its successors and permitted assigns. Without limiting the
generality of the foregoing, Secured Party may grant a participation in or
assign its rights hereunder in the same manner and to the same extent that it
is entitled to grant a participation in or assign its rights under the Lease;
provided (as defined in the Purchase Agreement) that if there is more than one
assignee under an absolute assignment of the full rights of Secured Party under
the Lease executed after the date hereof, one of such assignees shall be
selected by all such assignees to serve as their agent hereunder. None of the
rights or duties of Debtor hereunder may be assigned or otherwise transferred
without the prior written consent of Secured Party; provided that, subject to
the terms and conditions of the Transaction Documents, Debtor's right to
receive Collateral upon the release thereof pursuant to the terms of this
Agreement and the Custodial Agreement may be assigned in connection with any
assignment of Debtor's rights to the Property (as defined in the Purchase
Agreement) under the other Transaction Documents so long as Debtor remains
liable for all of its duties and obligations under this Agreement and the
Custodial Agreement.
69. Termination. Following the Designated Payment Date, upon
satisfaction in full of all Obligations and upon written request for the
termination hereof delivered by Debtor to Secured Party, (i) this Agreement and
the security interest created hereby shall terminate and all rights to the
Collateral shall revert to Debtor and (ii) Secured Party will, upon Debtor's
request and at Debtor's expense, (a) return to Debtor such of the Collateral as
shall not have been sold or otherwise disposed of or applied pursuant to the
terms hereof; and (b) execute and deliver to Debtor such documents as Debtor
shall reasonably request to evidence such termination and release.
70. Governing Law. (a) This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of New York
(without regard to its conflicts of law provisions). Each party hereto
irrevocably submits itself to the non-exclusive jurisdiction of the state and
federal
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<PAGE> 156
courts of New York for purposes of this Agreement and agrees and consents that
service of process may be made upon it in any legal proceeding relating to this
Agreement by any means allowed under federal or New York law. The parties
hereto hereby waive and agree not to assert, by way of motion, as a defense or
otherwise, that any such proceeding is brought in an inconvenient forum or that
the venue thereof is improper.
(b) Debtor hereby irrevocably designates CT Corporation Systems
located at 1633 Broadway, New York, New York 10019, as the Designee, Appointee
and Agent of Debtor to receive, for and on behalf of Debtor service of process
in such respective jurisdictions in any legal action or proceeding with respect
to this Agreement and the Custodial Agreement. It is understood that a copy of
such process served on such Agent will be promptly forwarded by overnight
courier to Debtor at its address set forth under its signature below, but the
failure of Debtor to receive such copy shall not affect in any way the service
of such process. Debtor further irrevocably consents to the service of process
of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
Debtor at its said address, such service to become effective thirty (30) days
after such mailing.
71. Counterparts. This Agreement may be separately executed in
any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
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IN WITNESS WHEREOF, Debtor and Secured Party have caused this
Agreement to be executed and delivered by their officers thereunto duly
authorized, as of the date first above written.
CYPRESS SEMICONDUCTOR CORPORATION
By:____________________________________
Name:_______________________________
Title:______________________________
BNP LEASING CORPORATION
By:____________________________________
Name: Lloyd G. Cox
Title: Vice President
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<PAGE> 158
EXHIBIT A
REQUEST FOR RELEASE
Reference is made to that certain Pledge and Security Agreement dated
as of _______________, 1996 (as from time to time amended, the "Agreement"), by
and between Cypress Semiconductor Corporation ("Debtor") and BNP Leasing
Corporation ("Secured Party"). Terms which are defined in the Agreement are
used herein with the meanings given them in the Agreement.
Pursuant to the terms of the Agreement Debtor hereby requests that
Secured Party release the Collateral described below (the "Designated
Collateral"):
[Treasury Securities to be described here by Par Amount, Coupon and Maturity or
other Collateral to be described by dollar amount and type.]
To induce Secured Party to release such Collateral, Debtor hereby
represents, warrants, acknowledges, and agrees to and with Secured Party that:
(a) The person signing this instrument on behalf of
Debtor has all necessary authority to act for Debtor in making the
request herein contained.
(b) There does not exist on the date hereof any condition
or event which constitutes an Event of Default which has not been
cured or waived in writing by Secured Party.
(c) After giving effect to the release of the Designated
Collateral, the Market Value of the Collateral remaining encumbered
under the Agreement shall be at least equal to 102% of the Minimum
Collateral Value, in each case as determined as of the Valuation Date
most recently preceding the date of this Request for Release.
IN WITNESS WHEREOF, this instrument is executed as of
____________________, ____.
CYPRESS SEMICONDUCTOR CORPORATION
By:____________________________________
Name:
Title:
<PAGE> 159
BNP Leasing Corporation hereby releases the Designated Collateral
described above from the Agreement and authorizes Custodian to transfer the
Designated Collateral from the Custodial Account and to indicate such release
on its books and records.
BNP LEASING CORPORATION
By:____________________________________
Name:
Title:
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<PAGE> 160
EXECUTION
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "AGREEMENT") is made as of April 12,
1996, 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. As a condition to BNP's acquisition of any of the land
described in Exhibit A, BNP requires the agreements of Cypress, on and subject
to the terms and conditions set out herein, to protect BNP against certain
losses that BNP may suffer if (1) the value of the land covered from time to
time under the Lease is or becomes less than BNP's investment in such land, or
(2) the value of buildings and other property covered by the Lease, exclusive
of land, is or may become less than BNP's investment in such buildings and
other property.
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:
(a) 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:
(i) 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.
(ii) Designated Payment Date. "Designated Payment
Date" means the earlier of the following:
a) the first Business Day in May, 2001; or
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b) 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
c) 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 ninety (90) 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 sends 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.
(iii) 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 completed all Construction Projects, the construction of
which was commenced prior to the Designated Payment Date; 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.
(d) Improvement Value Percentage. "Improvement Value
Percentage" means the percentage computed by dividing the value of
the Improvements and any other Property, exclusive of the land, by the
value of the entire Property, including land. BNP and Cypress
stipulate that the Improvement Value Percentage is and will remain
59.78%.
(e) Land Value Percentage. "Land Value Percentage" means
40.22%, which equals 100% less the Improvement Value Percentage.
(f) 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
an Advance Date or 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.
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(g) Net Improvement Sales Proceeds. "Net Improvement
Sales Proceeds" means the Improvement Value Percentage, times the net cash
price that BNP actually receives from any Applicable Purchaser upon the
Designated Payment Date because of BNP's sale of its interest in the Property
to such
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Applicable Purchaser or that BNP would have received from an Applicable
Purchaser on the Designated Payment Date but for BNP's election to
retain the Property as provided in Paragraph 2(a)(ii) below.
(h) Net Land Sales Proceeds. "Net Land Sales Proceeds"
means the Land Value Percentage, times the net cash price that BNP
actually receives from any Applicable Purchaser upon the Designated
Payment Date because of BNP's sale of its interest in the Property to
such Applicable Purchaser or that BNP would have received from an
Applicable Purchaser on the Designated Payment Date but for BNP's
election to retain the Property as provided in Paragraph 2(a)(ii)
below.
(i) Remarketing Notice. "Remarketing Notice" shall have
the meaning assigned to it in Paragraph 2(b)(1) below.
(j) Required Documents. "Required Documents" means the
grant deed and other documents that BNP must tender pursuant to
Paragraph 3 below.
(k) Shortage Amount. "Shortage Amount" shall mean the
sum of any Supplemental Land Payment and any Supplemental Improvement
Payment that may become due pursuant to Paragraph 2(a)(ii) below.
(l) Stipulated Loss Value of the Improvements.
"Stipulated Loss Value of the Improvements" means the Improvement
Value Percentage, times the Stipulated Loss Value outstanding on the
Designated Payment Date prior to any sale hereunder.
(m) Stipulated Loss Value of the Land. "Stipulated Loss
Value of the Land" means the Land Value Percentage, times the
Stipulated Loss Value outstanding on the Designated Payment Date prior
to any sale hereunder.
(n) Supplemental Improvement Payment. "Supplemental
Improvement Payment" means a payment from Cypress to BNP equal to the
amount, if any, by which the Stipulated Loss Value of the Improvements
exceeds Net Improvement Sales Proceeds. HOWEVER, IF (BUT ONLY IF) NO
EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING UNDER THE LEASE AND
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, THEN ANY SUPPLEMENTAL IMPROVEMENT PAYMENT REQUIRED BY
THIS AGREEMENT SHALL NOT EXCEED EIGHTY-FIVE PERCENT (85%) OF THE
STIPULATED LOSS VALUE OF THE IMPROVEMENTS.
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(o) Supplemental Land Payment. "Supplemental Land
Payment" means a payment from Cypress to BNP equal to the amount, if any, by
which the Stipulated Loss Value of the Land exceeds Net Land Sale Proceeds.
HOWEVER, IF (BUT ONLY IF) NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING
UNDER THE LEASE AND 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, THEN ANY SUPPLEMENTAL LAND PAYMENT REQUIRED BY THIS AGREEMENT
SHALL NOT EXCEED EIGHTY-FIVE PERCENT (85%) OF THE STIPULATED LOSS VALUE OF THE
LAND.
(b) Cypress's Elections and Obligations on the Designated
Payment Date.
(i) 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) pay to BNP the Supplemental Improvement Payment (if
any) and the Supplemental Land Payment (if any) and
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 percent (15%) of Stipulated Loss Value
outstanding immediately prior to the purchase. If,
however, the Fair Market Value is less than fifteen
percent (15%) of Stipulated Loss Value, BNP may elect
to keep the Property and any Escrowed Proceeds rather
than sell to the Applicable Purchaser, and no such
election by BNP will relieve Cypress of its
obligation to pay the Supplemental Improvement
Payment and the Supplemental Land Payment. Any
Supplemental Improvement Payment will compensate BNP
for, or mitigate against, any loss BNP may suffer
relating to BNP's interest in Improvements; and any
Supplemental Land Payment will compensate BNP for, or
mitigate against, any loss BNP may suffer relating to
BNP's interest in the Land only. In any event, if
the net cash price actually paid by the Applicable
Purchaser to BNP exceeds the Purchase Price and all
other sums that are then due from Cypress to BNP,
Cypress shall be entitled to such excess.
(ii) 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:
a) 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
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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.
b) 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).
(iii) 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:
a) 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
b) 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.
(iv) 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.
(v) 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),
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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 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.
(vi) 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:
a) 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
b) 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.
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
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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.
(c) 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 Acknowledgment 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
(the "Assignment of Grantor's Rights") in the form attached as Exhibit J, and
(10) if 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. Any such Indemnity will be completed by
attaching a list of such identified encumbrances as Annex B thereto.
Notwithstanding anything to the contrary herein, BNP shall not be
required to deliver the Assignment of Grantor's Rights pursuant to this
Agreement, or any other prior agreement between Cypress and BNP, so long as BNP
continues to own any property encumbered by the restrictive covenants described
in the Assignment of Grantor's Rights.
(d) Survival of Cypress's Obligations.
(i) 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
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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 and of any Escrowed Proceeds (if
such tender is not excused because of an election by BNP to keep the
Property under Paragraph 2(a)(ii)), 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
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.
(ii) 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.
(e) 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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<PAGE> 169
(f) 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.
(g) 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.
(h) 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 been
provided within the prior six month period.
(i) Notices.
(i) 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 II.
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
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<PAGE> 170
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.
(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, 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
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 Cypress:
Cypress Semiconductor Corporation
3901 North First Street
San Jose, California 95134
Attn: Chief Financial Officer
Telecopy: (408) 943-2796
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<PAGE> 171
With a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill
Palo Alto, California 94304-1050
Attention: Real Estate Department
Telecopy: (415) 493-6811
(j) 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.
(k) 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.
(l) 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.
(m) 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.
(n) 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.
(o) 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 in 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.
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<PAGE> 172
(p) 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 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.
(q) 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.
(r) 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 Shortgage 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, 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.
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<PAGE> 173
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
"BNP"
BNP LEASING CORPORATION, a Delaware corporation
Lloyd G. Cox, Vice President
"Cypress"
CYPRESS SEMICONDUCTOR CORPORATION, a Delaware corporation
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<PAGE> 174
EXHIBIT A
Legal Description
Real Property in the City of San Jose, County of Santa Clara, State of
California, described as follows:
<PAGE> 175
EXHIBIT B
CORPORATION GRANT DEED
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
NAME:
ADDRESS:
ATTN:
CITY:
STATE:
Zip:
MAIL TAX STATEMENTS TO:
NAME:
ADDRESS:
ATTN:
CITY:
STATE:
ZIP:
CORPORATION GRANT DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP
LEASING CORPORATION, a Delaware corporation, hereby grants to CYPRESS
SEMICONDUCTOR CORPORATION, a Delaware corporation [OR THE APPLICABLE
PURCHASER], all of the land situated in the County of Santa Clara, State of
California, described on Annex A attached hereto and hereby made a part hereof,
together with the improvements currently located on such land and any
easements, rights-of-way, privileges, appurtenances and other rights pertaining
to such land; provided, however, that this grant is subject to the following,
as well as the Permitted Encumbrances described on Annex B:
1. Real Estate Taxes not yet due and payable;
2. General Special Assessments payable after the date hereof;
3. Liens, claims, easements, covenants, restrictions, encumbrances and
other matters of record;
4. Zoning ordinances and regulations;
5. Public Utility Drainage and Highway easements, whether or not of
record;
6. Rights of parties in possession;
<PAGE> 176
7. Encroachments, variations in area or in measurements, boundary line
disputes, roadways and other matters not of record which would be
disclosed by a survey and inspection of the property conveyed
hereby.
BNP LEASING CORPORATION
Date: As of ____________ By:________________________________________
Its: Vice President
Attest:_________________________________
Its: Assistant Secretary
STATE OF ______ )
) SS
COUNTY OF _____ )
On ___________________ before me,_____________________________________,
personally appeared _________________________ and ____________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the persons whose names are subscribed to the within instrument and
acknowledged to me that they executed the same in their authorized capacities,
and that by their signatures on the instrument the person, or the entity upon
behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
Signature _____________________________
Exhibit B - Page 2
<PAGE> 177
ANNEX A
(to Deed)
Legal Description
Real Property in the City of San Jose, County of Santa Clara, State of
California, described as follows:
[INSERT PROPERTY DESCRIPTION IDENTICAL TO EXHIBIT A TO THIS AGREEMENT.]
Exhibit B - Page 3
<PAGE> 178
ANNEX B
(to Deed)
PERMITTED ENCUMBRANCES
This conveyance is subject to the following matters to the extent the same
are still valid and in force:
[INSERT LIST IDENTICAL TO EXHIBIT B TO LEASE]
__. Lease Agreement dated as of April __, 1996 by and between BNP Leasing
Corporation, as lessor, and Cypress Corporation, as lessee.
[IN ADDITION, IF THE CONVEYANCE IS TO AN APPLICABLE PURCHASER:
__. Any encumbrances claimed by, through or under Cypress Corporation]
[ADD A LIST OF ANY OTHER KNOWN ENCUMBRANCES FOR WHICH BNP IS NOT RESPONSIBLE
UNDER PARAGRAPH 9(A) OF THE LEASE.]
Exhibit B - Page 4
<PAGE> 179
<TABLE>
<S> <C> <C> <C>
EXHIBIT C THIS SPACE FOR RECORDER'S USE
PRELIMINARY CHANGE OF OWNERSHIP REPORT
THIS REPORT IS NOT A PUBLIC DOCUMENT
(To be completed by transferee (buyer) prior to transfer of the subject
property in accordance with Section 480.3 of the Revenue and Taxation Code.)
- -----------------------------------------------------------------------------------------------------------------------------
SELLER/TRANSFEROR: ________________________________________________________________
FOR ASSESSOR'S USE ONLY
SELLER RECORDING DATE: _____________________ DOCUMENT NO. _________________________
Cluster __________
BUYER/TRANSFEREE: OC1 ______________ OC2 __________
DT _______________ INT __________
ASSESSOR'S IDENTIFICATION NUMBER(S)________________________________________________ RC _______________ SP$ __________
LA ------ Page Parcel DTT $ ____________ # Pcl. _______
PROPERTY ADDRESS OR LOCATION: _____________________________________________________
No Street
_____________________________________________________
City State Zip Code
MAIL TAX INFORMATION TO:
NAME: _____________________________________________________________________________
ADDRESS: __________________________________________________________________________
Street No City State Zip Code ----------------------------------
A Preliminary Change in Ownership
Report must be filed with each
conveyance in the County Recorder's
office for the county where the
property is located; this particular
form may be used in all 58 counties
of California.
- ------------------------------------------------------------------------------------------------------------------------------
NOTICE: A lien for property taxes applies to your property on March 1 of each year for the taxes owing in the following fiscal
year, July 1 through June 30. One-half of those taxes is due November 1 and one-half is due February 1. The first installment
becomes delinquent on December 10 and the second installment becomes delinquent on April 10. One tax bill is mailed before
November 1 to the owner of record. IF THIS TRANSFER OCCURS AFTER MARCH 1 AND ON OR BEFORE DECEMBER 31, YOU MAY BE RESPONSIBLE FOR
THE SECOND INSTALLMENT OF TAXES ON FEBRUARY 1.
The property which you acquired may be subject to a supplemental tax assessment in an amount to be determined by the Santa Clara
County Assessor. For further information on your supplemental roll obligation, please call the Santa Clara County Assessor at
(______) _______-__________.
- -------------------------------------------------------------------------------------------------------------------------------
PART I: TRANSFER INFORMATION Please answer all questions.
YES NO
[ ] [ ] A. Is this transfer solely between husband and wife (Addition of a spouse, death of a spouse, divorce settlement,
etc.)?
[ ] [ ] B. Is this transaction only a correction of the name(s) of the person(s) holding title to the property (For
example, a name change upon marriage)?
[ ] [ ] C. Is this document recorded to create, terminate, or reconvey a lender's interest in the property?
[ ] [ ] D. Is this transaction recorded only to create, terminate, or reconvey a security interest (e.g., cosigner)?
[ ] [ ] E. Is this document recorded to substitute a trustee under a deed of trust, mortgage, or other similar document?
[ ] [ ] F. Did this transfer result in the creation of a joint tenancy in which the seller (transferor) remains as one of
the joint tenants?
[ ] [ ] G. Does this transfer return property to the person who created the joint tenancy (original transferor)?
[ ] [ ] H. Is this transfer of property:
1. to a trust for the benefit of the grantor, or grantor's spouse?
2. to a trust revocable by the transferor?
3. to a trust from which the property reverts to the grantor within 12 years?
[ ] [ ] I. If this property is subject to a lease, is the remaining lease term 35 years or more including written options?
[ ] [ ] J. Is this a transfer from parents to children or from children to parents?
[ ] [ ] K. Is this transaction to replace a principal residence by a person 55 years of age or older?
[ ] [ ] L. Is this transaction to replace a principal residence by a person who is severely disabled as defined by Revenue
and Taxation Code Section 69.5?
If you checked yes to J, K or L, an applicable claim form must be filed with the County Assessor. Please provide any
other information that would help the Assessor to understand the nature of the transfer. __________________________
- ----------------------------------------------------------------------------------------------------------------------------------
IF YOU HAVE ANSWERED "YES" TO ANY OF THE ABOVE QUESTIONS EXCEPT J, K, OR L, PLEASE SIGN AND DATE.
OTHERWISE COMPLETE BALANCE OF THE FORM.
- ----------------------------------------------------------------------------------------------------------------------------------
PART II: OTHER TRANSFER INFORMATION
A. Date of transfer if other than recording date.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 180
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B. Type of transfer. Please check appropriate box.
[ ] Purchase [ ] Foreclosure [ ] Gift [ ] Trade or Exchange [ ] Merger, Stock or Partnership Acquisition
[ ] Contract of Sale -- Date of Contract
[ ] Inheritance -- Date of Contract [ ] Other: Please explain:
[ ] Creation of a lease: [ ] Assignment of a lease; [ ] Termination of a lease
Date lease began
Original term in years (including written options)
Remaining term in years (including written options)
C. Was only a partial interest in the property transferred? [ ] Yes [ ] No
If yes, indicate the percentage transferred ____________%
- ----------------------------------------------------------------------------------------------------------------------------------
Please answer, to the best of your knowledge, all applicable questions, sign and date.
If a question does not apply, indicate with "N/A".
- ----------------------------------------------------------------------------------------------------------------------------------
PART III.: PURCHASE PRICE & TERMS OF SALE
4. CASH DOWN PAYMENT OR Value of Trade or Exchange (excluding closing cost) Amount $_______________
5. FIRST DEED OF TRUST @ ____% interest for ____ years. Pymts./Mo. = $ _________ (Prin. & Int. only) Amount $_______________
[ ] FHA [ ] Fixed Rate
[ ]
New Loan
[ ] Conventional [ ] Variable Rate
[ ]
Assumed Existing Loan
Balance Amount $_______________
[ ] VA [ ] All Inclusive D.T. ($_______ Wrapped)
[ ] Bank or Savings & Loan
[ ] Cal-Vet [ ] Loan Carried by Seller
[ ] Finance Company Amount $________________
Balloon Payment [ ] Yes [ ] No Due Date _______________
Amount $_______________
6. SECOND DEED OF TRUST @ ____% interest for ____ years. Pymts./Mo. = $ _________ (Prin. & Int. only)
[ ] Bank or Savings & Loan [ ] Fixed Rate Amount $________________
[ ] New Loan
[ ] Loan Carried by Seller [ ] Variable Rate
[ ] Assumed
Existing Loan Balance
Balloon Payment [ ] Yes [ ] No Due Date _______________
Amount $_______________
7. OTHER FINANCING: Is other financing involved not covered in (b) or (c) above? [ ] Yes
[ ] No
Type ________ @ ____% interest for_______ years. Pymts./Mo. = $ ______________ (Prin. & Int. only)
[ ] Bank or Savings & Loan [ ] Fixed Rate
[ ] New Loan
[ ] Loan Carried by Seller [ ] Variable Rate
[ ] Assumed
Existing Loan Balance
Balloon Payment [ ] Yes [ ] No Due Date _______________
Amount $_______________
8. IMPROVEMENT BOND
9. TOTAL PURCHASE PRICE: (or acquisition price, if traded or exchanged,
include real estate commission if paid.)
Total items A through E $
10. PROPERTY PURCHASED: [ ] Through a broker:
If purchased through a broker, provide broker's name and phone no.:
Please explain any special terms or financing and many other information that would
help the Assessor understand the purchase price and terms of sale.
- ---------------------------------------------------------------------------------------------------------------------------------
PART IV.: PROPERTY INFORMATION
1. IS PERSONAL PROPERTY INCLUDED IN THE PURCHASE PRICE
(other than a mobilehome subject to local property tax)? [ ] Yes [ ] No
If yes, enter the value of the personal property included in the purchase price $
(Attach itemized list of personal property)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit C - Page 2
<PAGE> 181
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2. IS THIS PROPERTY INTENDED AS YOUR PRINCIPAL RESIDENCE? [ ] Yes [ ] No
If yes, enter date of occupancy ______________/_______________/, 19_____ or intended occupancy ____________/___________, 19______
Month Day Month Day
3. TYPE OF PROPERTY TRANSFERRED:
[ ] Single-Family residence [ ] Agricultural [ ]
Timeshare
[ ] Multiple-Family residence (no. of units: _______) [ ] Coop/Own-your-own
[ ] Mobilehome
[ ] Commercial/Industrial [ ] Condominium [ ]
Unimproved lot
[ ] Other (Description: ______
4. DOES THE PROPERTY PRODUCE INCOME? [ ] Yes [ ] No
5. IF THE ANSWER TO QUESTION D IS YES, IS THE INCOME FROM:
[ ] Lease/Rent [ ] Contract
6. WHAT WAS THE CONDITION OF THE PROPERTY AT THE TIME OF SALE?
[ ] Good [ ] Average [ ] Fair [ ] Poor
Enter here, or on an attached sheet, any other information that would assist the Assessor in determining value of the
property such as the physical condition of the property, restrictions, etc.
__________________________________________________________________________________________________________________________________
I certify that the foregoing is true, correct and complete to the best of my knowledge and belief.
Signed ____________________________________________________
(New Owner/Corporate Officer)
Please Print Name of New Owner/Corporate Officer
Phone No. where you are available from 8:00 a.m. - 5:00 p.m. (__________) _______________________
(Note: The Assessor may contact you for further information)
- -----------------------------------------------------------------------------------------------------------------------------------
If a document evidencing a change of ownership is presented to the recorder for recordation without the concurrent filing of a
PRELIMINARY CHANGE OF OWNERSHIP REPORT, the recorder may charge an additional recording fee of twenty dollars ($20).
</TABLE>
Exhibit C - Page 3
<PAGE> 182
EXHIBIT D
BILL OF SALE, ASSIGNMENT OF CONTRACT
RIGHTS AND INTANGIBLE ASSETS
Reference is made to that certain Agreement of Purchase and Sale dated
March 22, 1996 (the "Agreement") between RND Funding Company, Inc., as seller,
and BNP LEASING CORPORATION ("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) Escrowed Proceeds (as defined in the Purchase Agreement hereinafter
described) 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;
(d) any goods, equipment, furnishings, furniture, chattels and personal
property of whatever nature that are located on or about the Property; and
(e) 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 Purchase Agreement between Assignor and Cypress
Semiconductor Corporation dated as of April __, 1996 (the "Purchase Agreement")
(pursuant to which this document is being delivered), (ii) the Lease, as
defined in the Purchase Agreement, 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 outstanding as of the date hereof, (iii) agreements between
Assignor and Participants, as defined in the Lease, or any modification or
extension thereof, and (iv) any other instrument being delivered to Assignor
contemporaneously herewith pursuant to the Purchase Agreement.
<PAGE> 183
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 Landlord's Liens (as defined in the Lease referenced above),
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:
BNP LEASING CORPORATION
a Delaware corporation
By:_____________________________________
Its:____________________________________
ASSIGNEE:
[Cypress, or the Applicable Purchaser],
a _________ corporation
By:_____________________________________
Its:____________________________________
Exhibit D - Page 2
<PAGE> 184
ANNEX A
Legal Description
Real Property in the City of San Jose, County of Santa Clara, State of
California, described as follows:
[INSERT PROPERTY DESCRIPTION IDENTICAL TO EXHIBIT A TO THIS AGREEMENT.]
Exhibit D - Page 3
<PAGE> 185
EXHIBIT E
ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this
"Certificate") is made as of ___________________, ____, by [CYPRESS OR THE
APPLICABLE PURCHASER, AS THE CASE MAY BE], a ___________________ ("Grantee").
Contemporaneously with the execution of this Certificate, BNP Leasing
Corporation, a Delaware corporation ("BNP"), is executing and delivering to
Grantee (1) a Corporation Grant Deed and (2) a Bill of Sale, Assignment of
Contract Rights and Intangible Assets (the foregoing documents and any other
documents to be executed in connection therewith are herein called the
"Conveyancing Documents" and any of the properties, rights or other matters
assigned, transferred or conveyed pursuant thereto are herein collectively
called the "Subject Property").
NOTWITHSTANDING ANY PROVISION CONTAINED IN THE CONVEYANCING DOCUMENTS TO
THE CONTRARY, GRANTEE ACKNOWLEDGES THAT BNP MAKES NO REPRESENTATIONS OR
WARRANTIES OF ANY NATURE OR KIND, WHETHER STATUTORY, EXPRESS OR IMPLIED, WITH
RESPECT TO ENVIRONMENTAL MATTERS OR THE PHYSICAL CONDITION OF THE SUBJECT
PROPERTY, AND GRANTEE, BY ACCEPTANCE OF THE CONVEYANCING DOCUMENTS, ACCEPTS THE
SUBJECT PROPERTY "AS IS," "WHERE IS," "WITH ALL FAULTS" AND WITHOUT ANY SUCH
REPRESENTATION OR WARRANTY BY GRANTOR AS TO ENVIRONMENTAL MATTERS, THE PHYSICAL
CONDITION OF THE SUBJECT PROPERTY, COMPLIANCE WITH SUBDIVISION OR PLATTING
REQUIREMENTS OR CONSTRUCTION OF ANY IMPROVEMENTS. Without limiting the
generality of the foregoing, Grantee hereby further acknowledges and agrees
that warranties of merchantability and fitness for a particular purpose are
excluded from the transaction contemplated by the Conveyancing Documents, as
are any warranties arising from a course of dealing or usage of trade. Grantee
hereby assumes all risk and liability (and agrees that BNP shall not be liable
for any special, direct, indirect, consequential, or other damages) resulting
or arising from or relating to the ownership, use, condition, location,
maintenance, repair, or operation of the Subject Property, except for damages
proximately caused by (and attributed by any applicable principles of
comparative fault to) the Misconduct of BNP or any Participant. For purposes
hereof, "Misconduct" shall have the meaning assigned to it the Lease Agreement
between BNP and Cypress Semiconductor Corporation dated April __, 1996. Such
Lease Agreement is referenced in the Purchase Agreement of even date therewith
between BNP and Cypress Semiconductor Corporation, pursuant to which the
Conveyancing Documents are being delivered.
The provisions of this Certificate shall be binding on Grantee, its
successors and assigns and any other party claiming through Grantee. Grantee
hereby acknowledges that BNP is entitled to rely and is relying on this
Certificate.
<PAGE> 186
EXECUTED as of ________________, _____.
______________________________, a __________________________
By:_______________________________________________
Name:__________________________________________
Title:_________________________________________
E-2
<PAGE> 187
EXHIBIT F
DOCUMENTARY TRANSFER TAX REQUEST
ACCOUNTABLE FORM #
DATE:_____________________________
To: Santa Clara County Recorder
Subject: REQUEST THAT DOCUMENTARY TRANSFER TAX DECLARATION BE MADE IN
ACCORDANCE WITH REVENUE CODE 11932.
Re: Instrument Title: Corporation Grant Deed
Name of Party Conveying Title: BNP Leasing Corporation
The Documentary Transfer Tax is declared to be in the amount of
$_______________ for the referenced instrument and is:
[ ] Computed on full value of property conveyed.
[ ] Computed on full value less liens/encumbrances remaining
thereon at time of sale.
This separate declaration is made in accordance with
_________________________________. It is requested that the amount paid not be
indicated on the face of the document after the permanent copy has been made.
Sincerely,
____________________________________________
Individual (or his agent) who made, signed
or issued instrument
PART I
RECORDING REFERENCE DATA:
Serial #______________________ Date Recorded_________________________
SEPARATE PAPER AFFIXED TO INSTRUMENT:
"Tax paid" indicated on the face of instrument and the separate request
(DRA 3-A) was affixed for Recorder by:
<PAGE> 188
______________________________________ Date ___________
Documentary Transfer Tax Collector
Witnessed by:_____________________ Date________________
Mail Clerk
(Note: Prepare photo for Recorder file.)
PART II ACCOUNTABLE FORM #
------------------
REFERENCE DATA: Title: ________________________________________________________
Serial: ______________________________ Date:________________
INSTRUCTIONS:
1. This slip must accompany document.
2. Mail Clerk hand carry document to Tax Collector to indicate the
amount of tax paid.
F-2
<PAGE> 189
EXHIBIT G
SECRETARY'S CERTIFICATE
The undersigned, _____________________ Secretary of BNP Leasing
Corporation, a Delaware corporation (the "Corporation"), hereby certifies as
follows:
1. That he is the duly, elected, qualified and acting Secretary [or
Assistant Secretary] of the Corporation and has custody of the corporate
records, minutes and corporate seal.
2. That the following named persons have been properly designated,
elected and assigned to the office in the Corporation as indicated below; that
such persons hold such office at this time and that the specimen signature
appearing beside the name of such officer is his or her true and correct
signature.
[THE FOLLOWING BLANKS MUST BE COMPLETED WITH THE NAMES AND SIGNATURES OF THE
OFFICERS WHO WILL BE SIGNING THE DEED AND OTHER REQUIRED DOCUMENTS ON BEHALF OF
THE CORPORATION.]
Name Title Signature
_________________ ____________________ __________________
_________________ ____________________ __________________
3. That the resolutions attached hereto and made a part hereof were
duly adopted by the Board of Directors of the Corporation in accordance with
the Corporation's Articles of Incorporation and Bylaws, as evidenced by the
signatures of all directors of the Corporation affixed thereto. Such
resolutions have not been amended, modified or rescinded and remain in full
force and effect.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal
of the Corporation on this _____, day of ____________, 199__.
________________________________________
[signature]
<PAGE> 190
CORPORATE RESOLUTIONS OF
BNP LEASING CORPORATION
WHEREAS, pursuant to that certain Purchase Agreement (herein called the
"Purchase Agreement") dated as of April __, 1996, by and between BNP Leasing
Corporation (the "Corporation") and Cypress Semiconductor Corporation
("Purchaser"), the Corporation agreed to sell and Purchaser agreed to purchase
or cause the Applicable Purchaser (as defined in the Purchase Agreement) to
purchase the Corporation's interest in the property (the "Property") located in
Santa Clara County, California more particularly described therein.
NOW THEREFORE, BE IT RESOLVED, that the Board of Directors of the
Corporation, in its best business judgment, deems it in the best interest of
the Corporation and its shareholders that the Corporation convey the Property
to Purchaser or the Applicable Purchaser pursuant to and in accordance with the
terms of the Purchase Agreement.
RESOLVED FURTHER, that the officers of the Corporation, and each of them,
are hereby authorized and directed in the name and on behalf of the Corporation
to cause the Corporation to fulfill its obligations under the Purchase
Agreement.
RESOLVED FURTHER, that the officers of the Corporation, and each of them,
are hereby authorized and directed to take or cause to be taken any and all
actions and to prepare or cause to be prepared and to execute and deliver any
and all deeds and other documents, instruments and agreements that shall be
necessary, advisable or appropriate, in such officer's sole and absolute
discretion, to carry out the intent and to accomplish the purposes of the
foregoing resolutions.
IN WITNESS WHEREOF, we, being all the directors of the Corporation, have
hereunto signed our names as of the dates indicated by our signatures.
__________________________________[signature and date]
__________________________________[signature and date]
__________________________________[signature and date]
G-2
<PAGE> 191
EXHIBIT H
BNP LEASING CORPORATION
717 N. HARWOOD
SUITE 2630
DALLAS, TEXAS 75201
____________________, 199___
[Title Insurance Company]
___________________
___________________
___________________
Re: Recording of Grant Deed to [CYPRESS OR THE APPLICABLE PURCHASER, AS
THE CASE MAY BE] ("Purchaser")
Ladies and Gentlemen:
BNP Leasing Corporation has executed and delivered to Purchaser a Grant
Deed in the form attached to this letter. You are hereby authorized and
directed to record the Grant Deed at the request of Purchaser.
Sincerely,
<PAGE> 192
EXHIBIT I
FIRPTA STATEMENT
Section 1445 of the Internal Revenue Code of 1986, as amended, provides
that a transferee of a U.S. real property interest must withhold tax if the
transferor is a foreign person. Sections 18805, 18815 and 26131 of the
California Revenue and Taxation Code, as amended, provide that a transferee of
a California real property interest must withhold income tax if the transferor
is a nonresident seller.
To inform [CYPRESS OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE] (the
"Transferee") that withholding of tax is not required upon the disposition of a
California real property interest by transferor, BNP Leasing Corporation (the
"Seller"), the undersigned hereby certifies the following on behalf of the
Seller:
1. The Seller is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate (as those terms are defined in the Internal Revenue
Code and Income Tax Regulations);
2. The United States employer identification number for the Seller is
_____________________;
3. The office address of the Seller is ______________
__________________________________________.
[NOTE: BNP MUST INCLUDE EITHER ONE, BUT ONLY ONE, OF THE FOLLOWING
REPRESENTATIONS IN THE FIRPTA STATEMENT, BUT IF THE ONE INCLUDED STATES THAT
BNP IS DEEMED EXEMPT FROM CALIFORNIA INCOME AND FRANCHISE TAX, THEN BNP MUST
ALSO ATTACH A WITHHOLDING CERTIFICATE FROM THE CALIFORNIA FRANCHISE TAX BOARD
EVIDENCING THE SAME:
4. THE SELLER IS QUALIFIED TO DO BUSINESS IN CALIFORNIA.
OR
4. THE SELLER IS DEEMED TO BE EXEMPT FROM THE WITHHOLDING REQUIREMENT OF
CALIFORNIA REVENUE AND TAXATION CODE SECTION 26131(E), AS EVIDENCED BY THE
WITHHOLDING CERTIFICATE FROM THE CALIFORNIA FRANCHISE TAX BOARD WHICH IS
ATTACHED.]
The Seller understands that this certification may be disclosed to the
Internal Revenue Service and/or to the California Franchise Tax Board by the
Transferee and that any false statement contained herein could be punished by
fine, imprisonment, or both.
The Seller understands that the Transferee is relying on this affidavit
in determining whether withholding is required upon said transfer. The Seller
hereby agrees to indemnify and hold the Transferee harmless from and against
any and all obligations, liabilities, claims, losses, actions, causes of
<PAGE> 193
action, demands, rights, damages, costs, and expenses (including but not
limited to court costs and attorneys' fees) incurred by the Transferee as a
result of any false misleading statement contained herein.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct
and complete, and I further declare that I have authority to sign this document
on behalf of the Seller.
Dated: ___________, _____.
By:________________________________
Name: __________________________
Title: _________________________
I-2
<PAGE> 194
EXHIBIT J
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
Attn: ______________________________
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
ASSIGNMENT AND ASSUMPTION OF GRANTOR'S RIGHTS
UNDER DECLARATION OF COVENANTS, CONDITIONS
AND RESTRICTIONS FOR OAKMEAD-SAN JOSE
This Assignment and Assumption ("Assignment") is made as of this ____ day
of , ___________ by and between BNP LEASING CORPORATION, a Delaware corporation
("Assignor") and _ [CYPRESS OR THE APPLICABLE PURCHASER], a
___________________________________("Assignee").
Recitals
A. Oakmead-San Jose, a California general partnership ("Oakmead-San
Jose"), by the execution of a document entitled "Declaration of Covenants,
Conditions and Restrictions for Oakmead-San Jose" dated May 31, 1983 (the
"Declaration") and filed for record in the official records of Santa Clara
County on June 3, 1983 in Book H604, Page 334, Recorder's Series No. 7702643,
and amended by (i) that First Amendment to Covenants, Conditions and
Restrictions for Oakmead-San Jose dated December 23, 1983, and filed for record
in the official records of Santa Clara County on January 26, 1984 in Book I257,
Page 252, Recorder's Series No. 7958309, (ii) that Second Amendment to
Declaration of Covenants, Conditions and Restrictions for Oakmead-San Jose
dated as of October 14, 1988, and filed for record in the official records of
Santa Clara County on October 18, 1988 in Book K721, Page 265, Recorder's
Series No. 9874588, (iii) Third Amendment to Declaration of Covenants,
Conditions and Restrictions for Oakmead-San Jose and First Amendment to
Declaration of Covenants, Conditions and Restrictions for Oakmead-San Jose Sign
and Landscape Maintenance Association dated as of July 12, 1989, and filed
<PAGE> 195
for record in the official records of Santa Clara County on July 19, 1989 in
Book L024, Page 587, Recorder's Series No. 10184069, and (iv) Partial
Termination of Declaration of Covenants, Conditions and Restrictions for
Oakmead-San Jose dated as of September 12, 1989, and filed for record in the
official records of Santa Clara County on September 18, 1989 in Book L097, Page
1662, Recorder's Series No. 10259002 (all of the foregoing collectively, the
"CC&Rs"), imposed certain restrictions upon that real property situated in the
County of Santa Clara, State of California more particularly described in
Exhibit A to the Declaration, as amended (the "Oakmead-San Jose Property").
B. Article VIII, Section 8.1.1 of the CC&Rs provides that any and all
of the rights, powers and reservations of "Grantor" (as defined in the CC&Rs)
contained in the CC&Rs may be assigned to any person, corporation or
association, with such assignment to be evidenced by a recorded instrument
executed by the assignor and assignee of such rights, powers and reservations.
C. Pursuant to that certain Assignment and Assumption of Grantor's
Rights Under Declaration of Covenants, Conditions and Restrictions for
Oakmead-San Jose and Removal of Approving Agent dated as of April 20, 1989 by
and between Oakmead-San Jose, as grantor, and Oakmead Building Associates, a
California general partnership ("Oakmead"), as assignee, and filed for record
in the official records of Santa Clara County on April 26, 1989 in Book K927,
Page 261, Recorder's Series No. 10087302, Oakmead-San Jose assigned its rights,
powers and reservations as Grantor under the CC&Rs to Oakmead and Oakmead
accepted such rights, powers and reservations with respect to certain of the
Oakmead-San Jose Property described therein.
D. Pursuant to that certain Assignment and Assumption of Grantor's
Rights Under Declaration of Covenants, Conditions and Restrictions for
Oakmead-San Jose dated as of September 1, 1994 by and between Oakmead, as
grantor, and Assignor, as assignee, and filed for record in the official
records of Santa Clara County on _________________, 1994 in Book _________,
Page _______, Recorder's Series No. ______________________, Oakmead assigned
its rights, powers and reservations as Grantor under the CC&Rs to Assignor and
Assignor accepted such rights, powers and reservations with respect to certain
of the Oakmead-San Jose Property described therein.
E. Concurrently herewith Assignee is purchasing from Assignor a
portion of the Oakmead-San Jose Property more particularly described in Annex
A-1 ("_________________") and in Annex A-2 ("______ _________";
_________________________ are collectively referred to herein as the "Subject
Property").
F. In connection with the purchase and sale of the Subject Property,
Assignor desires to assign to Assignee all of its rights, powers and
reservations as Grantor contained in the CC&Rs with respect to the Subject
Property, and Assignee desires to accept the assignment thereof and assume the
obligations of Grantor contained in the CC&Rs with respect to the Subject
Property.
NOW, THEREFORE, in consideration of the promises and conditions contained
herein, Assignor and Assignee hereby agree as follows:
1. Assignor hereby assigns to Assignee all of the rights, powers and
reservations of Assignor, as Grantor, contained in the CC&Rs with respect to
the Subject Property, including, without limitation, (i) all of the
responsibilities and approval rights of the Approving Agent (as defined in the
CC&Rs) in connection with the implementation of the restrictions contained in
the CC&Rs, in the Design Guidelines (as defined in the CC&Rs), and in that
document entitled "Declaration of Covenants, Conditions and Restrictions for
Oakmead-San Jose Sign and Landscape Maintenance Association", dated May 31,
1983, and recorded June 3, 1983, Book H604, Page 505, Recorder's Series No.
7702644, as
J-2
<PAGE> 196
amended by that certain Third Amendment to Declaration of Covenants, Conditions
and Restrictions for Oakmead-San Jose and First Amendment to Declaration of
Covenants, Conditions and Restrictions for Oakmead-San Jose Sign and Landscape
Maintenance Association dated as of July 12, 1989, and filed for record in the
official records of Santa Clara County on July 19, 1989 in Book L024, Page 587,
Recorder's Series No. 10184069 (the "Landscape CC&Rs"), (ii) all of the rights
to enforce the provisions of the CC&Rs and the Landscape CC&Rs, which are given
to the Approving Agent in those respective documents, (iii) the right of
Assignor, as Grantor, to designate a representative to perform the duties of
the Approving Agent under the CC&Rs, the Landscape CC&Rs and under the Design
Guidelines, with respect to the Subject Property, (iv) the right to amend,
modify, rescind or change the Design Guidelines with respect to the Subject
Property, (v) the right to further assign the rights, powers and reservations
of Grantor with respect to all or any portion of the Subject Property; and (vi)
the right to negotiate with the City of San Jose and/or the City of San Jose
Redevelopment Agency and/or any other appropriate governmental agency to enter
into agreements and establish payment methods for on-going maintenance, with
respect to the Subject Property.
2. Assignor warrants and represents that as of the date hereof none of
the rights, powers and reservations of Assignor, as Grantor under the CC&Rs
with respect to the Subject Property, have been assigned to any other party.
3. Assignee hereby accepts the assignment of and assumes all of
Assignor's rights, powers and reservations as Grantor under the CC&Rs with
respect to the Subject Property and agrees to be subject to the same
obligations and duties as are given to and assumed by Assignor, as Grantor in
the CC&Rs with respect only to the Subject Property and Assignor is hereby
relieved of such obligations and duties.
4. In the event of litigation between Assignor and Assignee with
respect to this Assignment, the prevailing party shall be entitled to receive
all costs and expenses of such litigation, including attorneys' fees from the
other party.
5. This Assignment shall be binding on and inure to the benefit of the
parties hereto, their successors and assigns.
6. Reference is hereby made to each exhibit attached hereto for all
purposes.
7. This Assignment may be executed in counterparts, all of which
counterparts shall constitute but one and the same original.
J-3
<PAGE> 197
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment
as of the day and year first above written.
ASSIGNOR:
BNP LEASING CORPORATION, a Delaware
corporation
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
ASSIGNEE:
__________________________________________
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
J-4
<PAGE> 198
STATE OF ______ Section
Section
COUNTY OF ______ Section
On _____________, ____, before me, ________________________, personally
appeared _________________________________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
___________________________________
Notary Signature - State of Texas
J-5
<PAGE> 199
STATE OF ________________ Section
Section
COUNTY OF _______________ Section
On _____________, ____, before me, ________________________, personally
appeared _________________________________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
________________________________________
Notary Signature - State of ____________
STATE OF ________________ Section
Section
COUNTY OF _______________ Section
On _____________, ____, before me, ________________________, personally
appeared _________________________________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
________________________________________
Notary Signature - State of ____________
J-6
<PAGE> 200
ANNEX A-1
J-7
<PAGE> 201
ANNEX A-2
J-8
<PAGE> 202
EXHIBIT K
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "AGREEMENT") is made as of
_________________, _____, by CYPRESS SEMICONDUCTOR CORPORATION, a Delaware
corporation ("PURCHASER") [OR THE APPLICABLE PURCHASER] and BNP LEASING
CORPORATION, a Delaware corporation ("SELLER") and ___________________________
("TITLE COMPANY").
R E C I T A L S
A. Purchaser is acquiring the land described in Annex A attached
hereto and any improvements located thereon (the "PROPERTY") pursuant to the
terms and conditions of that certain Purchase Agreement dated April __, 1996 by
between Seller and Purchaser [or Cypress Semiconductor Corporation] (the
"PURCHASE AGREEMENT").
B. In connection with its acquisition of the Property, Seller has been
notified as contemplated by the Purchase Agreement that the matters described
in Annex B attached hereto (the "RELEVANT ENCUMBRANCES") have been identified
as encumbrances upon title to the Property and that such matters, to the extent
valid, constitute Landlord's Liens as defined in the Purchase Agreement.
C. Because of such notice to Seller, Seller is required by the
Purchase Agreement to tender this Indemnity Agreement to Purchaser.
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:
Seller must promptly remove any of the Relevant Encumbrances that
constitute "LANDLORD'S LIENS" (which for purposes of this Indemnity Agreement
shall have the meaning assigned to it in the Purchase Agreement by reference to
a Lease Agreement described therein). Seller must also pay, indemnify and hold
harmless Purchaser, the Title Company, the Purchaser's successors and assigns
as to the Property and the Title Company's successors and assigns as to any
title insurance policy issued to Purchaser by the Title Company covering the
Property from and against any and all liabilities, damages, claims, actions,
judgments, costs and expenses (including, without limitation, reasonable
attorneys' fees) caused by Seller's failure to promptly remove any of the
Relevant Encumbrances that constitute Landlord's Liens.
Nothing herein shall be construed as an admission by Seller that any of
the Relevant Encumbrances do constitute Landlord's Liens or as imposing a duty
upon Seller to remove or defend against claims arising out of any Relevant
Encumbrances that do not constitute Landlord's Liens. Nothing herein contained
shall limit Purchaser's rights or remedies under the Purchase Agreement because
of any failure by BNP to remove all Landlord's Liens before conveying the
Property.
K-1
<PAGE> 203
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
SELLER, PURCHASER AND THE TITLE COMPANY EACH HEREBY WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT, OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT 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. Purchaser, Seller and the Title Company 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. Purchaser,
Seller and the Title Company 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 OR THIS AGREEMENT. In the
event of litigation, this Agreement may be filed as a written consent to a
trial by the court.
K-2
<PAGE> 204
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"Seller"
BNP LEASING CORPORATION, a Delaware
corporation
By:_________________________________________
Lloyd Cox, Vice President
"Purchaser"
CYPRESS SEMICONDUCTOR CORPORATION, a
Delaware corporation
By:_________________________________________
Name: ______________________
Title: ______________________
"Title Company"
_________________________________, a
_______________________
By:_________________________________________
Name: ______________________
Title: ______________________
K-3
<PAGE> 205
ANNEX A
Property Description
Real Property in the City of San Jose, County of Santa Clara, State of
California, described as follows:
[INSERT PROPERTY DESCRIPTION IDENTICAL TO EXHIBIT A TO THIS AGREEMENT.]
K-1
<PAGE> 206
ANNEX B
Relevant Encumbrances
[THIS ANNEX IS TO BE COMPLETED BY A LIST OF POSSIBLE LANDLORD'S LIENS
IDENTIFIED BY CYPRESS AND AGAINST WHICH CYPRESS HAS NOT BEEN ABLE TO OBTAIN
TITLE INSURANCE.]
<PAGE> 1
EXHIBIT 4.20
================================================================================
CREDIT AGREEMENT
DATED AS OF JULY 24, 1996
AMONG
CYPRESS SEMICONDUCTOR CORPORATION,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS AGENT
AND
LETTER OF CREDIT ISSUING BANK,
FLEET NATIONAL BANK,
AS CO-AGENT
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BA SECURITIES, INC.
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.03 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.01 Amounts and Terms of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.02 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.03 Procedure for Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.04 Conversion and Continuation Elections . . . . . . . . . . . . . . . . . . . . . . . . 21
2.05 Voluntary Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . 22
2.06 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.07 Mandatory Cash Collateralization; Mandatory Prepayment of Loans . . . . . . . . . . . 23
2.08 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.09 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.10 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Arrangement, Agency Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.11 Computation of Fees and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.13 Payments by the Banks to the Agent . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.14 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE III THE LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.01 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.02 Issuance, Amendment and Renewal of Letters of Credit . . . . . . . . . . . . . . . . 29
3.03 Participations, Drawings and Reimbursements . . . . . . . . . . . . . . . . . . . . . 31
3.04 Repayment of Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.05 Role of the Issuing Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.06 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.07 Cash Collateral Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.08 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.09 Uniform Customs and Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . 37
4.01 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.02 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.03 Increased Costs and Reduction of Return . . . . . . . . . . . . . . . . . . . . . . . 39
4.04 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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4.05 Inability to Determine Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.06 Certificates of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.08 Replacement of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE V CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.01 Conditions of Initial Credit Extensions . . . . . . . . . . . . . . . . . . . . . . . 42
(a) Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Resolutions; Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(c) Organization Documents; Good Standing . . . . . . . . . . . . . . . . . . . . 42
(d) Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(e) Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(f) Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(g) Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(h) Convertible Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . . 43
(i) Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(j) Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.02 Conditions to All Credit Extensions . . . . . . . . . . . . . . . . . . . . . . . . . 43
(a) Notice, Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) Continuation of Representations and Warranties . . . . . . . . . . . . . . . 44
(c) No Existing Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VI REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.01 Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.02 Corporate Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . 45
6.03 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.04 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.05 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.06 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.07 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.08 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.09 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.11 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.13 Regulated Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.14 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.15 Copyrights, Patents, Trademarks and Licenses, etc. . . . . . . . . . . . . . . . . . 48
6.16 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.18 Swap Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.19 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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ARTICLE VII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.01 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.02 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.04 Preservation of Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . 52
7.05 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.06 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.07 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.08 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.09 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.10 Inspection of Property and Books and Records . . . . . . . . . . . . . . . . . . . . 53
7.11 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.13 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VIII NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.01 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.02 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.03 Consolidations and Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.04 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.05 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.06 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.07 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.08 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.09 Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.11 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.12 Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.13 Payment of Convertible Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE IX EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.01 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(a) Non-Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(b) Representation or Warranty . . . . . . . . . . . . . . . . . . . . . . . . . 61
(c) Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(d) Other Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(e) Cross-Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(f) Insolvency; Voluntary Proceedings . . . . . . . . . . . . . . . . . . . . . . 62
(g) Involuntary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(i) Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
(j) Non-Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
(k) Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
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(l) Loss of Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
(n) Invalidity of Subordination Provisions . . . . . . . . . . . . . . . . . . . . 63
9.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.03 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE X THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.01 Appointment and Authorization; "Agent" . . . . . . . . . . . . . . . . . . . . . . . . 64
10.02 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.03 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.04 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.06 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.07 Indemnification of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.08 Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.09 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.10 Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.11 Co-Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.01 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.03 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.04 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.05 Company Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.06 Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.07 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.08 Assignments, Participations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.09 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.10 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.11 Automatic Debits of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.12 Notification of Addresses, Lending Offices, Etc. . . . . . . . . . . . . . . . . . . . 77
11.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.15 No Third Parties Benefited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.16 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.18 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
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SCHEDULES
Schedule 2.01 Commitments
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Company's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
v.
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CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of July 24, 1996, among
Cypress Semiconductor Corporation, a Delaware corporation (the "Company"), the
several financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"), Fleet National Bank, as
Co-Agent, and Bank of America National Trust and Savings Association, as letter
of credit issuing bank and as agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
I
DEFINITIONS
1 Certain Defined Terms. The following terms have the following
meanings:
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the
acquisition of in excess of 50% of the capital stock, partnership
interests, membership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than
a Person that is a Subsidiary) provided that the Company or the
Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly
or indirectly, the power to direct or cause the direction of the
management and
1.
<PAGE> 8
policies of the other Person, whether through the ownership of voting
securities, membership interests, by contract, or otherwise.
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 10.09.
"Agent-Related Persons" means BofA and any successor agent
arising under Section 10.09 and any successor letter of credit issuing
bank hereunder, together with their respective Affiliates (including,
in the case of BofA, the Arranger), and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Payment Office" means the address for payments set
forth on Schedule 11.02 or such other address as the Agent may from
time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Margin" means
(i) with respect to Base Rate Loans, 0%; and
(ii) with respect to Offshore Rate Loans, as
follows:
(A) 0.35%, if the Facility Utilization
is less than 25%,
(B) 0.425%, if the Facility Utilization
is greater than or equal to 25% and
less than 50%,
(C) 0.50%, if the Facility Utilization
is greater than or equal to 50% and
less than 75%, or
(D) 0.60%, if the Facility Utilization
is greater than or equal to 75%;
provided, however, that if at any time the Company's Total Debt/Capitalization
Ratio as reported in the Company's most recent Compliance Certificate delivered
to the Agent and the
2.
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Banks as provided in Section 7.02 exceeds 0.35 to 1.00, then 0.10% shall be
added to the Applicable Margin with respect to Offshore Rate Loans, effective
90 days after the last day of the fiscal year or 45 days after the last day of
the fiscal quarter, as the case may be, to which such Compliance Certificate
relates. For the period from the Closing Date until the date on which a change
in the Total Debt/Capitalization Ratio becomes effective as provided in the
preceding proviso, the Total Debt/Capitalization Ratio shall be as reported in
the Company's Compliance Certificate delivered to the Agent and the Banks on
the Closing Date.
"Arranger" means BA Securities, Inc., a Delaware corporation.
"Assignee" has the meaning specified in subsection 11.08(a).
"Attorney Costs" means and includes all fees and disbursements
of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause
hereto. References to the "Banks" shall include BofA, including in
its capacity as Issuing Bank; for purposes of clarification only, to
the extent that BofA may have any rights or obligations in addition to
those of the Banks due to its status as Issuing Bank, its status as
such will be specifically referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of
interest in effect for such day as publicly announced from time to
time by BofA in San Francisco, California, as its "reference rate."
(The "reference rate" is a rate set by BofA based upon various factors
including BofA's costs and desired return, general economic conditions
and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate.)
3.
<PAGE> 10
Any change in the reference rate announced by BofA
shall take effect at the opening of business on the day specified in
the public announcement of such change.
"Base Rate Loan" means a Revolving Loan, or an L/C Advance,
that bears interest based on the Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans of the same Type made to the Company on the same day
by the Banks under Article II, and, other than in the case of Base
Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or San Francisco
are authorized or required by law to close and, if the applicable
Business Day relates to any Offshore Rate Loan, means such a day on
which dealings are carried on in the applicable offshore dollar
interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Cash Collateralize" means to pledge and deposit with or
deliver to the Agent, for the benefit of the Agent, the Issuing Bank
and the Banks, as collateral for the L/C Obligations, cash or deposit
account balances pursuant to documentation in form and substance
satisfactory to the Agent and the Issuing Bank (which documents are
hereby consented to by the Banks). Derivatives of such term shall
have corresponding meanings.
"Change of Control" means (a) any "person" (as such term is
used in subsections 13(d) and 14(d) of the Exchange
4.
<PAGE> 11
Act) or group of persons on or after the Closing Date, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing 35%
or more of the combined voting power of the Company's then-outstanding
voting securities, or (b) the existing directors for any reason cease
to constitute a majority of the Company's board of directors.
"Existing directors" means (x) individuals constituting the Company's
board of directors on the Closing Date, and (y) any subsequent
director whose election by the board of directors or nomination for
election by the Company's shareholders was approved by a vote of at
least a majority of the directors then in office, which directors
either were directors on the Closing Date or whose election or
nomination for election was previously so approved.
"Closing Date" means the date on which all conditions
precedent set forth in Section 5.01 are satisfied.
"Co-Agent" means Fleet National Bank in its capacity as
co-agent hereunder.
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment", as to each Bank, has the meaning specified in
Section 2.01, as such amount may be reduced from time to time pursuant
to Section 2.05.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C.
"Consolidated Current Liabilities" means, as of any date of
determination, all amounts that would, in accordance with GAAP, be
included under current liabilities on a consolidated balance sheet of
the Company, but in any event including all Loans and L/C Obligations.
"Consolidated Tangible Net Worth" shall mean, on a
consolidated basis, the excess of all of the Company's assets
(excluding any value for goodwill, trademarks, patents, copyrights,
capitalized software, organization expense, and other similar
intangible items) over all liabilities, as determined and computed in
accordance with GAAP.
5.
<PAGE> 12
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to
assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b)
with respect to any Surety Instrument (other than any Letter of
Credit) issued for the account of that Person or as to which that
Person is otherwise liable for reimbursement of drawings or payments;
(c) to purchase any materials, supplies or other property from, or to
obtain the services of, another Person if the relevant contract or
other related document or obligation requires that payment for such
materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever
performed or tendered, or (d) in respect of any Swap Contract. The
amount of any Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable amount of
the primary obligation in respect of which such Guaranty Obligation is
made or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof, and in the case of other
Contingent Obligations other than in respect of Swap Contracts, shall
be equal to the maximum reasonably anticipated liability in respect
thereof and, in the case of Contingent Obligations in respect of Swap
Contracts, shall be equal to the Swap Termination Value.
6.
<PAGE> 13
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or
by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under
Section 2.04, the Company (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
"Convertible Subordinated Note Documents" means the
Subordinated Notes and the indenture relating thereto.
"Convertible Subordinated Notes" means the 3.15% Convertible
Subordinated Notes issued by the Company on March 30, 1994, in an
original aggregate principal amount of $110,000,000 pursuant to the
terms of the indenture relating thereto.
"Credit Extension" means and includes (a) the making of any
Revolving Loans hereunder, and (b) the Issuance of any Letters of
Credit hereunder.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Effective Amount" means (i) with respect to any Revolving
Loans on any date, the aggregate outstanding principal amount thereof
after giving effect to any Borrowings and prepayments or repayments of
Revolving Loans occurring on such date; and (ii) with respect to any
outstanding L/C Obligations on any date, the amount of such L/C
Obligations on such date after giving effect to any Issuances of
Letters of Credit occurring on such date and any other changes in the
aggregate amount of the L/C Obligations as of such date, including as
a result of any reimbursements of outstanding unpaid drawings under
any
7.
<PAGE> 14
Letters of Credit or any reductions in the maximum amount available
for drawing under Letters of Credit taking effect on such date.
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having
a combined capital and surplus of at least $200,000,000; (b) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $200,000,000,
provided that such bank is acting through a branch or agency located
in the United States; and (c) a Person that is primarily engaged in
the business of commercial banking and that is (i) a Subsidiary of a
Bank, (ii) a Subsidiary of a Person of which a Bank is a Subsidiary,
or (iii) a Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any
8.
<PAGE> 15
ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as defined
in Section 4001(a)(2) of ERISA) or a cessation of operations which is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a
complete or partial withdrawal by the Company or any ERISA Affiliate
from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate,
the treatment of a Plan amendment as a termination under Section 4041
or 4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or
(f) the imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
the Company or any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"Facility Utilization" means at any time the Effective Amount
of Revolving Loans plus the Effective Amount of L/C Obligations as a
percentage of the combined Commitments of the Banks, rounded to the
nearest whole percentage point.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for
9.
<PAGE> 16
any relevant day such rate is not so published on any such preceding
Business Day, the rate for such day will be the arithmetic mean as
determined by the Agent of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"Fee Letter" has the meaning specified in subsection 2.10(a).
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Further Taxes" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees, withholdings
or similar charges (including, without limitation, net income taxes
and franchise taxes), and all liabilities with respect thereto,
imposed by any jurisdiction on account of amounts payable or paid
pursuant to Section 4.01.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
10.
<PAGE> 17
"Honor Date" has the meaning specified in subsection 3.03(b).
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary
course of business on ordinary terms); (c) all non-contingent
reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (e)
all indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in either
case with respect to property acquired by the Person (even though the
rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such
property); (f) all obligations with respect to capital leases; (g) all
indebtedness referred to in clauses (a) through (f) above secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in
property (including accounts and contracts rights) owned by such
Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness; and (h) all Guaranty Obligations in
respect of indebtedness or obligations of others of the kinds referred
to in clauses (a) through (g) above.
For all purposes of this Agreement, the Indebtedness of any Person
shall include all recourse Indebtedness of any Joint Venture in which
such Person is a general partner or a joint venturer or a member.
"Indemnified Liabilities" has the meaning specified in Section
11.05.
"Indemnified Person" has the meaning specified in Section
11.05.
"Independent Auditor" has the meaning specified in subsection
7.01(a).
11.
<PAGE> 18
"Insolvency Proceeding" means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for
creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; undertaken
under U.S. Federal, state or foreign law, including the Bankruptcy
Code.
"Intellectual Property" means all patents and patent
applications, domestic or foreign, all state (including common law),
federal and foreign trademarks, service marks and trade names, and
applications for registration of such trademarks, service marks and
trade names, and all copyrights of the Company or any Subsidiary.
"Interest Payment Date" means, as to any Loan other than a
Base Rate Loan, the last day of each Interest Period applicable to
such Loan and, as to any Base Rate Loan, the last Business Day of each
calendar quarter and each date such Loan is converted into another
Type of Loan, provided, however, that if any Interest Period for an
Offshore Rate Loan exceeds three months, the date that falls three
months after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Company in its
Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless,
12.
<PAGE> 19
in the case of an Offshore Rate Loan, the result of such
extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end
on the preceding Business Day;
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Revolving Termination Date.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Issuance Date" has the meaning specified in subsection
3.01(a).
"Issue" means, with respect to any Letter of Credit, to issue
or to extend the expiry of, or to renew or increase the amount of,
such Letter of Credit; and the terms "Issued", "Issuing" and
"Issuance" have corresponding meanings.
"Issuing Bank" means BofA in its capacity as issuer of one or
more Letters of Credit hereunder, together with any replacement letter
of credit issuer arising under subsection 10.01(b) or Section 10.09.
"Joint Venture" means a partnership, limited liability
company, joint venture or other legal arrangement (whether created by
contract or conducted through a separate legal entity) now or
hereafter formed by the Company or any of its Subsidiaries with
another Person in order to conduct a common venture or enterprise with
such Person.
"L/C Advance" means each Bank's participation in any L/C
Borrowing in accordance with its Pro Rata Share.
13.
<PAGE> 20
"L/C Amendment Application" means an application form for
amendment of outstanding standby or commercial documentary letters of
credit as shall at any time be in use at the Issuing Bank, as the
Issuing Bank shall request.
"L/C Application" means an application form for issuances of
standby or commercial documentary letters of credit as shall at any
time be in use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been
reimbursed on the date when made nor converted into a Borrowing of
Revolving Loans under subsection 3.03(c).
"L/C Commitment" means the commitment of the Issuing Bank to
Issue, and the commitment of the Banks severally to participate in,
Letters of Credit from time to time Issued or outstanding under
Article III; provided that the L/C Commitment is a part of the
combined Commitments, rather than a separate, independent commitment.
"L/C Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Letters of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under all Letters of
Credit, including all outstanding L/C Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the Issuing Bank's
standard form documents for letter of credit issuances.
"Lending Office" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
11.02, or such other office or offices as such Bank may from time to
time notify the Company and the Agent.
"Letters of Credit" means any letters of credit (whether
standby letters of credit or commercial documentary
14.
<PAGE> 21
letters of credit) Issued by the Issuing Bank pursuant to Article III.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale
or other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any
financing statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any comparable
law) and any contingent or other agreement to provide any of the
foregoing, but not including the interest of a lessor under an
operating lease.
"Loan" means an extension of credit by a Bank to the Company
under Article II or Article III in the form of a Revolving Loan or L/C
Advance.
"Loan Documents" means this Agreement, any Notes, the Fee
Letters, the L/C-Related Documents, and all other documents delivered
to the Agent or any Bank in connection herewith.
"Majority Banks" means at any time Banks then holding at least
66-2/3% of the then aggregate unpaid principal amount of the Loans,
or, if no such principal amount is then outstanding, Banks then having
at least 66-2/3% of the Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole; (b) a material impairment of the
ability of the Company to perform under any Loan Document and to avoid
any Event of Default; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the
Company of any Loan Document.
15.
<PAGE> 22
"Material Subsidiary" means, at any time, any Subsidiary
having at such time either (i) total (gross) revenues for the
preceding four fiscal quarter period in excess of $10,000,000 or (ii)
total assets, as of the last day of the preceding fiscal quarter,
having a net book value in excess of $25,000,000, in each case, based
upon the Company's most recent annual or quarterly financial
statements delivered to the Agent under Section 7.01.
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has made,
or been obligated to make, contributions.
"Note" means a promissory note executed by the Company in
favor of a Bank pursuant to subsection 2.02(b), in substantially the
form of Exhibit F.
"Notice of Borrowing" means a notice in substantially the form
of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document
owing by the Company to any Bank, the Agent, or any Indemnified
Person, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now
existing or hereafter arising.
"Offshore Rate" means, for any Interest Period, with respect
to Offshore Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded upward to the next 1/16th of 1%)
determined by the Agent as follows:
LIBOR
Offshore Rate = ------------------------------------
1.00 - Eurodollar Reserve Percentage
16.
<PAGE> 23
Where,
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect
on such day (whether or not applicable to any Bank) under
regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum
determined by the Agent to be the arithmetic mean (rounded
upward to the next 1/16th of 1%) of the rates of interest per
annum notified to the Agent by the Reference Bank as the rate
of interest at which dollar deposits in the approximate amount
of the amount of the Loan to be made or continued as, or
converted into, an Offshore Rate Loan by such Reference Bank
and having a maturity comparable to such Interest Period would
be offered to major banks in the London interbank market at
their request at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest
Period.
The Offshore Rate shall be adjusted automatically as
to all Offshore Rate Loans then outstanding as of the
effective date of any change in the Eurodollar Reserve
Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on
the Offshore Rate.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement,
and all applicable resolutions of the board of directors (or any
committee thereof) of such corporation.
17.
<PAGE> 24
"Other Taxes" means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery, performance, enforcement or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"Participant" has the meaning specified in subsection
11.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Company
sponsors, maintains, or to which it makes, is making, or is obligated
to make contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 8.01.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
"Reference Bank" means BofA.
"Reportable Event" means, any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder,
18.
<PAGE> 25
other than any such event for which the 30-day notice requirement
under ERISA has been waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially
the same authority and responsibility; or, with respect to compliance
with financial covenants, the chief financial officer or the treasurer
of the Company, or any other officer having substantially the same
authority and responsibility.
"Revolving Loan" has the meaning specified in Section 2.01,
and may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type"
of Revolving Loan).
"Revolving Termination Date" means the earlier to occur of:
(a) July 24, 1999; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other
business entity of which more than 50% of the voting stock, membership
interests or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
19.
<PAGE> 26
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap or option, bond, note or bill option, interest rate
option, forward foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any
option to enter into any of the foregoing) or any combination of the
foregoing, and, unless the context otherwise clearly requires, any
master agreement relating to or governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for
any date on or after the date such Swap Contracts have been closed out
and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date
referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined by the
Company based upon one or more mid-market or other readily available
quotations provided by any recognized dealer in such Swap Contracts
(which may include any Bank).
"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or
similar charges, and all liabilities with respect thereto, excluding,
in the case of each Bank and the Agent, respectively, taxes imposed on
or measured by its net income by any jurisdiction (or any political
subdivision thereof).
"Total Debt/Capitalization Ratio" means, with respect to the
Company and its Subsidiaries, the ratio of (i) Indebtedness for
borrowed money plus capitalized leases plus Contingent Obligations in
respect of letters of credit
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issued and outstanding under this Agreement (collectively, "Total
Debt"), to (ii) Total Debt plus Consolidated Tangible Net Worth.
"Type" has the meaning specified in the definition of
"Revolving Loan."
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"Wholly-Owned Subsidiary" means any corporation in which
(other than directors' qualifying shares or similar shares required by
law) 100% of the capital stock of each class having ordinary voting
power, and 100% of the capital stock of every other class, in each
case, at the time as of which any determination is being made, is
owned, beneficially and of record, by the Company, or by one or more
of the other Wholly-Owned Subsidiaries, or both.
2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and
similar words refer to this Agreement as a whole and not to any particular
provision of this Agreement; and subsection, Section, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and
all instruments, documents, agreements, certificates, indentures,
notices and other writings, however evidenced.
(i) The term "including" is not limiting and
means "including without limitation."
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(ii) In the computation of periods of time from
a specified date to a later specified date, the word "from" means
"from and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein,
(i) references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement
are for convenience of reference only and shall not affect the interpretation
of this Agreement.
(f) This Agreement and other Loan Documents may
use several different limitations, tests or measurements to regulate the same
or similar matters. All such limitations, tests and measurements are
cumulative and shall each be performed in accordance with their terms. Unless
otherwise expressly provided, any reference to any action of the Agent or the
Banks by way of consent, approval or waiver shall be deemed modified by the
phrase "in its/their sole discretion."
(g) This Agreement and the other Loan Documents
are the result of negotiations among and have been reviewed by counsel to the
Agent, the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Agent merely
because of the Agent's or Banks' involvement in their preparation.
2 Accounting Principles.
(a) Unless the context otherwise clearly
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
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(b) References herein to "fiscal year" and
"fiscal quarter" refer to such fiscal periods of the Company.
II
THE CREDITS
1 Amounts and Terms of Commitments. Each Bank severally agrees,
on the terms and conditions set forth herein, to make loans to the Company
(each such loan, a "Revolving Loan") from time to time on any Business Day
during the period from the Closing Date to the Revolving Termination Date, in
an aggregate amount not to exceed at any time outstanding the amount set forth
on Schedule 2.01 (such amount as the same may be reduced under Section 2.05 or
as a result of one or more assignments under Section 10.08, the Bank's
"Commitment"); provided, however, that, after giving effect to any Borrowing of
Revolving Loans, the Effective Amount of all outstanding Revolving Loans and
the Effective Amount of all L/C Obligations, shall not at any time exceed the
combined Commitments; and provided further, that the Effective Amount of the
Revolving Loans of any Bank plus the participation of such Bank in the
Effective Amount of all L/C Obligations shall not at any time exceed such
Bank's Commitment. Within the limits of each Bank's Commitment, and subject to
the other terms and conditions hereof, the Company may borrow under this
Section 2.01, prepay under Section 2.06 and reborrow under this Section 2.01.
2 Loan Accounts.
(a) The Loans made by each Bank and the Letters
of Credit Issued by the Issuing Bank shall be evidenced by one or more accounts
or records maintained by such Bank or Issuing Bank, as the case may be, in the
ordinary course of business. The accounts or records maintained by the Agent,
the Issuing Bank and each Bank shall be conclusive absent manifest error of the
amount of the Loans made by the Banks to the Company and the Letters of Credit
Issued for the account of the Company, and the interest and payments thereon.
Any failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Company hereunder to pay any amount
owing with respect to the Loans or any Letter of Credit.
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(b) Upon the request of any Bank made through the
Agent, the Loans made by such Bank may be evidenced by one or more Notes,
instead of or in addition to loan accounts. Each such Bank shall endorse on
the schedules annexed to its Note(s) the date, amount and maturity of each Loan
made by it and the amount of each payment of principal made by the Company with
respect thereto. Each such Bank is irrevocably authorized by the Company to
endorse its Note(s) and each Bank's record shall be conclusive absent manifest
error; provided, however, that the failure of a Bank to make, or an error in
making, a notation thereon with respect to any Loan shall not limit or
otherwise affect the obligations of the Company hereunder or under any such
Note to such Bank.
3 Procedure for Borrowing.
(a) Each Borrowing of Revolving Loans shall be
made upon the Company's irrevocable written notice delivered to the Agent in
the form of a Notice of Borrowing (which notice must be received by the Agent
prior to 9:00 a.m. (San Francisco time) (i) three Business Days prior to the
requested Borrowing Date, in the case of Offshore Rate Loans; and (ii) one
Business Day prior to the requested Borrowing Date, in the case of Base Rate
Loans, specifying:
(A) the amount of the Borrowing,
which shall be in an aggregate minimum amount of $5,000,000 or
any multiple of $1,000,000 in excess thereof;
(B) the requested Borrowing
Date, which shall be a Business Day;
(C) the Type of Loans comprising
the Borrowing; and
(D) in the case of Offshore Rate
Loans, the duration of the Interest Period applicable to such
Loans included in such notice. If the Notice of Borrowing
fails to specify the duration of the Interest Period for any
Borrowing comprised of Offshore Rate Loans, such Interest
Period shall be three months.
provided, however, that with respect to the Borrowing to be made on the Closing
Date, the Notice of Borrowing shall be delivered to the Agent not later than
9:00 a.m. (San Francisco time) one
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Business Day before the Closing Date and such Borrowing will consist of Base
Rate Loans only.
(b) The Agent will promptly notify each Bank of
its receipt of any Notice of Borrowing and of the amount of such Bank's Pro
Rata Share of that Borrowing.
(c) Each Bank will make the amount of its Pro
Rata Share of each Borrowing available to the Agent for the account of the
Company at the Agent's Payment Office by 11:00 a.m. (San Francisco time) on the
Borrowing Date requested by the Company in funds immediately available to the
Agent. The proceeds of all such Loans will then be made available to the
Company by the Agent at such office by crediting the account of the Company on
the books of BofA with the aggregate of the amounts made available to the Agent
by the Banks and in like funds as received by the Agent.
(d) After giving effect to any Borrowing, unless
the Agent shall otherwise consent, there may not be more than six different
Interest Periods in effect.
4 Conversion and Continuation Elections.
(a) The Company may, upon irrevocable written
notice to the Agent in accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case
of Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of any other Type of Revolving Loans, to convert
any such Loans (or any part thereof in an amount not less than
$5,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof) into Loans of any other Type; or
(ii) elect as of the last day of the applicable
Interest Period, to continue any Revolving Loans having Interest
Periods expiring on such day (or any part thereof in an amount not
less than $5,000,000, or that is in an integral multiple of $1,000,000
in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $5,000,000, such Offshore Rate Loans shall
automatically convert
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<PAGE> 32
into Base Rate Loans, and on and after such date the right of the Company to
continue such Loans as, and convert such Loans into, Offshore Rate Loans shall
terminate.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than 9:00 a.m.
(San Francisco time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or
continued as Offshore Rate Loans; and (ii) one Business Day in advance of the
Conversion/Continuation Date, if the Loans are to be converted into Base Rate
Loans, specifying:
(A) the proposed
Conversion/Continuation Date;
(B) the aggregate amount of
Loans to be converted or continued;
(C) the Type of Loans resulting
from the proposed conversion or continuation; and
(D) other than in the case of
conversions into Base Rate Loans, the duration of the
requested Interest Period.
(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Loans, the Company has failed to select timely a
new Interest Period to be applicable to such Offshore Rate Loans, as the case
may be, or if any Default or Event of Default then exists, the Company shall be
deemed to have elected to convert such Offshore Rate Loans into Base Rate Loans
effective as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of
its receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the Company, the Agent will promptly notify each Bank of the
details of any automatic conversion. All conversions and continuations shall
be made ratably according to the respective outstanding principal amounts of
the Loans with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise consent,
during the existence of a Default or an Event of Default, the
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<PAGE> 33
Company may not elect to have a Loan converted into or continued as an Offshore
Rate Loan.
(f) After giving effect to any conversion or
continuation of Loans, unless the Agent shall otherwise consent, there may not
be more than six different Interest Periods in effect.
5 Voluntary Termination or Reduction of Commitments. The
Company may, upon not less than three Business Days' prior notice to the Agent,
terminate the Commitments, or permanently reduce the Commitments by an
aggregate minimum amount of $5,000,000 or any multiple of $5,000,000 in excess
thereof; unless, after giving effect thereto and to any prepayments of Loans
made on the effective date thereof, the Effective Amount of all Revolving Loans
and L/C Obligations together would exceed the amount of the combined
Commitments then in effect. Once reduced in accordance with this Section, the
Commitments may not be increased. Any reduction of the Commitments shall be
applied to each Bank according to its Pro Rata Share. All accrued commitment
and letter of credit fees to, but not including, the effective date of any
termination of Commitments, shall be paid on the effective date of such
termination.
6 Optional Prepayments. Subject to Section 4.04, the Company
may, at any time or from time to time, upon not less than One Business Days'
irrevocable notice to the Agent for Base Rate Loans and not less than three
Business Days' irrevocable notice to the Agent for Offshore Rate Loans, ratably
prepay Loans in whole or in part, in minimum amounts of $5,000,000 or any
increments of $1,000,000 in excess thereof. Such notice of prepayment shall
specify the date and amount of such prepayment and the Type(s) of Loans to be
prepaid. The Agent will promptly notify each Bank of its receipt of any such
notice, and of such Bank's Pro Rata Share of such prepayment. If such notice
is given by the Company, the Company shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to each such date on the amount prepaid
and any amounts required pursuant to Section 4.04.
7 Mandatory Cash Collateralization; Mandatory Prepayment of
Loans. If on any date the Effective Amount of all Revolving Loans and L/C
Obligations together exceeds the amount of the combined Commitments then in
effect, the Company shall Cash
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<PAGE> 34
Collateralize on such date the outstanding Letters of Credit in an amount equal
to the excess of the maximum amount then available to be drawn under the
Letters of Credit over the combined Commitments. The Company hereby grants the
Agent, for the benefit of the Agent, the Issuing Bank and the Banks, a security
interest in all cash and deposit account balances pledged or delivered to the
Agent in connection with the Cash Collateralization of the outstanding Letters
of Credit. Cash collateral shall be maintained in blocked,
non-interest-bearing deposit accounts at BofA. Subject to Section 4.04, if on
any date after giving effect to any Cash Collateralization made on such date
pursuant to the preceding sentence, the Effective Amount of all Revolving Loans
then outstanding plus the Effective Amount of all L/C Obligations still exceeds
the combined Commitments, the Company shall immediately, and without notice or
demand, prepay the outstanding principal amount of the Revolving Loans and L/C
Advances by an amount equal to the applicable excess.
8 Repayment. The Company shall repay to the Banks on the
Revolving Termination Date the aggregate principal amount of Loans outstanding
on such date.
9 Interest.
(a) Each Revolving Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to the Offshore Rate or the Base Rate, as the case may be
(and subject to the Company's right to convert to other Types of Loans under
Section 2.04), plus the Applicable Margin.
(b) Interest on each Revolving Loan shall be paid in
arrears on each Interest Payment Date. Interest shall also be paid on the date
of any prepayment of Loans under Section 2.06 or 2.07 for the portion of the
Loans so prepaid and upon payment (including prepayment) in full thereof and,
during the existence of any Event of Default, interest shall be paid on demand
of the Agent at the request or with the consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section, if
any amount of principal of or interest on any Loan, or any other amount payable
under any Loan Document, is not paid in full when due (giving effect to any
applicable grace periods under the Loan Documents), whether at stated maturity,
by acceleration or
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otherwise, the Company shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on such unpaid amount, at a
rate per annum which is determined by adding 2% per annum to the Applicable
Margin then in effect for such Loans and, in the case of Obligations not
subject to an Applicable Margin, at a rate per annum equal to the Base Rate
plus 2%; provided, however, that, on and after the expiration of any Interest
Period applicable to any Offshore Rate Loan outstanding on the date such amount
becomes due (giving effect to any applicable grace period), the principal
amount of such Loan shall, until paid in full, bear interest at a rate per
annum equal to the Base Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary
to the provisions of any law applicable to such Bank limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Bank, and in such event the Company shall pay such Bank interest at the highest
rate permitted by applicable law.
10 Fees. In addition to certain fees described in Section 3.08:
(a) Arrangement, Agency Fees. The Company shall pay an
arrangement fee to the Arranger for the Arranger's own account, and shall pay
an agency fee to the Agent for the Agent's own account, as required by the
letter agreement ("Fee Letter") between the Company and the Arranger and Agent
dated June 3, 1996.
(b) Commitment Fees. The Company shall pay to the Agent
for the account of each Bank a commitment fee on the average daily unused
portion of such Bank's Commitment, computed on a 360-day basis in arrears on
the last Business Day of each calendar quarter based upon the daily utilization
for that quarter as calculated by the Agent, equal to (i) 0.15 percent per
annum at any time when the Company's Total Debt/Capitalization Ratio as
reported in the Company's most recent Compliance Certificate delivered to the
Agent and the Banks as provided in Section 7.02 is less than or equal to 0.35
to 1.00, effective 90
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days after the last day of the fiscal year or 45 days after the last day of the
fiscal quarter, as the case may be, to which such Compliance Certificate
relates; and (ii) 0.225 percent per annum otherwise. For the period from the
Closing Date until the date on which a change in the Total Debt/Capitalization
Ratio becomes effective as provided in the preceding sentence, the Total
Debt/Capitalization Ratio shall be as reported in the Company's Compliance
Certificate delivered to the Agent and the Banks on the Closing Date. For
purposes of calculating utilization under this subsection, the Commitments
shall be deemed used to the extent of the Effective Amount of Revolving Loans
then outstanding, plus the Effective Amount of L/C Obligations then
outstanding. Such commitment fee shall accrue from the Closing Date to the
Revolving Termination Date and shall be due and payable quarterly in arrears on
the last Business Day of each calendar quarter commencing on September 30, 1996
through the Revolving Termination Date, with the final payment to be made on
the Revolving Termination Date; provided that, in connection with any
termination of Commitments under Section 2.05, the accrued commitment fee
calculated for the period ending on such date shall also be paid on the date of
such termination. The commitment fees provided in this subsection shall accrue
at all times after the above- mentioned commencement date, including at any
time during which one or more conditions in Article V are not met.
11 Computation of Fees and Interest.
(a) All computations of interest for Base Rate Loans when
the Base Rate is determined by BofA's "reference rate" shall be made on the
basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed. All other computations of fees and interest shall be made on the
basis of a 360-day year and actual days elapsed (which results in more interest
being paid than if computed on the basis of a 365-day year). Interest and fees
shall accrue during each period during which interest or such fees are computed
from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent
shall be conclusive and binding on the Company and the Banks in the absence of
manifest error. The Agent will, at the request of the Company or any Bank,
deliver to the Company or the Bank, as the case may be, a statement showing the
quotations used
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by the Agent in determining any interest rate and the resulting interest rate.
12 Payments by the Company.
(a) All payments to be made by the Company shall be made
without set-off, recoupment or counterclaim. Except as otherwise expressly
provided herein, all payments by the Company shall be made to the Agent for the
account of the Banks at the Agent's Payment Office, and shall be made in
dollars and in immediately available funds, no later than 11:00 a.m. (San
Francisco time) on the date specified herein. The Agent will promptly
distribute to each Bank its Pro Rata Share (or other applicable share as
expressly provided herein) of such payment in like funds as received. Any
payment received by the Agent later than 11:00 a.m. (San Francisco time) shall
be deemed to have been received on the following Business Day and any
applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition
of "Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company
prior to the date on which any payment is due to the Banks that the Company
will not make such payment in full as and when required, the Agent may assume
that the Company has made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required),
in reliance upon such assumption, distribute to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent the
Company has not made such payment in full to the Agent, each Bank shall repay
to the Agent on demand such amount distributed to such Bank, together with
interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Bank until the date repaid.
13 Payments by the Banks to the Agent.
(a) Unless the Agent receives notice from a Bank on or
prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of
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such Borrowing, that such Bank will not make available as and when required
hereunder to the Agent for the account of the Company the amount of that Bank's
Pro Rata Share of the Borrowing, the Agent may assume that each Bank has made
such amount available to the Agent in immediately available funds on the
Borrowing Date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to the Company on such date a
corresponding amount. If and to the extent any Bank shall not have made its
full amount available to the Agent in immediately available funds and the Agent
in such circumstances has made available to the Company such amount, that Bank
shall on the Business Day following such Borrowing Date make such amount
available to the Agent, together with interest at the Federal Funds Rate for
each day during such period. A notice of the Agent submitted to any Bank with
respect to amounts owing under this subsection (a) shall be conclusive, absent
manifest error. If such amount is so made available, such payment to the Agent
shall constitute such Bank's Loan on the date of Borrowing for all purposes of
this Agreement. If such amount is not made available to the Agent on the
Business Day following the Borrowing Date, the Agent will notify the Company of
such failure to fund and, upon demand by the Agent, the Company shall pay such
amount to the Agent for the Agent's account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Loans comprising such
Borrowing.
(b) The failure of any Bank to make any Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Loan on such Borrowing Date, but no Bank shall be responsible for the
failure of any other Bank to make the Loan to be made by such other Bank on any
Borrowing Date.
14 Sharing of Payments, Etc. If, other than as expressly
provided elsewhere herein, any Bank shall obtain on account of the Loans made
by it any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made by them as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided, however, that if all
or any portion of such excess payment is thereafter recovered from the
purchasing Bank, such purchase shall to that extent be rescinded
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and each other Bank shall repay to the purchasing Bank the purchase price paid
therefor, together with an amount equal to such paying Bank's ratable share
(according to the proportion of (i) the amount of such paying Bank's required
repayment to (ii) the total amount so recovered from the purchasing Bank) of
any interest or other amount paid or payable by the purchasing Bank in respect
of the total amount so recovered. The Company agrees that any Bank so
purchasing a participation from another Bank may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off, but subject to Section 11.10) with respect to such participation as
fully as if such Bank were the direct creditor of the Company in the amount of
such participation. The Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased under
this Section and will in each case notify the Banks following any such
purchases or repayments.
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III
THE LETTERS OF CREDIT
1 Letters of Credit.
(a) On the terms and conditions set forth herein (i) the
Issuing Bank agrees, (A) from time to time on any Business Day during the
period from the Closing Date to the Revolving Termination Date to issue Letters
of Credit for the account of the Company, and to amend or renew Letters of
Credit previously issued by it, in accordance with subsections 3.02(c) and
3.02(d), and (B) to honor drafts under the Letters of Credit; and (ii) the
Banks severally agree to participate in Letters of Credit Issued for the
account of the Company; provided, that the Issuing Bank shall not be obligated
to Issue, and no Bank shall be obligated to participate in, any Letter of
Credit if as of the date of Issuance of such Letter of Credit (the "Issuance
Date") (1) the Effective Amount of all L/C Obligations plus the Effective
Amount of all Revolving Loans exceeds the combined Commitments, (2) the
participation of any Bank in the Effective Amount of all L/C Obligations plus
the Effective Amount of the Revolving Loans of such Bank exceeds such Bank's
Commitment, or (3) the Effective Amount of L/C Obligations exceeds the L/C
Commitment. Within the foregoing limits, and subject to the other terms and
conditions hereof, the Company's ability to obtain Letters of Credit shall be
fully revolving, and, accordingly, the Company may, during the foregoing
period, obtain Letters of Credit to replace Letters of Credit which have
expired or which have been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue any
Letter of Credit if:
(i) any order, judgment or decree of any
Governmental Authority or arbitrator shall by its terms purport to
enjoin or restrain the Issuing Bank from Issuing such Letter of
Credit, or any Requirement of Law applicable to the Issuing Bank or
any request or directive (whether or not having the force of law) from
any Governmental Authority with jurisdiction over the Issuing Bank
shall prohibit, or request that the Issuing Bank refrain from, the
Issuance of letters of credit generally or such Letter of Credit in
particular or shall impose upon the Issuing Bank with respect to such
Letter of Credit any restriction, reserve or
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capital requirement (for which the Issuing Bank is not otherwise
compensated hereunder) not in effect on the Closing Date, or shall
impose upon the Issuing Bank any unreimbursed loss, cost or expense
which was not applicable on the Closing Date and which the Issuing
Bank in good faith deems material to it;
(ii) the Issuing Bank has received written
notice from any Bank, the Agent or the Company, on or prior to the
Business Day prior to the requested date of Issuance of such Letter of
Credit, that one or more of the applicable conditions contained in
Article V is not then satisfied;
(iii) the expiry date of any requested Letter of
Credit is (A) more than 365 days after the date of Issuance, or (B)
after the Revolving Termination Date, unless all of the Banks have
approved such expiry date in writing;
(iv) the expiry date of any requested Letter of
Credit is prior to the maturity date of any financial obligation to be
supported by the requested Letter of Credit;
(v) any requested Letter of Credit does not
provide for drafts, or is not otherwise in form and substance
acceptable to the Issuing Bank, or the Issuance of a Letter of Credit
shall violate any applicable policies of the Issuing Bank;
(vi) any standby Letter of Credit is for the
purpose of supporting the issuance of any letter of credit by any
other Person; or
(vii) any standby Letter of Credit is in a face
amount less than $1,000,000 or to be denominated in a currency other
than Dollars.
2 Issuance, Amendment and Renewal of Letters of Credit.
(a) Each Letter of Credit shall be issued upon the
irrevocable written request of the Company received by the Issuing Bank (with a
copy sent by the Company to the Agent) at least three days (or such shorter
time as the Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of issuance. Each such request for
issuance of
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a Letter of Credit shall be by facsimile, confirmed immediately in an original
writing, in the form of an L/C Application, and shall specify in form and
detail satisfactory to the Issuing Bank: (i) the proposed date of issuance of
the Letter of Credit (which shall be a Business Day); (ii) the face amount of
the Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the
name and address of the beneficiary thereof; (v) the documents to be presented
by the beneficiary of the Letter of Credit in case of any drawing thereunder;
(vi) the full text of any certificate to be presented by the beneficiary in
case of any drawing thereunder; and (vii) such other matters as the Issuing
Bank may require.
(b) Unless the Issuing Bank has received notice on or
before the Business Day immediately preceding the date the Issuing Bank is to
issue a requested Letter of Credit from the Agent (i) directing the Issuing
Bank not to issue such Letter of Credit because such issuance is not then
permitted under subsection 3.01(a) as a result of the limitations set forth in
clauses (1) through (3) thereof or subsection 3.01(b)(ii); or (ii) that one or
more conditions specified in Article V are not then satisfied; then, subject to
the terms and conditions hereof, the Issuing Bank shall, on the requested date,
issue a Letter of Credit for the account of the Company in accordance with the
Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is
outstanding and prior to the Revolving Termination Date, the Issuing Bank will,
upon the written request of the Company received by the Issuing Bank (with a
copy sent by the Company to the Agent) at least three days (or such shorter
time as the Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of amendment, amend any Letter of Credit
issued by it. Each such request for amendment of a Letter of Credit shall be
made by facsimile, confirmed immediately in an original writing, made in the
form of an L/C Amendment Application and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be amended; (ii)
the proposed date of amendment of the Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such other
matters as the Issuing Bank may require. The Issuing Bank shall be under no
obligation to amend any Letter of Credit if: (A) the Issuing Bank would have
no obligation at such time to issue such Letter of Credit in its amended form
under the terms of this Agreement; or (B) the
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beneficiary of any such letter of Credit does not accept the proposed amendment
to the Letter of Credit. The Agent will promptly notify the Banks of the
receipt by it of any L/C Application or L/C Amendment Application.
(d) The Issuing Bank and the Banks agree that, while a
Letter of Credit is outstanding and prior to the Revolving Termination Date, at
the option of the Company and upon the written request of the Company received
by the Issuing Bank (with a copy sent by the Company to the Agent) at least
three days (or such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of notification of
renewal, the Issuing Bank shall be entitled to authorize the renewal of any
Letter of Credit issued by it. Each such request for renewal of a Letter of
Credit shall be made by facsimile, confirmed immediately in an original
writing, in the form of an L/C Amendment Application, and shall specify in form
and detail satisfactory to the Issuing Bank: (i) the Letter of Credit to be
renewed; (ii) the proposed date of notification of renewal of the Letter of
Credit (which shall be a Business Day); (iii) the revised expiry date of the
Letter of Credit; and (iv) such other matters as the Issuing Bank may require.
The Issuing Bank shall be under no obligation so to renew any Letter of Credit
if: (A) the Issuing Bank would have no obligation at such time to issue or
amend such Letter of Credit in its renewed form under the terms of this
Agreement; or (B) the beneficiary of any such Letter of Credit does not accept
the proposed renewal of the Letter of Credit. If any outstanding Letter of
Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Bank that such Letter of
Credit shall not be renewed, and if at the time of renewal the Issuing Bank
would be entitled to authorize the automatic renewal of such Letter of Credit
in accordance with this subsection 3.02(d) upon the request of the Company but
the Issuing Bank shall not have received any L/C Amendment Application from the
Company with respect to such renewal or other written direction by the Company
with respect thereto, the Issuing Bank shall nonetheless be permitted to allow
such Letter of Credit to renew, and the Company and the Banks hereby authorize
such renewal, and, accordingly, the Issuing Bank shall be deemed to have
received an L/C Amendment Application from the Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as required
by the Agent at the direction of the Majority Banks),
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deliver any notices of termination or other communications to any Letter of
Credit beneficiary or transferee, and take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the expiry
date of such Letter of Credit to be a date not later than the Revolving
Termination Date.
(f) This Agreement shall control in the event of any
conflict with any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent,
concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or
amendment to or renewal of a Letter of Credit.
3 Participations, Drawings and Reimbursements.
(a) Immediately upon the Issuance of each Letter of
Credit, each Bank shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Bank a participation in
such Letter of Credit and each drawing thereunder in an amount equal to the
product of (i) the Pro Rata Share of such Bank, times (ii) the maximum amount
available to be drawn under such Letter of Credit and the amount of such
drawing, respectively. For purposes of subsection 2.01(b), each Issuance of a
Letter of Credit shall be deemed to utilize the Commitment of each Bank by an
amount equal to the amount of such participation.
(b) In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the Issuing Bank
will promptly notify the Company. The Company shall reimburse the Issuing Bank
prior to 10:00 a.m. (San Francisco time), on each date that any amount is paid
by the Issuing Bank under any Letter of Credit (each such date, an "Honor
Date"), in an amount equal to the amount so paid by the Issuing Bank. In the
event the Company fails to reimburse the Issuing Bank for the full amount of
any drawing under any Letter of Credit by 10:00 a.m. (San Francisco time) on
the Honor Date, the Issuing Bank will promptly notify the Agent and the Agent
will promptly notify each Bank thereof, and the Company shall be deemed to have
requested that Base Rate Loans be made by the Banks to be disbursed on the
Honor Date under such Letter of Credit, subject
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to the amount of the unutilized portion of the Revolving Commitment and subject
to the conditions set forth in Section 5.02 (other than subsection 5.02(a)).
Any notice given by the Issuing Bank or the Agent pursuant to this subsection
3.03(c) may be oral if immediately confirmed in writing (including by
facsimile); provided that the lack of such an immediate confirmation shall not
affect the conclusiveness or binding effect of such notice.
(c) Each Bank shall upon any notice pursuant to
subsection 3.03(b) make available to the Agent for the account of the relevant
Issuing Bank an amount in Dollars and in immediately available funds equal to
its Pro Rata Share of the amount of the drawing, whereupon the participating
Banks shall (subject to subsection 3.03(e)) each be deemed to have made a
Revolving Loan consisting of a Base Rate Loan to the Company in that amount.
If any Bank so notified fails to make available to the Agent for the account of
the Issuing Bank the amount of such Bank's Pro Rata Share of the amount of the
drawing by no later than 12:00 noon (San Francisco time) on the Honor Date,
then interest shall accrue on such Bank's obligation to make such payment, from
the Honor Date to the date such Bank makes such payment, at a rate per annum
equal to the Federal Funds Rate in effect from time to time during such period.
The Agent will promptly give notice of the occurrence of the Honor Date, but
failure of the Agent to give any such notice on the Honor Date or in sufficient
time to enable any Bank to effect such payment on such date shall not relieve
such Bank from its obligations under this Section 3.03.
(d) With respect to any unreimbursed drawing that is not
converted into Revolving Loans consisting of Base Rate Loans to the Company in
whole or in part, because of the Company's failure to satisfy the conditions
set forth in Section 5.02 (other than subsection 5.02(a)) or for any other
reason, the Company shall be deemed to have incurred from the Issuing Bank an
L/C Borrowing in the amount of such drawing, which L/C Borrowing shall be due
and payable on demand (together with interest) and shall bear interest at a
rate per annum equal to the Base Rate plus 2% per annum, and each Bank's
payment to the Issuing Bank pursuant to subsection 3.03(c) shall be deemed
payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Bank in satisfaction of its participation
obligation under this Section 3.03.
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(e) Each Bank's obligation in accordance with this
Agreement to make the Revolving Loans or L/C Advances, as contemplated by this
Section 3.03, as a result of a drawing under a Letter of Credit, shall be
absolute and unconditional and without recourse to the Issuing Bank and shall
not be affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the Issuing
Bank, the Company or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default, an Event of Default or a Material
Adverse Effect; or (iii) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; provided, however, that each
Bank's obligation to make Revolving Loans under this Section 3.03 is subject to
the conditions set forth in Section 5.02.
4 Repayment of Participations.
(a) Upon (and only upon) receipt by the Agent for the
account of the Issuing Bank of immediately available funds from the Company (i)
in reimbursement of any payment made by the Issuing Bank under the Letter of
Credit with respect to which any Bank has paid the Agent for the account of the
Issuing Bank for such Bank's participation in the Letter of Credit pursuant to
Section 3.03 or (ii) in payment of interest thereon, the Agent will pay to each
Bank, in the same funds as those received by the Agent for the account of the
Issuing Bank, the amount of such Bank's Pro Rata Share of such funds, and the
Issuing Bank shall receive the amount of the Pro Rata Share of such funds of
any Bank that did not so pay the Agent for the account of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any
time to return to the Company, or to a trustee, receiver, liquidator,
custodian, or any official in any Insolvency Proceeding, any portion of the
payments made by the Company to the Agent for the account of the Issuing Bank
pursuant to subsection 3.04(a) in reimbursement of a payment made under the
Letter of Credit or interest or fees thereon, each Bank shall, on demand of the
Agent, forthwith return to the Agent or the Issuing Bank the amount of its Pro
Rata Share of any amounts so returned by the Agent or the Issuing Bank plus
interest thereon from the date such demand is made to the date such amounts are
returned by such Bank to the Agent or the Issuing Bank, at a rate per annum
equal to the Federal Funds Rate in effect from time to time.
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5 Role of the Issuing Bank.
(a) Each Bank and the Company agree that, in paying any
drawing under a Letter of Credit, the Issuing Bank shall not have any
responsibility to obtain any document (other than any sight draft and
certificates expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank shall be liable
to any Bank for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Banks (including the Majority Banks, as
applicable); (ii) any action taken or omitted in the absence of gross
negligence or willful misconduct; or (iii) the due execution, effectiveness,
validity or enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided, however, that this assumption is not intended to,
and shall not, preclude the Company's pursuing such rights and remedies as it
may have against the beneficiary or transferee at law or under any other
agreement. No Agent-Related Person, nor any of the respective correspondents,
participants or assignees of the Issuing Bank, shall be liable or responsible
for any of the matters described in clauses (i) through (vii) of Section 3.06;
provided, however, anything in such clauses to the contrary notwithstanding,
that the Company may have a claim against the Issuing Bank, and the Issuing
Bank may be liable to the Company, to the extent, but only to the extent, of
any direct, as opposed to consequential or exemplary, damages suffered by the
Company which the Company proves were caused by the Issuing Bank's willful
misconduct or gross negligence or the Issuing Bank's willful failure to pay
under any Letter of Credit after the presentation to it by the beneficiary of a
sight draft and certificate(s) strictly complying with the terms and conditions
of a Letter of Credit. In furtherance and not in limitation of the foregoing:
(i) the Issuing Bank may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary; and (ii) the Issuing Bank shall not be
responsible for the validity
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or sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason.
6 Obligations Absolute. The obligations of the Company under
this Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any
drawing under a Letter of Credit converted into Revolving Loans, shall be
unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement and each such other L/C-Related Document under all
circumstances, including the following:
(i) any lack of validity or enforceability of
this Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of
the Company in respect of any Letter of Credit or any other amendment
or waiver of or any consent to departure from all or any of the
L/C-Related Documents;
(iii) the existence of any claim, set-off,
defense or other right that the Company may have at any time against
any beneficiary or any transferee of any Letter of Credit (or any
Person for whom any such beneficiary or any such transferee may be
acting), the Issuing Bank or any other Person, whether in connection
with this Agreement, the transactions contemplated hereby or by the
L/C-Related Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; or any loss or
delay in the transmission or otherwise of any document required in
order to make a drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under any
Letter of Credit against presentation of a draft or certificate that
does not strictly comply with the terms of any Letter of Credit; or
any payment made by the Issuing Bank under any Letter of Credit to any
Person purporting to
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be a trustee in bankruptcy, debtor-in-possession, assignee for the
benefit of creditors, liquidator, receiver or other representative of
or successor to any beneficiary or any transferee of any Letter of
Credit, including any arising in connection with any Insolvency
Proceeding;
(vi) any exchange, release or non-perfection of
any collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations
of the Company in respect of any Letter of Credit; or
(vii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, including
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Company or a guarantor.
7 Cash Collateral Pledge. Upon (i) the request of the Agent,
(A) if the Issuing Bank has honored any full or partial drawing request on any
Letter of Credit and such drawing has resulted in an L/C Borrowing hereunder,
or (B) if, as of the Revolving Termination Date, any Letters of Credit may for
any reason remain outstanding and partially or wholly undrawn, or (ii) the
occurrence of the circumstances described in subsection 2.07 requiring the
Company to Cash Collateralize Letters of Credit, then, the Company shall
immediately Cash Collateralize the L/C Obligations in an amount equal to such
L/C Obligations. The Company hereby grants to the Agent, for the benefit of the
Agent, the Issuing Bank and the Banks, a security interest in all cash and
deposit account balances pledged or delivered to the Agent in connection with
the Cash Collateralization of the L/C Obligations. Cash collateral shall be
maintained in blocked, non-interest-bearing deposit accounts at BofA.
8 Letter of Credit Fees.
(a) The Company shall pay to the Agent for the account of
each of the Banks a letter of credit fee with respect to the Letters of Credit
at a rate per annum equal to the:
(i) 0.35 percent, if the Facility Utilization is less
than 25 percent;
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(ii) 0.425 percent, if the Facility Utilization is
greater than or equal to 25 percent and less than 50 percent;
(iii) 0.50 percent, if the Facility Utilization is
greater than or equal to 50 percent and less than 75 percent, or;
(iv) 0.60 percent, if the Facility Utilization is
greater than or equal to 75 percent,
of the average daily maximum amount available to be drawn under the outstanding
Letters of Credit, computed on a 360-day basis in arrears on the last Business
Day of each calendar quarter based upon Letters of Credit outstanding for that
quarter as calculated by the Agent. However, if at any time the Borrower's
Total Debt/Capitalization Ratio as reported in the Company's most recent
Compliance Certificate delivered to the Agent and the Banks as provided in
Section 7.02 exceeds 0.35 to 1.00, then 0.10 percent shall be added to each of
the fee rates described in clauses (i) through (iv) above, effective 90 days
after the last day of the fiscal year or 45 days after the last day of the
fiscal quarter, as the case may be, to which such Compliance Certificate
relates. For the period from the Closing Date until the date on which a change
in the Total Debt/Capitalization Ratio becomes effective as provided in the
preceding sentence, the Total Debt/Capitalization Ratio shall be as reported in
the Company's Compliance Certificate delivered to the Agent and the Banks on
the Closing Date. Letter of credit fees shall be due and payable quarterly in
arrears on the last Business Day of each calendar quarter during which Letters
of Credit are outstanding, commencing on the first such quarterly date to occur
after the Closing Date, through the Revolving Termination Date (or such later
date upon which the outstanding Letters of Credit shall expire), with the final
payment to be made on the Revolving Termination Date (or such later expiration
date).
(b) The Company shall pay to the Issuing Bank a letter of
credit fronting fee for each Letter of Credit Issued by the Issuing Bank equal
to 0.125% per annum of the face amount (or increased face amount, as the case
may be) of such Letter of Credit. Such Letter of Credit fronting fee shall be
due and payable on each date of Issuance of a Letter of Credit.
(c) The Company shall pay to the Issuing Bank from time
to time on demand the normal issuance, presentation, amendment and other
processing fees, and other standard costs and
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charges, of the Issuing Bank relating to letters of credit as from time to time
in effect.
9 Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits as published by the International Chamber of
Commerce most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in the Letters of Credit) apply to the
Letters of Credit.
IV
TAXES, YIELD PROTECTION AND ILLEGALITY
1 Taxes.
(a) Any and all payments by the Company to each Bank or
the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for, any Taxes. In
addition, the Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as
necessary so that, after making all required deductions and
withholdings (including deductions and withholdings applicable to
additional sums payable under this Section), such Bank or the Agent,
as the case may be, receives and retains an amount equal to the sum it
would have received and retained had no such deductions or
withholdings been made;
(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount
deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
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(iv) the Company shall also pay to each Bank or
the Agent for the account of such Bank, at the time interest is paid,
Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received
if such Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless
each Bank and the Agent for the full amount of i) Taxes, ii) Other Taxes, and
iii) Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if such
Taxes, Other Taxes or Further Taxes had not been imposed, and any liability
(including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes, Other Taxes or
Further Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Bank or the
Agent makes written demand therefor.
(d) Within 30 days after the date of any payment by the
Company of Taxes, Other Taxes or Further Taxes, the Company shall furnish to
each Bank or the Agent the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to such Bank or the
Agent.
(e) If the Company is required to pay any amount to any
Bank or the Agent pursuant to subsection (b) or (c) of this Section, then such
Bank shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by the Company which may thereafter
accrue, if such change in the sole judgment of such Bank is not otherwise
disadvantageous to such Bank.
2 Illegality.
(a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate
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Loans, then, on notice thereof by the Bank to the Company through the Agent,
any obligation of that Bank to make Offshore Rate Loans shall be suspended
until the Bank notifies the Agent and the Company that the circumstances giving
rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain
any Offshore Rate Loan, the Company shall, upon its receipt of notice of such
fact and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 4.04, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Company shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan.
3 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the
introduction of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the Offshore
Rate or in respect of the assessment rate payable by any Bank to the FDIC for
insuring U.S. deposits) in or in the interpretation of any law or regulation or
(ii) the compliance by that Bank with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to such Bank of agreeing to make or
making, funding or maintaining any Offshore Rate Loans or participating in
Letters of Credit, or, in the case of the Issuing Bank, any increase in the
cost to the Issuing Bank of agreeing to issue, issuing or maintaining any
Letter of Credit or of agreeing to make or making, funding or maintaining any
unpaid drawing under any Letter of Credit, then the Company shall be liable
for, and shall from time to time, within 30 days after the date of notice
thereof (with a copy of such notice to be sent to the Agent), pay to the Agent
for the account of such Bank, additional amounts as are sufficient to
compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration
of any Capital Adequacy
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Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Bank (or
its Lending Office) or any corporation controlling the Bank with any Capital
Adequacy Regulation, affects or would affect the amount of capital required or
expected to be maintained by the Bank or any corporation controlling the Bank
and (taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
Commitment, loans, credits or obligations under this Agreement, then, upon
demand of such Bank to the Company through the Agent, the Company shall pay to
the Bank, from time to time as specified by the Bank, additional amounts
sufficient to compensate the Bank for such increase.
4 Funding Losses. The Company shall reimburse each Bank and
hold each Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of:
(a) the failure of the Company to make on a timely basis
any payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.06;
(d) the prepayment (including pursuant to Section 2.07)
or other payment (including after acceleration thereof) of an Offshore Rate
Loan on a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.04 of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the
relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees
payable to terminate the deposits from which such funds were obtained. For
purposes of calculating amounts payable by the Company to the Banks under this
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Section and under subsection 4.03(a), (i) each Offshore Rate Loan made by a
Bank (and each related reserve, special deposit or similar requirement) shall
be conclusively deemed to have been funded at the LIBOR used in determining the
Offshore Rate for such Offshore Rate Loan by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such Offshore Rate Loan is in fact so funded.
5 Inability to Determine Rates. If the Agent determines that
for any reason adequate and reasonable means do not exist for determining the
Offshore Rate for any requested Interest Period with respect to a proposed
Offshore Rate Loan, or that the Offshore Rate applicable pursuant to subsection
2.09(a) for any requested Interest Period with respect to a proposed Offshore
Rate Loan does not adequately and fairly reflect the cost to the Banks of
funding such Loan, the Agent will promptly so notify the Company and each Bank.
Thereafter, the obligation of the Banks to make or maintain Offshore Rate Loans
hereunder shall be suspended until the Agent revokes such notice in writing.
Upon receipt of such notice, the Company may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the Company does
not revoke such Notice, the Banks shall make, convert or continue the Loans, as
proposed by the Company, in the amount specified in the applicable notice
submitted by the Company, but such Loans shall be made, converted or continued
as Base Rate Loans instead of Offshore Rate Loans.
6 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article IV shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Bank hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error; provided, however, that the
Company shall not be liable for any such amount attributable to any period
prior to the date 180 days prior to the date that an officer at such Bank
directly responsible for the administration of this Agreement knew or
reasonably should have known of such claim for reimbursement or compensation.
7 Survival. The agreements and obligations of the Company in
this Article IV shall survive the payment of all other Obligations.
8 Replacement of Bank.
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(a) In the event that any Bank makes a demand for payment
pursuant to Section 4.01 or 4.03, or any Bank has suspended its funding of
Offshore Loans pursuant to Section 4.02 or 4.05, the Company shall have the
right, if no Event of Default then exists, to replace such Bank in accordance
with this Section 4.08.
(b) If the Company determines to replace a Bank pursuant
to this Section 4.08, the Company shall have the right to replace such Bank
with an entity that is an Eligible Assignee (a "Replacement Bank"); provided
that such Replacement Bank: (i) if it is not already a Bank, shall be
reasonably acceptable to the Agent, (ii) shall unconditionally agree in writing
(with a copy to the Agent) to purchase all of such Bank's rights hereunder and
interest in the Loans owing to such Bank and the Note held by such Bank without
recourse at the principal amount of such Note plus interest and fees accrued
thereon to the date of such purchase on a date therein specified, and (iii)
shall, if such Replacement Bank is not already a Bank, execute and deliver to
the Agent an Assignment and Acceptance substantially in the form of Exhibit E
pursuant to which such Replacement Bank becomes a party hereto with a
Commitment equal to that of the Bank being replaced.
(c) Upon (i) satisfaction of the requirements set forth
in subsection 4.08(b), (ii) payment to such Bank by the Replacement Bank of the
purchase price in immediately available funds, (iii) payment to such Bank by
the Company of all requested increased costs or additional amounts accrued to
the date of such purchase which the Company is obligated to pay under Article
IV (including any break funding costs under Section 4.04) and all other amounts
owed by the Company to such Bank hereunder (other than the principal of and
interest on the Loans of such Bank purchased by the Replacement Bank and
interest and fees accrued thereon to the date of purchase), and (iv) payment to
the Agent by the Replacement Bank or the Company of a non-refundable processing
fee of $3,500, the Replacement Bank shall constitute a "Bank" hereunder with a
Commitment as so specified and the Bank being so replaced shall no longer
constitute a "Bank" hereunder (and this Agreement shall be deemed to be amended
to the extent, but only to the extent, necessary to reflect the addition of the
Replacement Bank) and such Bank shall be relieved of its obligations hereunder.
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(d) If, however, the conditions to replacement set forth
in this Section are for any reason not satisfied, or the proposed Replacement
Bank for any reason fails to purchase such rights and interest in accordance
with the terms hereof, the Company shall continue to be obligated to pay the
increased costs or additional amounts due to such Bank pursuant to Section 4.01
or 4.03, as applicable.
(e) In no event shall the Agent or any Bank have any
obligation to be a Replacement Bank or to assist the Company in finding a
Replacement Bank.
V
CONDITIONS PRECEDENT
1 Conditions of Initial Credit Extensions. The obligation of
each Bank to make its initial Credit Extension hereunder is subject to the
condition that the Agent shall have received on or before the Closing Date all
of the following, in form and substance satisfactory to the Agent and each
Bank, and in sufficient copies for each Bank:
(a) Credit Agreement. This Agreement executed by each
party hereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company authorizing the transactions contemplated
hereby, certified as of the Closing Date by the Secretary or an
Assistant Secretary of the Company; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of
the officers of the Company authorized to execute, deliver and
perform, as applicable, this Agreement, and all other Loan Documents
to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the
following documents:
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(i) the articles or certificate of
incorporation and the bylaws of the Company as in effect on the
Closing Date, certified by the Secretary or Assistant Secretary of the
Company as of the Closing Date; and
(ii) a good standing and tax good standing
certificate for the Company from the Secretary of State (or similar,
applicable Governmental Authority) of (A) its state of incorporation
and (B) each state where the Company is qualified to do business as a
foreign corporation and where the Company conducts material business,
in each case, as of a recent date, together with a bring-down
certificate by facsimile, dated the Closing Date;
(d) Legal Opinions. An opinion of Wilson, Sonsini,
Goodrich & Rosati, counsel to the Company and addressed to the Agent and the
Banks, substantially in the form of Exhibit D;
(e) Payment of Fees. Evidence of payment by the Company
of all accrued and unpaid fees, costs and expenses to the extent then due and
payable on the Closing Date, together with Attorney Costs of BofA to the extent
invoiced prior to or on the Closing Date; including any such costs, fees and
expenses arising under or referenced in Section 2.10;
(f) Certificate. A certificate signed by a Responsible
Officer, dated as of the Closing Date, stating that:
(i) the representations and warranties
contained in Article VI are true and correct on and as of such date,
as though made on and as of such date, except that if any such
representation and warranty expressly relates to an earlier date, such
representation and warranty shall be true and correct as of such
earlier date;
(ii) no Default or Event of Default exists or
would result from the Credit Extension; and
(iii) there has occurred since January 1, 1996,
no event or circumstance that has resulted or could reasonably be
expected to result in a Material Adverse Effect;
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(g) Compliance Certificate. A Compliance Certificate
signed by a Responsible Officer, dated as of the Closing Date, relating to the
fiscal quarter ended June 30, 1996.
(h) Convertible Subordinated Notes. All material
agreements, instruments and other documents evidencing or otherwise relating to
the Convertible Subordinated Notes;
(i) Disclosure Letter. The Disclosure Letter signed
by a Responsible Officer and dated as of the Closing Date; and
(j) Other Documents. Such other approvals, opinions,
documents or materials as the Agent or any Bank may request.
2 Conditions to All Credit Extensions. The obligation of each
Bank to make any Revolving Loan to be made by it (including its initial
Revolving Loan) and the obligation of the Issuing Bank to Issue any Letter of
Credit (including the initial Letter of Credit) is subject to the satisfaction
of the following conditions precedent on the relevant Borrowing Date or
Issuance Date:
(a) Notice, Application. The Agent shall have received
(with, in the case of the initial Revolving Loan only, a copy for each Bank) a
Notice of Borrowing or, in the case of any Issuance of any Letter of Credit,
the Issuing Bank and the Agent shall have received an L/C Application or L/C
Amendment Application, as required under Section 3.02;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct on and
as of such Borrowing Date or Issuance Date with the same effect as if made on
and as of such Borrowing Date or Issuance Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which
case they shall be true and correct as of such earlier date); and
(c) No Existing Default. No Default or Event of Default
shall exist or shall result from such Borrowing or Issuance.
Each Notice of Borrowing and L/C Application or L/C Amendment Application
submitted by the Company hereunder shall constitute a representation and
warranty by the Company hereunder, as of the date of each such notice and as of
each Borrowing Date or
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Issuance Date, as applicable, that the conditions in this Section 5.02 are
satisfied.
VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets, carry on
its business and to execute, deliver, and perform its obligations under the
Loan Documents;
(c) except as set forth in Schedule 6.01 to the
Disclosure Letter, is duly qualified as a foreign corporation and is licensed
and in good standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (b), clause (c) or clause (d), to
the extent that the failure to do so could not reasonably be expected to have a
Material Adverse Effect.
2 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company of this Agreement and each other Loan
Document to which the Company is party, have been duly authorized by all
necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Company's
Organization Documents;
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(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing
any material Contractual Obligation to which the Company is a party or any
order, injunction, writ or decree of any Governmental Authority to which the
Company or its property is subject; or
(c) violate any Requirement of Law.
3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document.
4 Binding Effect. This Agreement and each other Loan Document
to which the Company is a party constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5 Litigation. Except as specifically disclosed in Schedule 6.05
to the Disclosure Letter, there are no actions, suits, proceedings, claims or
disputes pending, or to the best knowledge of the Company, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against the Company, or its Subsidiaries or any of their respective
properties which:
(a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or
(b) if determined adversely to the Company or its
Subsidiaries, would reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin
or restrain the execution, delivery or performance of this Agreement or any
other Loan Document, or directing that the transactions provided for
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herein or therein not be consummated as herein or therein provided.
6 No Default. No Default or Event of Default exists or would
result from the incurring of any Obligations by the Company. As of the Closing
Date, neither the Company nor any Subsidiary is in default under or with
respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to have a
Material Adverse Effect, or that would, if such default had occurred after the
Closing Date, create an Event of Default under subsection 9.01(e).
7 ERISA Compliance. Except as specifically disclosed in
Schedule 5.07 to the Disclosure Letter:
(a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law. Each Plan which is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS and to the best
knowledge of the Company, nothing has occurred which would cause the loss of
such qualification. The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Company, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither the Company nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Company nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has
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occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has
engaged in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
8 Use of Proceeds; Margin Regulations. The proceeds of the
Loans are to be used solely for the purposes set forth in and permitted by
Section 7.12 and Section 8.07. Neither the Company nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
9 Title to Properties. The Company and each Subsidiary have
good record and marketable title in fee simple to, or valid leasehold interests
in, all real property necessary or used in the ordinary conduct of their
respective businesses, except for such defects in title as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. As of the Closing Date, the property of the Company and its
Subsidiaries is subject to no Liens, other than Permitted Liens.
10 Taxes. The Company and its Subsidiaries have filed all
Federal and other material tax returns and reports required to be filed, and
have paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. To the best of the Company's knowledge,
there is no proposed tax assessment against the Company or any Subsidiary that
would, if made, have a Material Adverse Effect.
11 Financial Condition.
(a) The audited consolidated financial statements of the
Company and its Subsidiaries dated January 1, 1996, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal year ended on that date:
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(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein;
(ii) fairly present in all material respects the
financial condition of the Company and its Subsidiaries as of the date
thereof and results of operations for the period covered thereby; and
(iii) except as specifically disclosed in
Schedule 6.11 to the Disclosure Letter, show all material indebtedness
and other liabilities, direct or contingent, of the Company and its
consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and material Contingent
Obligations, in accordance with GAAP consistently applied.
(b) Since January 1, 1996 there has been no Material
Adverse Effect.
12 Environmental Matters. The Company conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and
as a result thereof the Company has reasonably concluded that, except as
specifically disclosed in Schedule 6.12 to the Disclosure Letter, such
Environmental Laws and Environmental Claims could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
13 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. The Company is not subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any state public utilities code, or, to
the best of the Company's knowledge, any other Federal or state statute or
regulation limiting its ability to incur Indebtedness.
14 No Burdensome Restrictions. Neither the Company nor any
Subsidiary is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, which
could reasonably be expected to have a Material Adverse Effect.
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15 Copyrights, Patents, Trademarks and Licenses, etc. The Company
or its Subsidiaries own or are licensed or otherwise have the right to use (or
could obtain ownership of licenses to use or other rights to use on terms not
materially adverse to the Company and its Subsidiaries taken as a whole) all of
the patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person, except where the failure to have any of the foregoing or
where such conflict could not reasonably be expected to have a Material Adverse
Effect. To the best knowledge of the Company, no slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by the Company or any Subsidiary
infringes upon any rights held by any other Person, except where any such
infringement could not reasonably be expected to have a Material Adverse
Effect. Except as specifically disclosed in Schedule 6.05 to the Disclosure
Letter, no claim or litigation regarding any of the foregoing is pending or
threatened, and no patent, invention, device, application, principle or any
statute, law, rule, regulation, standard or code is pending or, to the
knowledge of the Company, proposed, which, in either case, could reasonably be
expected to have a Material Adverse Effect.
16 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
6.16 to the Disclosure Letter hereto and has no equity investments in any other
corporation or entity other than those specifically disclosed in part (b) of
Schedule 6.16 to the Disclosure Letter.
17 Insurance. Except as specifically disclosed in Schedule 6.17
to the Disclosure Letter, the properties of the Company and its Subsidiaries
are insured with financially sound and reputable insurance companies not
Affiliates of the Company, in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where the Company or
such Subsidiary operates.
18 Swap Obligations. Neither the Company nor any of its
Subsidiaries has incurred any outstanding obligations under any Swap Contracts,
other than Permitted Swap Obligations. The Company has undertaken its own
independent assessment of its
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consolidated assets, liabilities and commitments and has considered appropriate
means of mitigating and managing risks associated with such matters and has not
relied on any swap counterparty or any Affiliate of any swap counterparty in
determining whether to enter into any Swap Contract.
19 Full Disclosure. None of the representations or warranties
made by the Company in the Loan Documents as of the date such representations
and warranties are made or deemed made, and none of the statements contained in
any exhibit, report, written statement or certificate furnished by or on behalf
of the Company or any Subsidiary by a Responsible Officer in connection with
the Loan Documents (including the offering and disclosure materials delivered
by or on behalf of the Company to the Banks prior to the Closing Date),
contains any untrue statement of a material fact or omits any material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they are made, not misleading as of
the time when made or delivered (it being understood that although any
financial projections and forecasts furnished by the Company represent the
Company's best estimates and assumptions as to future performance, which the
Company believes to be fair and reasonable as of the time made in the light of
current and reasonably foreseeable business conditions, such financial
projections and forecasts as to future events are not to be viewed as facts and
that actual results during the period or periods covered thereby may differ
from the projected or forecasted results).
VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding (other than indemnity obligations that remain
inchoate), unless the Majority Banks waive compliance in writing:
1 Financial Statements. The Company shall deliver to the Agent,
in form and detail satisfactory to the Agent and the Majority Banks, with
sufficient copies for each Bank:
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(a) as soon as available, but not later than 90 days
after the end of each fiscal year, a copy of the audited consolidated balance
sheet of the Company and its Subsidiaries as at the end of such year and the
related consolidated statements of income or operations, shareholders' equity
and cash flows for such year, setting forth in each case in comparative form
the figures for the previous fiscal year, and accompanied by the unqualified
opinion of a nationally-recognized independent public accounting firm
("Independent Auditor") which report shall state that such consolidated
financial statements present fairly in all material respects the financial
position of the Company as of the date thereof and the results of operations
for the periods indicated in conformity with GAAP applied on a basis consistent
with prior years except as otherwise indicated therein. Such opinion shall not
be qualified or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any
Subsidiary's records;
(b) as soon as available, but not later than 45 days
after the end of each of the first three fiscal quarters of each fiscal year
(commencing with the fiscal quarter ended June 30, 1996), a copy of the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such quarter and the related consolidated statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary,
good faith year-end audit adjustments and except for the absence of footnotes),
the financial position and the results of operations of the Company and the
Subsidiaries;
2 Certificates; Other Information. The Company shall furnish to
the Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsections 7.01(a) and (b), a Compliance Certificate
executed by a Responsible Officer;
(b) promptly, but no later than five days after reporting
or otherwise filing the same with the SEC, copies of all financial statements
and reports that the Company sends to its shareholders, and copies of all
financial statements and regular, periodical or special reports on Forms 10K,
10Q, 8K S-1, S-2, S-3 or S-4 that the Company or any Subsidiary may make to, or
file with, the SEC; and
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(c) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as
the Agent, at the request of any Bank, may from time to time request.
3 Notices. The Company shall promptly notify the Agent and each
Bank:
(a) of the occurrence of any Default or Event of Default;
(b) of any matter that has resulted or could reasonably
be expected to result in a Material Adverse Effect, including (i) breach or
non-performance of, or any default under, a Contractual Obligation of the
Company or any Subsidiary; (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and any
Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting the Company or any
Subsidiary; including pursuant to any applicable Environmental Laws;
(c) of the occurrence of any of the following events
affecting the Company or any ERISA Affiliate (but in no event more than 10 days
after such event), and deliver to the Agent and each Bank a copy of any notice
with respect to such event that is filed with a Governmental Authority and any
notice delivered by a Governmental Authority to the Company or any ERISA
Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code by the
Company or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment results in a
material increase in contributions or Unfunded Pension Liability.
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(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its consolidated
Subsidiaries; and
(e) upon the request from time to time of the Agent, the
Swap Termination Values, together with a description of the method by which
such values were determined, relating to any then-outstanding Swap Contracts to
which the Company or any of its Subsidiaries is party.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Company or any
affected Subsidiary proposes to take with respect thereto and at what time.
Each notice under subsection 7.03(a) shall describe with particularity any and
all clauses or provisions of this Agreement or other Loan Document that have
been (or foreseeably will be) breached or violated.
4 Preservation of Corporate Existence, Etc. The Company shall,
and shall cause each Material Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation, except as otherwise permitted by Section 8.03;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
in connection with transactions permitted by Section 8.03 and sales of assets
permitted by Section 8.02 and except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill, except as
otherwise permitted by Section 8.03; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
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5 Maintenance of Property. The Company shall maintain, and
shall cause each Subsidiary to maintain, and preserve all its property
(including Intellectual Property) which is used or useful in its business in
good working order and condition, ordinary wear and tear excepted and make all
necessary repairs thereto and renewals and replacements thereof except where
the failure to do so could not reasonably be expected to have a Material
Adverse Effect, except as permitted by Section 8.02.
6 Insurance. The Company shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons.
7 Payment of Obligations. The Company shall, and shall cause
each Subsidiary to, pay and discharge as the same shall become due and payable,
all their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property; and
(c) all Indebtedness, as and when due and payable, but
not in contravention of any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness; provided that the failure
to pay any Indebtedness as and when due shall not constitute a Default or an
Event of Default hereunder except as provided in subsection 9.01(e).
8 Compliance with Laws. The Company shall comply, and shall
cause each Subsidiary to comply, in all material respects with all Requirements
of Law of any Governmental Authority having jurisdiction over it or its
business (including the Federal Fair Labor Standards Act), except such as may
be contested in good faith or as to which a bona fide dispute may exist and
except
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where the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
9 Compliance with ERISA. The Company shall, and shall cause
each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
10 Inspection of Property and Books and Records. The Company
shall maintain and shall cause each Subsidiary to maintain proper, true and
correct books of record and account sufficient to prepare financial statements
in conformity with GAAP consistently applied. The Company shall permit, and
shall cause each Subsidiary to permit, representatives and independent
contractors of the Agent or any Bank to visit and inspect any of their
respective properties, to examine their respective corporate, financial and
operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, all at the expense of
the Company and at such reasonable times during normal business hours, but no
more often than once in any fiscal quarter, upon reasonable advance notice to
the Company; provided, however, when an Event of Default exists the Agent or
any Bank may do any of the foregoing at the expense of the Company at any time
during normal business hours and without advance notice and as often as the
Agent or any Bank may desire in its sole discretion.
11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws.
12 Use of Proceeds. The Company shall use the proceeds of the
Loans for working capital and other general corporate purposes not in
contravention of any Requirement of Law or of any Loan Document.
13 Financial Covenants. The Company, on a consolidated basis and
in accordance with GAAP, shall have:
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(a) at the end of each fiscal quarter after the Closing
Date, a Total Debt/Capitalization Ratio of no greater than 0.45 to 1.00;
(b) at the end of each fiscal quarter after the Closing
Date, a Consolidated Tangible Net Worth that is equal to at least: (i) 85% of
Consolidated Tangible Net Worth as of January 2, 1996, plus (ii) 75% of the
Company's aggregate consolidated net income (with no reduction for quarterly
losses, if any) after January 2, 1996, plus (iii) the aggregate book value of
all capital stock issued by the Company after January 2, 1996 (including
capital stock issued by the Company upon the conversion of any of the
Convertible Subordinated Notes);
(c) at the end of each fiscal quarter after the Closing
Date, a ratio of (i) cash plus the value of cash equivalents (other than cash
equivalents subject to any Lien securing Indebtedness) plus net accounts
receivable, to (ii) Consolidated Current Liabilities of not less than 1.00 to
1.00; provided, however, that during the period from the Closing Date through
December 31, 1997, the Banks shall permit such ratio to be not less than 0.80
to 1.00 as of the end of any two fiscal quarters during such period;
(d) at the end of each fiscal quarter after the Closing
Date on a rolling four-quarter basis, a ratio of (i) earnings before interest
income and interest expense and taxes plus lease expense, to (ii) interest
expense plus lease expense plus current maturities of long term debt plus
outstanding Loans and issued and outstanding Letters of Credit hereunder, of
not less than 1.25 to 1.00.
VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding (other than indemnity obligations that remain
inchoate), unless the Majority Banks waive compliance in writing:
1 Limitation on Liens. The Company shall not, and shall not
suffer or permit any Subsidiary to, directly or indirectly,
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make, create, incur, assume or suffer to exist any Lien upon or with respect to
any part of its property, whether now owned or hereafter acquired, other than
the following ("Permitted Liens"):
(a) any Lien existing on property of the Company or any
Subsidiary on the Closing Date and set forth in Schedule 8.01 of the Disclosure
Letter securing Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable without
penalty, or to the extent that non-payment thereof is permitted by Section
7.07, provided that no notice of lien has been filed or recorded under the
Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary
course of business which are not delinquent or remain payable without penalty
or which are being contested in good faith and by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of the
property subject thereto;
(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
social security legislation;
(f) Liens on the property of the Company or its
Subsidiaries securing (i) the non-delinquent performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, (ii)
contingent obligations on surety and appeal bonds or letters of credit issued
in lieu thereof, and (iii) other non-delinquent obligations of a like nature;
in each case, incurred in the ordinary course of business, provided all such
Liens in the aggregate would not (even if enforced) cause a Material Adverse
Effect;
(g) Liens consisting of judgment or judicial attachment
liens, provided, however, that (i) the enforcement of such Liens is effectively
stayed, and (ii) all such Liens in the aggregate at any time outstanding for
the Company and its Subsidiaries do not exceed $5,000,000;
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(h) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business which, in the
aggregate, do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the businesses of the Company
and its Subsidiaries taken as a whole;
(i) Liens on assets of corporations which become
Subsidiaries after the date of this Agreement or on assets that are acquired at
the time the Company or a Subsidiary is the subject of a merger, provided,
however, that such Liens existed at the time the respective corporations became
Subsidiaries or at the time the assets were acquired and were not created in
anticipation thereof;
(j) purchase money security interests on any property
acquired or held by the Company or its Subsidiaries securing Indebtedness
incurred or assumed for the purpose of financing all or any part of the cost of
acquiring such property; provided that (i) any such Lien attaches to such
property concurrently with or within 180 days after the acquisition thereof,
(ii) such Lien attaches solely to the property so acquired in such transaction,
(iii) the principal amount of the debt secured thereby does not exceed 100% of
the cost of such property;
(k) Liens securing obligations in respect of capital
leases on assets subject to such leases, provided that such capital leases are
otherwise permitted hereunder;
(l) Liens arising solely by virtue of any statutory,
common law or contractual provision relating to banker's liens, rights of
set-off or similar rights and remedies as to deposit accounts or other funds
maintained with a creditor depository institution; provided that (i) such
deposit account is not a dedicated cash collateral account and is not subject
to restrictions against access by the Company in excess of those set forth by
regulations promulgated by the FRB, and (ii) such deposit account is not
intended by the Company or any Subsidiary to provide collateral to the
depository institution; and
(m) Liens on Intellectual Property acquired by or
licensed or otherwise transferred to the Company or any Subsidiary in the
ordinary course of business.
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(n) Liens not otherwise permitted hereunder and not
exceeding $1,000,000 in the aggregate.
(o) Liens in connection with off-balance sheet financings
characterized as operating leases on the Company's financial statements in
accordance with GAAP.
2 Disposition of Assets. The Company shall not, and shall not
suffer or permit any Subsidiary to, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or
surplus equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement equipment; and
(c) dispositions of inventory, equipment or other assets
by the Company or any Subsidiary to the Company or any Subsidiary pursuant to
reasonable business requirements;
(d) dispositions of Intellectual Property in the ordinary
course of business;
(e) dispositions not otherwise permitted hereunder which
are made for fair market value; provided, that (i) at the time of any
disposition, no Event of Default shall exist or shall result from such
disposition, (ii) the aggregate sales price from such disposition shall be paid
in cash, and (iii) such disposition shall not involve any of the Company's
current assets;
(f) sales of receivables; provided that all such sales of
receivables shall not exceed $5,000,000 in aggregate face value in any fiscal
quarter; and
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(g) dispositions or liquidation of cash equivalents or
other marketable securities for fair market value.
3 Consolidations and Mergers. The Company shall not, and shall
not suffer or permit any Subsidiary to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided
that the Company shall be the continuing or surviving corporation, or with any
one or more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation;
(b) any Subsidiary may sell all or substantially all of
its assets (upon voluntary liquidation or otherwise), to the Company or a
Wholly-Owned Subsidiary; and
(c) any Person may merge or consolidate with the Company;
provided, that (i) the Company shall be the continuing or surviving
corporation, and (ii) no Event of Default shall exist or shall result from such
merger or consolidation.
4 Loans and Investments. The Company shall not purchase or
acquire, or suffer or permit any Subsidiary to purchase or acquire any capital
stock, equity interest, or any obligations or other securities of, or any
interest in, any Person, or make any Acquisitions, or make any advance, loan,
extension of credit or capital contribution to or any other investment in, any
Person including any Affiliate of the Company (together, "Investments"), except
for:
(a) Investments held by the Company or Subsidiary in the
form of cash equivalents or marketable securities having maturities of not more
than five years;
(b) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the ordinary course of business;
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(c) extensions of credit by the Company to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned Subsidiaries to another
of its Wholly-Owned Subsidiaries;
(d) Investments incurred in order to consummate
Acquisitions otherwise permitted herein, provided that (i) such Acquisitions
are undertaken in accordance with all applicable Requirements of Law; (ii) no
Event of Default shall exist or result from such Acquisition; and (iii) the
prior, effective written consent or approval to such Acquisition of the board
of directors or equivalent governing body of the acquiree is obtained;
(e) Investments in Joint Ventures, provided that no Event
of Default shall exist or result from any such Investment;
(f) Investments constituting Permitted Swap Obligations
or payments or advances under Swap Contracts relating to Permitted Swap
Obligations;
(g) Investments in Subsidiaries in the ordinary course of
business;
(h) Investments existing as of the Closing Date and
identified on Schedule 8.04 of the Disclosure Letter;
(i) Investments received in the settlement of delinquent
obligations owed to or disputes involving the Company or a Subsidiary;
(j) Investments consisting of loans or advances to
employees in the ordinary course of business consistent with past practices.
5 Limitation on Indebtedness. The Company shall not, and shall
not suffer or permit any Subsidiary to, create, incur, assume, suffer to exist,
or otherwise become or remain directly or indirectly liable with respect to,
any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness existing on the Closing Date and
identified on Schedule 8.05 to the Disclosure Letter, and any refinancings,
extensions or renewals thereof so long as the principal amount thereof is not
increased;
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(c) Indebtedness between the Company and any of its
Subsidiaries or between any Subsidiary and another Subsidiary, in each case
incurred in the ordinary course of business; and
(d) other unsecured Indebtedness not otherwise permitted
hereunder so long as such Indebtedness is on terms and conditions no more
favorable to the holder(s) of such Indebtedness than the terms and conditions
hereunder.
6 Transactions with Affiliates. The Company shall not, and
shall not suffer or permit any Subsidiary to, enter into any transaction with
any Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate of the
Company or such Subsidiary.
7 Use of Proceeds. The Company shall not, and shall not suffer
or permit any Subsidiary to, use any portion of the Loan proceeds or any Letter
of Credit, directly or indirectly, (i) to purchase or carry Margin Stock, (ii)
to repay or otherwise refinance indebtedness of the Company or others incurred
to purchase or carry Margin Stock, (iii) to extend credit for the purpose of
purchasing or carrying any Margin Stock, or (iv) to acquire any security in any
transaction that is subject to Section 13 or 14 of the Exchange Act.
8 Contingent Obligations. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume or suffer to exist
any Contingent Obligations other than in the ordinary course of business,
except:
(a) Contingent Obligations existing on the Closing Date
and identified on Schedule 8.08 to the Disclosure Letter and any renewals or
extensions thereof so long as the amount thereof is not increased;
(b) Contingent Obligations between the Company and any of
its Subsidiaries or between any Subsidiary and another Subsidiary, in each case
incurred in the ordinary course of business; and
(c) Contingent Obligations of the Company in favor of the
Banks, the Issuing Bank or the Agent.
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9 Joint Ventures. The Company shall not, and shall not suffer
or permit any Subsidiary to enter into any Joint Venture, other than in the
ordinary course of business.
10 ERISA. The Company shall not, and shall not suffer or permit
any of its ERISA Affiliates to: (a) engage in a prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably expected to result in liability of the Company
in an aggregate amount in excess of $1,000,000; or (b) engage in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
11 Change in Business. The Company shall not, and shall not
suffer or permit any Subsidiary to, engage in any material line of business
substantially different from those lines of business carried on by the Company
and its Subsidiaries on the date hereof, or lines of business reasonably
related or incidental thereto.
12 Accounting Changes. The Company shall not, and shall not
suffer or permit any Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of the Company or of any Subsidiary.
13 Payment of Convertible Subordinated Notes. The Company shall
not make any payment of principal or otherwise on account of the Convertible
Subordinated Notes without the prior written consent of the Majority Banks, or
of the Agent on behalf of the Majority Banks, which consent shall be within the
sole discretion of the Majority Banks, provided that the foregoing restriction
on payments made on account of the Convertible Subordinated Notes shall not
prohibit (i) the conversion of any of the Convertible Subordinated Notes into
common stock of the Company at the option of any holder of Convertible
Subordinated Notes, nor (ii) a redemption of all or a portion of the
Convertible Subordinated Notes that is underwritten and paid for entirely by
one or more third parties (other than any Subsidiary or Affiliate of the
Company), in each case, in accordance with the terms and conditions of the
Convertible Subordinated Note Documents. Notwithstanding anything to the
contrary in the preceding sentence, the Company shall be permitted to make
scheduled payments of interest on the Convertible Subordinated Notes.
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IX
EVENTS OF DEFAULT
1 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when and
as required to be paid herein, any amount of principal of any Loan or of any
L/C Obligation, or (ii) within 3 days after the same becomes due, any interest,
fee or any other amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company or any Subsidiary made or deemed made herein, in any
other Loan Document, or which is contained in any certificate, document or
financial or other statement by the Company, any Subsidiary, or any Responsible
Officer, furnished at any time under this Agreement, or in or under any other
Loan Document, is incorrect in any material respect on or as of the date made
or deemed made; or
(c) Specific Defaults. The Company fails to perform or
observe any term, covenant or agreement contained in (i) subsection 7.03(a) or
Article VIII, or (ii) any of Sections 7.01, 7.02, 7.03 (other than subsection
7.03(a)) or 7.09 and such failure continues unremedied for a period of 10 days;
or
(d) Other Defaults. The Company fails to perform or
observe any other term or covenant contained in this Agreement or any other
Loan Document, and such default shall continue unremedied for a period of 30
days after the earlier of (i) the date upon which a Responsible Officer knew or
reasonably should have known of such failure or (ii) the date upon which
written notice thereof is given to the Company by the Agent or any Bank; or
(e) Cross-Default. (i) The Company or any Subsidiary (A)
fails to make any payment in respect of any Indebtedness or Contingent
Obligation (other than in respect of Swap Contracts), having an aggregate
principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than
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$25,000,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document
on the date of such failure; or (B) fails to perform or observe any other
condition or covenant, or any other event shall occur or condition exist, under
any agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded; or (ii)
there occurs under any Swap Contract an Early Termination Date (as defined in
such Swap Contract) resulting from (1) any event of default under such Swap
Contract as to which the Company or any Subsidiary is the Defaulting Party (as
defined in such Swap Contract) or (2) any Termination Event (as so defined) as
to which the Company or any Subsidiary is an Affected Party (as so defined),
and, in either event, the Swap Termination Value owed by the Company or such
Subsidiary as a result thereof is greater than $5,000,000; or
(f) Insolvency; Voluntary Proceedings. The Company or
any Material Subsidiary (i) ceases or fails to be solvent, or generally fails
to pay, or admits in writing its inability to pay, its debts as they become
due, subject to applicable grace periods, if any, whether at stated maturity or
otherwise; (ii) voluntarily ceases to conduct its business in the ordinary
course; (iii) commences any Insolvency Proceeding with respect to itself; or
(iv) takes any action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company or any
Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Company's or any
Material Subsidiary's properties, and any such proceeding or petition shall not
be dismissed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or
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fully bonded within 60 days after commencement, filing or levy; (ii) the
Company or any Material Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Material Subsidiary acquiesces in the appointment of a
receiver, trustee, custodian, conservator, liquidator, mortgagee in possession
(or agent therefor), or other similar Person for itself or a substantial
portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of the Company under Title IV of ERISA to
the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in
excess of $5,000,000; the aggregate amount of Unfunded Pension Liability among
all Pension Plans at any time exceeds $1,000,000; or (iii) the Company or any
ERISA Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an
aggregate amount in excess of $5,000,000; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is entered
against the Company or any Subsidiary involving in the aggregate a liability
(to the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $25,000,000 or more, and the same
shall remain unsatisfied, unvacated and unstayed pending appeal for a period of
45 days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment,
order or decree is entered against the Company or any Subsidiary which does or
would reasonably be expected to have a Material Adverse Effect, and there shall
be any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) Change of Control. There occurs any Change of
Control; or
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(l) Loss of Licenses. Any Governmental Authority revokes
or fails to renew any material license, permit or franchise of the Company or
any Subsidiary, or the Company or any Subsidiary for any reason loses any
material license, permit or franchise, or the Company or any Subsidiary suffers
the imposition of any restraining order, escrow, suspension or impound of funds
in connection with any proceeding (judicial or administrative) with respect to
any material license, permit or franchise, which revocation, failure, loss or
imposition could reasonably be expected to have a Material Adverse Effect; or
(m) Adverse Change. There occurs a Material Adverse
Effect; or
(n) Invalidity of Subordination Provisions. The
subordination provisions of the convertible subordinated notes issued by the
Company on March 31, 1996 or any agreement or instrument governing any other
subordinated debt is for any reason revoked or invalidated, or otherwise cease
to be in full force and effect, any Person contests in any manner the validity
or enforceability thereof or the Indebtedness hereunder is for any reason
subordinated or does not have the priority contemplated by this Agreement or
such subordination provisions.
2 Remedies. If any Event of Default occurs, the Agent shall, at
the request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans and
any obligation of the Issuing Bank to Issue Letters of Credit to be terminated,
whereupon such commitments and obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate
amount that is or at any time thereafter may become available for drawing under
any outstanding Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately due
and payable, and declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without
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presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights
and remedies available to it and the Banks under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 9.01 (in the case of clause (i) of subsection
(g) upon the expiration of the 60-day period mentioned therein), the obligation
of each Bank to make Loans and any obligation of the Issuing Bank to Issue
Letters of Credit shall automatically terminate and the unpaid principal amount
of all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Agent, the
Issuing Bank or any Bank.
3 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
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X
THE AGENT
1 Appointment and Authorization; "Agent".
(a) Each Bank hereby irrevocably (subject to Section
10.09) appoints, designates and authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to
it by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement or in any other
Loan Document, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Agent have or be deemed to have
any fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties.
(b) The Issuing Bank shall act on behalf of the Banks
with respect to any Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Agent may agree at the
request of the Majority Lenders to act for such Issuing Bank with respect
thereto; provided, however, that the Issuing Bank shall have all of the
benefits and immunities (i) provided to the Agent in this Article X with
respect to any acts taken or omissions suffered by the Issuing Bank in
connection with Letters of Credit Issued by it or proposed to be Issued by it
and the application and agreements for letters of credit pertaining to the
Letters of Credit as fully as if the term "Agent", as used in this Article X,
included the Issuing Bank with respect to such acts or omissions, and (ii) as
additionally provided in this Agreement with respect to the Issuing Bank.
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2 Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
3 Liability of Agent. None of the Agent-Related Persons shall
(i) be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Banks
for any recital, statement, representation or warranty made by the Company or
any Subsidiary or Affiliate of the Company, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document,
or the validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document, or for any failure of the Company or
any other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Bank
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Company or any
of the Company's Subsidiaries or Affiliates.
4 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Banks as it deems
appropriate and, if
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it so requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Majority Banks and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 5.01, each Bank that has executed this
Agreement shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter either sent by the Agent to such
Bank for consent, approval, acceptance or satisfaction, or required thereunder
to be consented to or approved by or acceptable or satisfactory to the Bank.
5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Banks, unless the Agent
shall have received written notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its
receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Majority Banks in
accordance with Article IX; provided, however, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Banks.
6 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Agent hereinafter taken, including any review of the affairs of
the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and
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information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Company and its Subsidiaries, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Company hereunder. Each Bank also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by the Agent,
the Agent shall not have any duty or responsibility to provide any Bank with
any credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of the Company
which may come into the possession of any of the Agent-Related Persons.
7 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided, however, that
no Bank shall be liable for the payment to the Agent-Related Persons of any
portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Bank shall reimburse the Agent upon demand for its ratable share of any
costs or out-of-pocket expenses (including Attorney Costs) incurred by the
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any
document contemplated by or referred to herein, to the extent that the Agent is
not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of the Agent.
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8 Agent in Individual Capacity. BofA and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Company and
its Subsidiaries and Affiliates as though BofA were not the Agent or the
Issuing Bank hereunder and without notice to or consent of the Banks. The
Banks acknowledge that, pursuant to such activities, BofA or its Affiliates may
receive information regarding the Company or its Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or such Subsidiary) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to its Loans,
BofA shall have the same rights and powers under this Agreement as any other
Bank and may exercise the same as though it were not the Agent or the Issuing
Bank.
9 Successor Agent. The Agent may, and at the request of the
Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If
the Agent resigns under this Agreement, the Majority Banks shall appoint from
among the Banks a successor agent for the Banks which successor agent shall be
approved by the Company, which approval shall not be unreasonably withheld. If
no successor agent is appointed prior to the effective date of the resignation
of the Agent, the Agent may appoint, after consulting with the Banks and the
Company, a successor agent from among the Banks. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Agent and the term "Agent"
shall mean such successor agent and the retiring Agent's appointment, powers
and duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article X and Sections 11.04 and
11.05 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement. If no successor agent has
accepted appointment as Agent by the date which is 30 days following a retiring
Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Banks shall perform all of the
duties of the Agent hereunder until such time, if any, as the Majority Banks
appoint a successor agent as provided for above. Notwithstanding the
foregoing, however, BofA may not be removed as the Agent at the request of the
Majority Banks unless BofA shall also simultaneously be replaced as
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"Issuing Bank" hereunder pursuant to documentation in form and substance
reasonably satisfactory to BofA.
10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership
or trust" within the meaning of the Code and such Bank claims exemption from,
or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the
Code, such Bank agrees with and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or
a reduction of, withholding tax under a United States tax treaty, two
properly completed and executed copies of IRS Form 1001 before the
payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid
under this Agreement is exempt from United States withholding tax
because it is effectively connected with a United States trade or
business of such Bank, two properly completed and executed copies of
IRS Form 4224 before the payment of any interest is due in the first
taxable year of such Bank and in each succeeding taxable year of such
Bank during which interest may be paid under this Agreement; and
(iii) such other form or forms as may be
required under the Code or other laws of the United States as a
condition to exemption from, or reduction of, United States
withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such Bank agrees to
notify the Agent (which will then notify the Company) of the percentage amount
in which it is no longer the beneficial owner of Obligations of the Company to
such Bank. To the extent of
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such percentage amount, the Agent will treat such Bank's IRS Form 1001 as no
longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Company to such Bank, such Bank agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any interest payment to
such Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction. However, if the forms or other documentation
required by subsection (a) of this Section are not delivered to the Agent, then
the Agent may withhold from any interest payment to such Bank not providing
such forms or other documentation an amount equivalent to the applicable
withholding tax imposed by Sections 1441 and 1442 of the Code, without
reduction.
(e) If the IRS or any other Governmental Authority of
the United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not properly executed,
or because such Bank failed to notify the Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Bank shall indemnify the Agent fully
for all amounts paid, directly or indirectly, by the Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of the
Banks under this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
11 Co-Agent.
None of the Banks identified on the facing page or signature pages of
this Agreement as a "co-agent" shall have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Banks as such.
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Without limiting the foregoing, none of the Banks so identified as a "co-agent"
shall have or be deemed to have any fiduciary relationship with any Bank. Each
Bank acknowledges that it has not relied, and will not rely, on any of the
Banks so identified in deciding to enter into this Agreement or in taking or
not taking action hereunder.
XI
MISCELLANEOUS
1 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Company therefrom, shall be effective unless
the same shall be in writing and signed by the Majority Banks (or by the Agent
at the written request of the Majority Banks) and the Company and acknowledged
by the Agent, and then any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing
and signed by all the Banks and the Company and acknowledged by the Agent, do
any of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 8.02);
(b) postpone or delay any date fixed by this Agreement
or any other Loan Document for any payment of principal, interest, fees or
other amounts due to the Banks (or any of them) hereunder or under any other
Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or (subject to clause (iii) below) any fees or
other amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder; or
(e) amend this Section, or Section 2.14, or any
provision herein providing for consent or other action by all Banks;
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and, provided further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Issuing Bank in addition to the Majority Banks or
all the Banks, as the case may be, affect the rights or duties of the Issuing
Bank under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, (ii) no amendment, waiver or consent
shall, unless in writing and signed by the Agent in addition to the Majority
Banks or all the Banks, as the case may be, affect the rights or duties of the
Agent under this Agreement or any other Loan Document, and (iii) the Fee
Letters may be amended, or rights or privileges thereunder waived, in a writing
executed by the parties thereto.
2 Notices.
(a) All notices, requests, consents, approvals, waivers
and other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission and mailed, faxed or
delivered, to the address or facsimile number specified for notices on Schedule
11.02; or, as directed to the Company or the Agent, to such other address as
shall be designated by such party in a written notice to the other parties, and
as directed to any other party, at such other address as shall be designated by
such party in a written notice to the Company and the Agent.
(b) All such notices, requests and communications shall,
when transmitted by overnight delivery, or faxed, be effective when delivered
for overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or X to the Agent shall not be effective
until actually received by the Agent, and notices pursuant to Article III to
the Issuing Bank shall not be effective until actually received by the Issuing
Bank at the address specified for the "Issuing Bank" on the applicable
signature page hereof.
(c) The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Company
to give any communication hereunder and the Agent and the Banks shall not have
any liability to the Company or other Person on account of any action taken or
not
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taken by the Agent or the Banks in reliance upon such communication. The
obligation of the Company to repay the Loans and L/C Obligations shall not be
affected in any way or to any extent by any failure by the Agent and the Banks
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Banks of a confirmation which is at variance with
the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
3 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Agent or any Bank, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby
are consummated, pay or reimburse BofA (including in its capacity as Agent and
Issuing Bank) within 30 Business Days after demand (subject to subsection
5.01(e)) for all reasonable costs and expenses incurred by BofA (including in
its capacity as Agent and Issuing Bank) in connection with the development,
preparation, delivery, administration and execution of, and any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by BofA (including in its capacity as Agent and Issuing Bank)
with respect thereto; and
(b) pay or reimburse the Agent, the Arranger and each
Bank within 30 Business Days after demand (subject to subsection 5.01(e)) for
all reasonable costs and expenses (including Attorney Costs) incurred by them
in connection with the enforcement, attempted enforcement, or preservation of
any rights or remedies under this Agreement or any other Loan Document during
the existence of an Event of Default or after acceleration of the Loans
(including in connection with any "workout" or restructuring regarding the
Loans, and including in any Insolvency Proceeding or appellate proceeding).
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5 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Agent-Related Persons, and each Bank and each of its respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of the Agent or replacement of any
Bank) be imposed on, incurred by or asserted against any such Person in any
way relating to or arising out of this Agreement or any document contemplated
by or referred to herein, or the transactions contemplated hereby, or any
action taken or omitted by any such Person under or in connection with any of
the foregoing, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding)
related to or arising out of this Agreement or the Loans or Letters of Credit
or the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Company shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities resulting solely
from the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
6 Payments Set Aside. To the extent that the Company makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Agent or such Bank in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any Insolvency
Proceeding or otherwise, then (a) to the extent of such recovery the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such
set-off had not occurred, and (b) each Bank severally agrees to pay to the
Agent upon demand its pro rata share of any amount so recovered from or repaid
by the Agent.
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7 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agent and each Bank.
8 Assignments, Participations, etc.
(a) Any Bank may, with the written consent of the
Company at all times other than during the existence of an Event of Default and
the Agent and the Issuing Bank, which consents shall not be unreasonably
withheld, at any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Company, the Agent or the Issuing Bank
shall be required in connection with any assignment and delegation by a Bank to
an Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee")
all, or any ratable part of all, of the Loans, the Commitments, the L/C
Obligations and the other rights and obligations of such Bank hereunder, in a
minimum amount of $5,000,000; provided, however, that the Company and the Agent
may continue to deal solely and directly with such Bank in connection with the
interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee
shall have delivered to the Company and the Agent an Assignment and Acceptance
in the form of Exhibit E ("Assignment and Acceptance") together with any Note
or Notes subject to such assignment and (iii) the assignor Bank or Assignee has
paid to the Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies the
assignor Bank and the Company that it has received (and provided its consent
with respect to) an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the
rights and obligations of a Bank under the Loan Documents, and (ii) the
assignor Bank shall, to the extent that rights and obligations hereunder and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance,
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relinquish its rights and be released from its obligations under the Loan
Documents.
(c) Immediately upon each Assignee's making its
processing fee payment under the Assignment and Acceptance, this Agreement
shall be deemed to be amended to the extent, but only to the extent, necessary
to reflect the addition of the Assignee and the resulting adjustment of the
Commitments arising therefrom. The Commitment allocated to each Assignee shall
reduce such Commitments of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more
commercial banks or other Persons not Affiliates of the Company (a
"Participant") participating interests in any Loans, the Commitment of that
Bank and the other interests of that Bank (the "originating Bank") hereunder
and under the other Loan Documents; provided, however, that (i) the originating
Bank's obligations under this Agreement shall remain unchanged, (ii) the
originating Bank shall remain solely responsible for the performance of such
obligations, (iii) the Company, the Issuing Bank and the Agent shall continue
to deal solely and directly with the originating Bank in connection with the
originating Bank's rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Bank shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would require
unanimous consent of the Banks as described in the first proviso to Section
11.01. In the case of any such participation, the Participant shall be
entitled to the benefit of Sections 4.01, 4.03 and 11.05 as though it were also
a Bank hereunder, and if amounts outstanding under this Agreement are due and
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to have
the right of set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision in this
Agreement, any Bank may at any time create a security interest in, or pledge,
all or any portion of its rights under and interest in this Agreement and the
Note held by it in favor of any Federal Reserve Bank in accordance with
Regulation A of the
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FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve
Bank may enforce such pledge or security interest in any manner permitted under
applicable law.
9 Confidentiality. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information specifically identified as
"non-public" by the Company and provided to it by the Company or any
Subsidiary, or by the Agent on the Company's or such Subsidiary's behalf, under
this Agreement or any other Loan Document, and neither it nor any of its
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents or in connection
with other business now or hereafter existing or contemplated with the Company
or any Subsidiary; except to the extent such information (i) was or becomes
generally available to the public other than as a result of disclosure by the
Bank, (ii) was or becomes available on a non-confidential basis from a source
other than the Company, provided that such source is not bound by a
confidentiality agreement with the Company known to the Bank, or (iii) was
already in the Bank's possession on a non-confidential basis; provided,
however, that any Bank may disclose such information (A) at the request or
pursuant to any requirement of any Governmental Authority to which the Bank is
subject or in connection with an examination of such Bank by any such
authority; (B) pursuant to subpoena or other court process after notice to the
Company; (C) when required to do so in accordance with the provisions of any
applicable Requirement of Law; (D) to the extent reasonably required in
connection with any litigation or proceeding to which the Agent, any Bank or
their respective Affiliates may be party after notice to the Company; (E) to
the extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F) to such Bank's independent
auditors and other professional advisors; (G) to any Participant or Assignee,
actual or potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Banks hereunder;
(H) as to any Bank or its Affiliate, as expressly permitted under the terms of
any other document or agreement regarding confidentiality to which the Company
or any Subsidiary is party or is deemed party with such Bank or such Affiliate;
and (I) to its Affiliates.
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10 Set-off. In addition to any rights and remedies of the
Banks provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the Company to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Company against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Agent or such
Bank shall have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured. Each Bank agrees
promptly to notify the Company and the Agent after any such set-off and
application made by such Bank; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application.
11 Automatic Debits of Fees. With respect to any commitment
fee, arrangement fee or letter of credit fee due and payable to the Agent, the
Issuing Bank, BofA or the Arranger under the Loan Documents, the Company hereby
irrevocably authorizes BofA to debit any deposit account of the Company with
BofA in an amount such that the aggregate amount debited from all such deposit
accounts does not exceed such fee or other cost or expense. If there are
insufficient funds in such deposit accounts to cover the amount of the fee or
other cost or expense then due, such debits will be reversed (in whole or in
part, in BofA's sole discretion) and such amount not debited shall be deemed to
be unpaid. No such debit under this Section shall be deemed a set-off.
12 Notification of Addresses, Lending Offices, Etc. Each Bank
shall notify the Agent in writing of any changes in the address to which
notices to the Bank should be directed, of addresses of any Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as the Agent shall reasonably request.
13 Counterparts. This Agreement may be executed in any number
of separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
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14 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
15 No Third Parties Benefited. This Agreement is made and
entered into for the sole protection and legal benefit of the Company, the
Banks, the Agent and the Agent-Related Persons, and their permitted successors
and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
16 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED
THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT
AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
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17 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE COMPANY, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
18 Entire Agreement. This Agreement, together with the other
Loan Documents, embodies the entire agreement and understanding among the
Company, the Banks and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in San Francisco, California, by their proper
and duly authorized officers as of the day and year first above written.
CYPRESS SEMICONDUCTOR CORPORATION
By:_____________________________________
Title:__________________________________
95.
<PAGE> 102
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:_____________________________________
Title:__________________________________
96.
<PAGE> 103
FLEET NATIONAL BANK, as Co-Agent
By:_____________________________________
Title:__________________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Issuing Bank
By:_____________________________________
Title:__________________________________
Commitment: $35,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By:_____________________________________
Title:__________________________________
Commitment: $30,000,000 FLEET NATIONAL BANK, as a Bank
By:_____________________________________
Title:__________________________________
Commitment: $25,000,000 BANQUE NATIONALE DE PARIS, as a Bank
By:_____________________________________
Title:__________________________________
Commitment: $10,000,000 THE SUMITOMO TRUST & BANKING
CO., LTD., as a Bank
97.
<PAGE> 104
By:_____________________________________
Title:__________________________________
98.
<PAGE> 105
SCHEDULE 2.01
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
---- ---------------------------------------------------
<S> <C> <C>
Bank of America National
Trust and Savings
Association $35,000,000 35%
Fleet National Bank $30,000,000 30%
Banque Nationale de
Paris $25,000,000 25%
The Sumitomo Trust &
Banking Co., Ltd. $10,000,000 10%
TOTAL $100,000,000 100%
</TABLE>
<PAGE> 106
SCHEDULE 11.02
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
CYPRESS SEMICONDUCTOR CORPORATION
CYPRESS SEMICONDUCTOR CORPORATION
3901 North First Street
San Jose, CA 95134-1599
Attention: Manny Hernandez
Telephone: (408) 943-2754
Facsimile: (408) 943-2796
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
Borrowing notices, Notices of
Conversion/Continuation and Payments:
Bank of America National Trust
and Savings Association
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Wendy Young
Telephone: (415) 436-3420
Facsimile: (415) 436-2700
All other notices:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
The Mid-Cap Technology Group #3537
530 Lytton Avenue, Second Floor
Palo Alto, CA 94301
Attention: Cecily Person
Telephone: (415) 853-4688
Facsimile: (415) 853-4476
<PAGE> 107
AGENT'S PAYMENT OFFICE:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
ABA No. 1210-0035-8
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Account No.: ___________
Reference: _____________________
Attention: Agency Management Services #5596
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
Domestic and Offshore Lending Office
(Borrowing notices, Notices of
Conversion/Continuation, and Payments):
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Attention: _______________
Telephone: (510) ________
Facsimile: (510) ________
All other notices:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
The Mid-Cap Technology Group #3537
530 Lytton Avenue, Second Floor
Palo Alto, CA 94301
Attention: Cecily Person
Telephone: (415) 853-4688
Facsimile: (415) 853-4476
FLEET NATIONAL BANK,
as Co-Agent and a Bank
Domestic and Offshore Lending Office(s)
(Borrowing notices, Notices of
<PAGE> 108
Conversion/Continuation, and Payments):
FLEET NATIONAL BANK
Mail Stop MAOF 0320
1 Federal Street
Boston, MA 02211
Attention: Pauline Kowalczyk
Telephone: (617) 346-0622
Facsimile: (617) 346-0595
<PAGE> 109
All other notices:
FLEET NATIONAL BANK
Mail Stop MAOF 0305
1 Federal Street
Boston, MA 02211
Attention: Mr. Frank Benesh
Vice President
Telephone: (617) 346-0617
Facsimile: (617) 346-0568
BANQUE NATIONALE DE PARIS
Domestic and Offshore Lending Office(s)
(Borrowing notices, Notices of
Conversion/Continuation, and Payments):
BANQUE NATIONALE DE PARIS
180 Montgomery Street
San Francisco, CA 94104
Attention: Donald Hart, Treasury
Telephone: (415) 956-0707
Facsimile: (415) 989-9041
All other notices:
BANQUE NATIONALE DE PARIS
180 Montgomery Street
San Francisco, CA 94104
Attention: Rafael Lumanlan, Corporate Banking
Telephone: (415) 956-0707
Facsimile: (415) 296-8954
THE SUMITOMO TRUST & BANKING CO., LTD.
Domestic and Offshore Lending Office(s)
(Borrowing notices, Notices of
Conversion/Continuation, and Payments):
THE SUMITOMO TRUST & BANKING CO., LTD.
Los Angeles
333 South Grand Avenue, Suite 5300
<PAGE> 110
Los Angeles, CA 90071
Attention: Ms. Yoshimi Tardiff
Telephone: (213) 229-2129
Facsimile: (213) 628-2719
<PAGE> 111
All other notices:
THE SUMITOMO TRUST & BANKING CO., LTD.
333 South Grand Avenue, Suite 5300
Los Angeles, CA 90071
Attention: Ninoos Y. Benjamin
Vice President & Manager
Telephone: (213) 229-2106
Facsimile: (213) 613-1083
<PAGE> 112
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<PAGE> 113
EXHIBIT A
to the Credit Agreement
FORM OF NOTICE OF BORROWING
Date: _______________________
To: Bank of America National Trust and
Savings Association as Agent
Agency Management Services (#5596)
1455 Market Street, 12th Fl.
San Francisco, CA 94103
Attn: Wendy Young
Re: Cypress Semiconductor Corporation
Ladies and Gentlemen:
The undersigned, Cypress Semiconductor Corporation (the "Company"),
refers to the Credit Agreement dated as of July 24, 1996 (as amended, modified,
renewed or extended from time to time, the "Credit Agreement"), among the
Company, the several financial institutions party to the Credit Agreement (the
"Banks"), Fleet Bank, as Co-Agent, and Bank of America National Trust and
Savings Association, as Issuing Bank and Agent for the Banks, for full
particulars of the matters herein described. All capitalized terms used in
this Notice of Borrowing and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement. The undersigned
hereby gives you irrevocable notice, pursuant to Section 2.03 of the Credit
Agreement, of the Borrowing specified herein and that:
(a) The requested Borrowing Date for the proposed Borrowing is
___________________.
(b) The aggregate amount of the proposed Borrowing is
$______________.
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<PAGE> 114
(c) The Borrowing is to be comprised of $_____________ of
[Offshore Rate] [Base Rate] Loans.
(d) [If applicable:] The duration of the Interest Period for the
Offshore Rate Loans included in the Borrowing shall be [one] [two] [three]
[six] months.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the proposed
Borrowing, before and after giving effect thereto and to the application of the
proceeds therefrom:
the representations and warranties of the Company
contained in Article VI of the Credit Agreement are true and correct
as though made on and as of each such date (except to the extent such
representations and warranties relate to an earlier date, in which
case they are true and correct as of such earlier date, and except
that subsections 6.11(a) and 6.11(b) of the Credit Agreement shall be
deemed to refer instead to the last day of the most recent fiscal year
for which financial statements have then been delivered);
(2) no Default or Event of Default exists, or would
result from such proposed Borrowing; and
(3) the proposed Borrowing will not cause (i) the
Effective Amount of all Revolving Loans plus the Effective Amount of
all L/C Obligations to exceed the total of all Commitments.
CYPRESS SEMICONDUCTOR CORPORATION
By: _________________________
Name:
Title:
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<PAGE> 115
EXHIBIT B
to the Credit Agreement
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date: ___________________
To: Bank of America National Trust and
Savings Association as Agent
Agency Management Services (#5596)
1455 Market Street, 12th Fl.
San Francisco, CA 94103
Attn: Wendy Young
Re: Cypress Semiconductor Corporation
Ladies and Gentlemen:
The undersigned, Cypress Semiconductor Corporation (the "Company"),
refers to the Credit Agreement dated as of July 24, 1996 (as amended, modified,
renewed or extended from time to time, the "Credit Agreement"), among the
Company, the several financial institutions party to the Credit Agreement (the
E-4
<PAGE> 116
"Banks"), Fleet Bank, as Co-Agent, and Bank of America National Trust and
Savings Association, as Issuing Bank and Agent for the Banks, for full
particulars of the matters herein described. All capitalized terms used in
this Notice of Conversion/Continuation and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The
undersigned hereby gives you irrevocable notice, pursuant to Section 2.04 of
the Credit Agreement, of the [conversion] [continuation] of the Loans specified
herein and that:
(e) The date of the [conversion] [continuation] is
______________________, ____.
(f) The [conversion] [continuation] is in respect of
outstanding Revolving Loans.
(g) The aggregate amount of the Loans to be [converted]
[continued] is $_________________.
(h) The Loans are to be [converted into] [continued as]
[Offshore Rate] [Base Rate] Loans.
(i) [If applicable:] The duration of the Interest Period
for the Offshore Rate Loans to be [converted] [continued] shall be
[one] [two] [three] [six] months.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the proposed
[conversion][continuation], before and after giving effect thereto:
(1) the representations and warranties of the Company
contained in Article VI of the Credit Agreement are true and correct
as though made on and as of each such date (except to the extent such
representations and warranties relate to an earlier date, in which
case they are true and correct as of such earlier date, and except
that subsections 6.11(a) and 6.11(b) of the Credit Agreement shall be
deemed to refer instead to the last day of the most recent fiscal year
for which financial statements have then been delivered); and
(2) no Default or Event of Default exists, or would
result from such proposed [conversion] [continuation].
6.
<PAGE> 117
CYPRESS SEMICONDUCTOR CORPORATION
By: _________________________
Name:
Title:
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
CYPRESS SEMICONDUCTOR CORPORATION
FINANCIAL STATEMENTS DATE: ______________
Reference is made to that certain Credit Agreement dated as of July
24, 1996 (as extended, renewed, amended or restated from time to time, the
"Credit Agreement"), among Cypress Semiconductor Corporation (the "Company"),
the several financial
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<PAGE> 118
institutions from time to time party thereto (the "Banks"), Fleet Bank, as
Co-Agent and Bank of America National Trust and Savings Association, as Issuing
Bank and Agent for the Banks. Unless otherwise defined herein, capitalized
terms used herein have the respective meanings assigned to them in the Credit
Agreement.
The undersigned Responsible Officer of the Company hereby certifies as
of the date hereof that he/she is the [_______________] of the Company, and
that, as such, he/she is authorized to execute and deliver this Certificate to
the Banks and the Agent on the behalf of the Company and its consolidated
Subsidiaries, and that:
[USE THE FOLLOWING PARAGRAPH IF THIS CERTIFICATE IS DELIVERED IN CONNECTION
WITH THE FINANCIAL STATEMENTS REQUIRED BY SUBSECTION 7.01(A) OF THE CREDIT
AGREEMENT.]
1. Attached hereto are true and correct copies of the audited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
the fiscal year ended _______________ and the related consolidated statements
of income or operations, shareholders' equity and cash flows for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, accompanied by the opinion of the Independent Auditor, which
opinion (a) states that such consolidated financial statements present fairly
the financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years and (b) is not qualified or
limited because of a restricted or limited examination by the Independent
Auditor of any material portion of the Company's or any Subsidiary's records.
OR
[USE THE FOLLOWING PARAGRAPH IF THIS CERTIFICATE IS DELIVERED IN CONNECTION
WITH THE FINANCIAL STATEMENTS REQUIRED BY SUBSECTION 7.01(B) OF THE CREDIT
AGREEMENT.]
1. Attached hereto are true and correct copies of the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
the fiscal quarter ended _________ and the related consolidated statements of
income, shareholders' equity and cash flows for the period commencing on the
first day and ending on the last day of such quarter, which are complete
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<PAGE> 119
and accurate in all material respects and fairly present, in accordance with
GAAP (subject to ordinary, good faith year-end audit adjustments), the
financial position, the results of operations and the cash flows of the Company
and the Subsidiaries.
2. The undersigned has reviewed and is familiar with the terms of the
Credit Agreement and has made, or has caused to be made under his/her
supervision, a detailed review of the transactions and condition (financial or
otherwise) of the Company and its Subsidiaries during the accounting period
covered by the attached financial statements.
3. The Company and its Subsidiaries, during such period, have
observed, performed or satisfied all of the covenants and other agreements, and
satisfied every condition in the Credit Agreement to be observed, performed or
satisfied by the Company and its Subsidiaries, and the undersigned has no
knowledge of any Default or Event of Default.
4. The representations and warranties of the Company contained in
Article V of the Credit Agreement are true and correct as though made on and as
of the date hereof (except to the extent such representations and warranties
relate to an earlier date, in which case they shall be true and correct as of
such date; and except that this notice shall be deemed instead to refer to the
last day of the most recent fiscal year for which financial statements have
then been delivered in respect of the representation and warranty made in
Section 6.11(a) of the Credit Agreement).
5. The financial covenant analyses and information set forth on
Schedule 1 attached hereto are shown on a consolidated basis and are true and
accurate on and as of the date of this Certificate.
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<PAGE> 120
IN WITNESS WHEREOF, the undersigned has executed this Certificate as
the ____________ of the Company as of ______________.
CYPRESS SEMICONDUCTOR CORPORATION
By: ______________________________
Title: ___________________________
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<PAGE> 121
SCHEDULE 1
to the Compliance Certificate
Dated _______________ / For the fiscal [quarter][year] ended ___________.
1. Total Debt/Capitalization Ratio (Section 7.13(a))
a. Total Debt
The sum of:
i) Indebtedness for borrowed money __________
ii) capitalized leases __________
iii) Contingent Obligations (in respect
of outstanding Letters of Credit) __________
Total: __________
b. Consolidated Tangible Net Worth
i) total assets __________
less:
ii) value of goodwill, trademarks, patents,
copyright capitalized software,
organization expense and other
similar intangible items __________
less:
iii) total liabilities __________
Consolidated Tangible Net Worth: __________
c. Sum of 1.a. and 1.b. __________
d. Required Ratio of 1.a. to 1.c.
(i) 0.45 to 1.00 (maximum)
e. Actual Ratio of 1.a. to 1.c.: __________
2. Minimum Tangible Net Worth (Section 7.13(b))
a. The sum of:
i) 85% of Consolidated Tangible Net
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<PAGE> 122
Worth as of January 2, 1996 ________
ii) 75% of aggregate net income (without subtracting
losses) earned in each fiscal quarter ended after
January 2, 1996 ________
iii) 100% of the aggregate book value of all capital stock
issued by the Company after January 2, 1996
(including capital stock issued upon any conversion
of the Convertible Subordinated Notes ________
Total: ________
b. Actual Consolidated Tangible Net Worth (from 1.b.) ________
c. Difference between 2.a. and 2.b.: ________
3. Modified Quick Ratio (Section 7.13(c))
a. The sum of:
i) cash ________
ii) Cash Equivalents ________
iii) net accounts receivable ________
Total: ________
b. Consolidated Current Liabilities
(including all outstanding
Loans and L/C Obligations) ________
c. Required Ratio of 3.a. to 3.b.:
1.00 to 1.00 (minimum); provided, however, that during the
period from the Closing Date through December 31, 1997, such
ratio may be 0.80 to 1.00 (minimum) as of the end of any two
fiscal quarters in such period
d. Actual Ratio of 3.a. to 3.b.: ________
4. Coverage Ratio (Section 7.13(d)) (for the four consecutive fiscal
quarter periods ending on the last day of the last fiscal quarter
covered in this Schedule C-1)
a. earnings before interest income and
interest expense ________
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<PAGE> 123
plus: lease expense ________
Total: ________
b. The sum of:
i) interest expense ________
ii) lease expense ________
iii) the average current portion of long-
term debt for each of the four quarters
in such four fiscal quarter period ________
iv) outstanding Loans and issued and
outstanding Letter of Credit ________
Total: ________
c. Required Ratio of 4.a. to 4.b.:
1.25 to 1.00 (minimum)
d. Actual Ratio of 4.a. to 4.b. ________
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<PAGE> 124
EXHIBIT D
to the Credit Agreement
July 25, 1996
Bank of America National Trust and Savings Association,
as Agent
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
and the Banks party to the Credit Agreement described below
RE: Credit Agreement dated as of July 24, 1996 by and among Cypress
Semiconductor Corporation, the Banks named therein, and Bank of America
National Trust and Savings Association, in its capacity as Agent
Gentlemen:
We have acted as counsel to Cypress Semiconductor Corporation, a
Delaware corporation (the "Company"), in connection with the negotiation
of the Credit Agreement, dated as of July 24, 1996 (the "Credit
Agreement") by and among the Company, the Banks named therein, and Bank
of America National Trust and Savings Association, not in its individual
capacity, but solely in its capacity as Agent (the "Agent"), pursuant to
which the Banks have agreed to lend up to $100,000,000 to the Company.
This opinion is delivered to you pursuant to Section 5.01(d) of the Credit
Agreement. Capitalized terms used herein and not defined shall have the
meanings provided in the Credit Agreement.
In rendering the opinions expressed below, we have examined executed
originals or copies of the following documents:
(a) the Credit Agreement;
(b) the Certificate of Incorporation of the Company;
(c) the Bylaws of the Company;
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<PAGE> 125
(d) records of proceedings of the Board of Directors of the Company
during or by which resolutions were adopted relating to matters covered by
this opinion;
(e) a Certificate of the Secretary of the Company, dated as of the
date hereof, executed and delivered to you pursuant to Sections 5.01(b)
and 5.01(c) of the Credit Agreement, as to, among other things: (i) the
incumbency and signature of certain officers of the Company; (ii) the
Certificate of Incorporation of the Company; (iii) the Bylaws of the
Company; and (iv) the adoption of certain resolutions by the directors of
the Company;
(f) (i) a certificate of the Secretary of State of the State of
Delaware with respect to the standing of the Company as a corporation
incorporated under the laws of the State of Delaware, and (ii) a tax
status certificate for the Company from the Franchise Tax Board of the
State of Delaware;
(g) the certificate of certain officers of the Company as to
certain factual matters;
(h) each of the documents listed on Annex A hereto (the "Reviewed
Agreements").
In addition, we have examined and relied upon such corporate records of
the Company as we have deemed necessary or appropriate for purposes of the
opinions expressed below. We have also relied upon and obtained from
public officials and officers of the Company such other certificates and
assurances as we consider necessary for the rendering of this opinion.
With your permission and without any verification by us, we have assumed
the following for purposes of rendering the opinions set forth herein:
(i) The genuineness of all signatures, the legal capacity of all
natural persons to execute and deliver documents, the authenticity and
completeness of documents submitted to us as originals and the
completeness and conformity with authentic original documents of all
documents submitted to us as copies, and that all documents, books and
records made available to us by the Company are accurate and complete.
(ii) That there are no agreements or understandings between or among
the Company, the Agent or the Banks or third parties which would expand,
modify or otherwise affect the terms of the Credit Agreement or the
respective rights or obligations of the parties thereunder and that the
Credit Agreement correctly and completely sets forth the intent of all
parties thereto.
(iii) That all parties to the Credit Agreement (other than the
Company) have filed all required franchise tax returns, if any, and paid
all required taxes, if any, under the California Revenue & Taxation Code.
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<PAGE> 126
(iv) That the Credit Agreement has been duly authorized, executed
and delivered by each of the Agent and the Banks to the extent each such
party is contemplated to be a party thereto and that each of the Agent
and the Banks has full power, authority and legal right to enter into and
perform the terms and conditions of the Credit Agreement to be performed
by such person, and that the Credit Agreement constitutes a legal, valid
and binding obligation of each such person, enforceable against it in
accordance with its terms.
(v) That each Lender is either (i) a "Bank" as defined in and
operating under that certain act known as the "Bank Act" approved March 1,
1909, as amended, (ii) a bank created and operating under and pursuant to
the laws of the State of California or of the United States or (iii) a
foreign bank complying with the criteria set forth in Section 1716 of the
California Financial Code, as amended, and that the Banks are therefore
exempt from the restrictions of Section 1 of Article XV of the California
Constitution and related statutes relating to usury.
(vi) With respect to certain matters of fact, that the
representations and warranties of the Company set forth in the Credit
Agreement, the certificates of certain officers of the Company delivered
to you in connection with the transactions contemplated by the Credit
Agreement and the certificate of certain officers of the Company referred
to in paragraph (g) above are true, correct and complete.
As used in this opinion, the expression "to our knowledge" or "known to
us" with reference to matters of fact means that during the course of our
representation of the Company in connection with the Credit Agreement, no
information has come to the attention of the attorneys of our firm
involved in this engagement which would give them actual knowledge of the
existence or absence of such facts; however, we have made no independent
investigation to determine the existence or absence of such facts, and any
limited inquiry undertaken by us during the preparation of this opinion
should not be regarded as such an investigation. No inference as to our
knowledge of the existence or absence of any facts underlying any opinion
given "to our knowledge" should be drawn from the fact of our
representation of the Company. Specifically, in rendering the opinion set
forth in paragraph 5 below, we have not made any independent investigation
of court records to determine whether any actions have been filed.
Furthermore, this opinion letter does not purport to encompass information
which may have been communicated to any attorney in our firm who is a
director or officer of the Company, solely by reason of such attorney's
serving in such capacity.
On the basis of the foregoing and in reliance thereon, and based upon
examination of such questions of law as we have deemed appropriate, and
subject to the assumptions, exceptions, qualifications, and limitations
set forth herein, we advise you that in our opinion:
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<PAGE> 127
1. The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power and authority to
enter into the Credit Agreement and to carry out the transactions
contemplated thereby.
3. The execution and delivery by the Company of the Credit
Agreement, and the performance by The Company of its obligations under
each of the Credit Agreement, have been duly authorized by all necessary
corporate action on the part of the Company.
4. The Credit Agreement constitutes a valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms.
5. The execution and delivery of the Credit Agreement, the
undertaking of the covenants set forth in the Credit Agreement and the
borrowing of Loans in accordance with the Credit Agreement and repayment
of any Loans by the Company do not (a) conflict with or violate the Bylaws
or Certificate of Incorporation of the Company; (b) to our knowledge,
violate or contravene any United States federal or California state law,
statute, rule or regulation applicable to the Company; (c) to our
knowledge, violate or contravene any order, writ, judgment, decree,
determination or award of any United States federal or California state
governmental authority applicable to the Company; or (d) to our knowledge,
violate or result in a breach of or constitute any default under any
Reviewed Agreement, or, to our knowledge, result in or require the
creation or imposition of any lien on any of its properties or revenues
pursuant to any provision of any United States federal or California state
law, rule or regulation or any such contractual obligation.
6. No consents, approvals, authorizations, registrations,
declarations or filings are required to be made or obtained by or in
respect of the Company (or on its behalf) with or from any governmental or
regulatory authority or agency of the United States or the State of
California for the due authorization, execution and delivery by the
Company of the Credit Agreement, the undertaking of the covenants set
forth in the Credit Agreement, the borrowing of Loans in accordance with
the Credit Agreement or the repayment of any such Loans by the Company.
7. Except as disclosed in Schedule 6.05 to the Credit Agreement,
to our knowledge, there are no actions or proceedings against the Company
pending or overtly threatened in writing before any court, governmental
agency or arbitrator which (a) seek to challenge the enforceability of
the Credit Agreement, or (b) we believe are reasonably likely to have a
material adverse effect on the ability of the Company to perform its
obligations under the Credit Agreement.
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<PAGE> 128
8. Neither the Company, any Subsidiary, nor, to our knowledge, any
Person controlling the Company, is an "Investment Company" within the
meaning of the Investment Company Act of 1940.
Our opinions above are subject to the following qualifications:
A. We express no opinion as to any matter relating to laws of any
jurisdiction other than the laws of the State of California, the General
Corporation Law of the State of Delaware and the federal laws of the
United States, as such are in effect on the date hereof, and we have made
no inquiry into, and we express no opinion as to, the statutes,
regulations, treaties, common laws or other laws of any other nation,
state or jurisdiction. As you know, we are not licensed to practice law
in the State of Delaware and, accordingly, our opinions as to Delaware
General Corporation Law are based solely on a review of the official
statutes of the State of Delaware
B. We express no opinion as to (i) the effect of any bankruptcy,
insolvency, reorganization, arrangement, fraudulent conveyance, moratorium
or other laws relating to or affecting the rights of creditors generally,
or (ii) the effect of general principles of equity, including without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, and the possible unavailability of specific performance,
injunctive relief or other equitable relief, whether considered in a
proceeding in equity or at law.
C. We express no opinion regarding any of (i) the rights or
remedies available to any party for violations or breaches of any
provisions which are immaterial or the enforcement of which would be
unreasonable under the then existing circumstances, (ii) the rights or
remedies available to any party for material violations or breaches which
are the proximate result of actions taken by any party to the Credit
Agreement other than the party against whom enforcement is sought, which
actions such other party is not entitled to take pursuant to the Credit
Agreement or which otherwise violate applicable laws, (iii) the rights or
remedies available to any party which takes discretionary action which is
arbitrary, unreasonable or capricious, or is not taken in good faith or in
a commercially reasonable manner, whether or not the Credit Agreement
permits such action, (iv) the effect of the exercise of judicial
discretion, whether in a proceeding in equity or at law, (v) the
enforceability of any provision deemed to be "unconscionable" within the
meaning of Section 1670.5 of the California Civil Code, (vi) the
enforceability of any provision authorizing the exercise of any remedy
without reasonable notice and opportunity to cure, or (vii) the effect of
any provision of the Credit Agreement purporting to give the Agent or the
Banks the right to make any conclusive determination in its sole
discretion.
D. We express no opinion as to the legality, validity, binding
nature or enforceability of (i) any provisions in the Credit Agreement
providing for the payment or reimbursement of costs or expenses or
indemnifying a party, to the extent such provisions may be held
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unenforceable as contrary to public policy, (ii) any provision of the
Credit Agreement insofar as it provides for the payment or reimbursement
of costs and expenses or indemnification for claims, losses or liabilities
in excess of a reasonable amount determined by any court or other
tribunal, (iii) any provisions regarding a party's ability to collect
attorneys' fees and costs in an action involving the Credit Agreement, if
the party is not the prevailing party in such action (and we call your
attention to the effect of Section 1717 of the California Civil Code,
which provides that, where a contract permits one party thereto to recover
attorneys' fees, the prevailing party in any action to enforce any
provision of the contract shall be entitled to recover its reasonable
attorneys' fees), (iv) any provisions of the Credit Agreement imposing
penalties or forfeitures, late payment charges or any increase in interest
rate, upon delinquency in payment or the occurrence of a default to the
extent they constitute a penalty or forfeiture or are otherwise contrary
to public policy, (v) any rights of set-off, (vi) any provision of the
Credit Agreement to the effect that a statement, certificate,
determination or record shall be deemed conclusive absent manifest error
(or similar effect), including, without limitation, that any such
statement, certificate, determination or record shall be prima facie
evidence of a fact, or (vii) any provision of the Credit Agreement which
provides that notice not actually received may be binding on any party.
E. We express no opinion with respect to the legality, validity,
binding nature or enforceability of (i) any vaguely or broadly stated
waiver, including without limitation, the waivers of diligence,
presentment, demand, protest or notice, (ii) any waivers or consents
(whether or not characterized as a waiver or consent in the Credit
Agreement) relating to the rights of the Company or duties owing to it
existing as a matter of law, including, without limitation, waivers of the
benefits of statutory or constitutional provisions, to the extent such
waivers or consents are found by courts to be against public policy or
which are ineffective pursuant to California statutes and judicial
decisions, or (iii) covenants to the extent they are construed to be
independent requirements as distinguished from conditions that may trigger
an event of default.
F. We express no opinion with respect to the legality, validity,
binding nature or enforceability of any provision of the Credit Agreement
to the effect that rights or remedies are not exclusive, that every right
or remedy is cumulative and may be exercised in addition to any other
right or remedy, that the election of some particular remedy or remedies
does not preclude recourse to one or more other remedies or that failure
to exercise or delay in exercising rights or remedies will not operate as
a waiver of any such right or remedy.
G. We express no opinion as to any provision of the Credit
Agreement requiring written amendments or waivers of such documents
insofar as it suggests that oral or other modifications, amendments or
waivers could not be effectively agreed upon by the parties or that
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the doctrine of promissory estoppel might not apply.
H. We express no opinion as to the applicability or effect of
compliance or non-compliance by the Agent or the Banks with any state,
federal or other laws applicable to the Agent or the Banks or to the
transactions contemplated by the Credit Agreement because of the nature of
its business, including its legal or regulatory status.
I. Our opinions set forth in paragraph 1 as to due incorporation,
valid existence and good standing are based solely on the certificates
referenced in paragraph (f) above (originals or copies of which have been
furnished to you).
J. Our opinion set forth in paragraph 3 as to the due execution of
the Credit Agreement by the Company is based solely on representations
made to us by the Company in the certificate referenced in paragraph (g)
above.
K. We express no opinion as to the enforceability or legal effect
of any provision of the Credit Agreement purporting to reinstate, as
against any obligor or guarantor, obligations or liabilities of such
obligor which have been avoided or which have arisen from transactions
which have been rescinded or the payment of which has been required to be
returned by any court of competent jurisdiction.
L. Our opinion in clauses (b) and (c) of paragraph 5 above is
intended to express our opinion that the execution, delivery and
performance by the Company of the Credit Agreement are neither prohibited
by, nor do they subject The Company to a fine, penalty or similar sanction
under or any law, rule, regulation of the State of California or United
States federal law or any order, writ, judgment, decree, determination or
award of any United States federal or California state governmental
authority that a lawyer practicing in the State of California exercising
customary professional diligence would reasonably recognize to be
applicable to the Company and the transactions contemplated by the Credit
Agreement; accordingly, our opinions set forth above are limited to the
foregoing.
M. This opinion speaks only at and as of its date and is based
solely on the facts and circumstances known to us at and as of such date.
We express no opinion as to the effect on Agent's or any Bank's rights
under the Credit Agreement of any statute, rule, regulation or other law
which is enacted or becomes effective after, or of any court decision
which changes the law relevant to such rights which is rendered after, the
date of this opinion or the conduct of the parties following the closing
of the contemplated transaction. In addition, in rendering this opinion,
we assume no obligation to revise or supplement this opinion should the
present laws of the jurisdictions mentioned herein be changed by
legislative action, judicial decision or otherwise.
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This opinion is made with the knowledge and understanding that you (but
no other person) may rely thereon in entering into the Credit Agreement
and is solely for your benefit, and this opinion may not be disclosed to
or relied upon by any person other than you, except that (i) this opinion
may be disclosed to (A) bank regulatory and other governmental authorities
having jurisdiction over you requesting (or requiring) such disclosure,
and (B) prospective Assignees and Participants in connection with the
potential transfer of all or part of the Loans or Commitments of any Bank,
and (ii) this opinion may be relied upon by Assignees of or Participants
in the Loans if the assignments or participations relating thereto are
permitted under and made in accordance with the Credit Agreement; provided
that in no eveopinion extend to any issue or matter related to any such
assignment or participation or arising from or out of any such assignment
or participation (as distinct from the subject transaction).
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
EXHIBIT E
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to the Credit Agreement
FORM OF ASSIGNMENT AND ACCEPTANCE
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") dated as
of _____________________________, ____ is made between
__________________________________________ (the "Assignor") and
____________________________(the "Assignee").
WHEREAS, the Assignor is party to that certain Credit Agreement dated
as of July 24, 1996 (as extended, renewed, amended or restated from time to
time, the "Credit Agreement"), among Cypress Semiconductor Corporation (the
"Company"), the several financial institutions party to the Credit Agreement
(the "Banks"), Fleet Bank, as Co-Agent, and Bank of America National Trust and
Savings Association, as Issuing Bank and Agent for the Banks. Terms defined in
the Credit Agreement are used herein with the same meaning;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to make Revolving Loans to the Company and to participate in Letters
of Credit issued for the account of the Company in an aggregate amount not to
exceed ________ United States dollars (U.S.$___________) (the "Commitment");
WHEREAS, [the Assignor has made Loans in the aggregate principal
amount of __________ United States dollars (U.S.$____________) to the Company]
[no Loans are outstanding under the Credit Agreement] [and the amount of
Assignor's percentage share of the aggregate amount available for drawing under
outstanding Letters of Credit issued for the account of the Company is
___________________ United States dollars (U.S. $______ _______) ] [and no
Letters of Credit are outstanding under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee a ratable part
of the rights and obligations of the Assignor under the Credit Agreement in
respect of its Commitment, pro rata in accordance with the Assignor's
Commitment and L/C Commitment (which is a part of its Commitment rather than a
separate, independent commitment), [together with a corresponding portion of
each of its outstanding Loans and a corresponding portion of its participation
in each of the outstanding Letters of Credit,] in an amount equal to
____________ United States dollars
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(U.S.$__________) (the "Assigned Amount") on the terms listed on Schedule 1
hereto and subject to the conditions set forth herein and therein, and the
Assignee wishes to accept assignment of such rights and to assume such
obligations from the Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, provisions and covenants contained herein, the parties hereto agree
as follows:
(j) Assignment and Assumption.
(1) With effect on and after the Effective Date (as
defined in Section 5 hereof), the Assignor hereby sells and assigns to
Assignee, and the Assignee hereby purchases and assumes from the Assignor, the
Assigned Amount, which shall be equal to _______ percent (__%) (the "Assignee's
Percentage Share") of all of the Assignor's rights and obligations under the
Credit Agreement and the other Loan Documents, including, without limitation,
the Assignee's Percentage Share of the Assignor's Commitment and L/C Commitment
and any outstanding Loans and participations in outstanding Letters of Credit.
The assignment set forth in this Section 1(a) shall be without recourse to, or
representation or warranty (except as expressly provided in this Agreement) by,
the Assignor.
(2) With effect on and after the Effective Date, the
Assignee shall be a party to the Credit Agreement and succeed to all of the
rights and be obligated to perform all of the obligations of a Bank under the
Credit Agreement with a Commitment in an amount equal to the Assigned Amount.
The Assignee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank. It is the intent of the parties hereto that the
Commitment of the Assignor shall, as of the Effective Date, be reduced by an
amount equal to the Assigned Amount and the Assignor shall relinquish its
rights and be released from its obligations under the Credit Agreement to the
extent such obligations have been assumed by the Assignee, including with
respect to its L/C Commitment.
(3) After giving effect to the assignment and assumption,
on the Effective Date (i) the Assignee's Commitment will be
____________________________________ United States dollars
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<PAGE> 134
(U.S.$_________________), (ii) the Assignee's L/C Commitment will be
________________________ United States dollars (U.S.$ ____________) and (iii)
the Assignee's Commitment Percentage will be __%.
(k) Payments.
(1) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, (i) the Assignee shall pay to the Assignor on
the Effective Date in immediately available funds an amount equal to
____________________________ United States dollars (U.S. $_______________),
representing the Assignee's Percentage Share of the principal amount of all
Loans previously made, and currently owned, by the Assignor to the Company
under the Credit Agreement and outstanding on the Effective Date, and (ii) the
Assignee assumes the Assignee's Percentage Share of the Assignor's
participation in the outstanding Letters of Credit and each drawing under such
Letters of Credit, as the same is set forth in the Credit Agreement.
(2) The [Assignor] [Assignee] agrees to pay to the Agent a
processing or transfer fee in the amount of $3,500.
(l) Reallocation of Payments.
(1) Any interest, commissions, fees and other payments accrued
to but excluding the Effective Date with respect to the Loans, the Letters of
Credit and the Commitment shall be for the account of the Assignor. Any
interest, commissions, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Amount shall be for the account of
the Assignee. Each of the Assignor and the Assignee agrees that it will hold
in trust for the other party any interest, commissions, fees and other amounts
which it may receive to which the other party is entitled pursuant to the
preceding sentences and pay to the other party any such amounts which it may
receive promptly upon receipt. The Assignor's and the Assignee's obligations
to make the payments referred to in this Section 3 are non-assignable.
(2) The Assignor and the Assignee will make arrangements with
the Agent with respect to all interest, commissions, fees and other payments to
be made, and the date or dates for payment,
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<PAGE> 135
by the Agent to the Assignee pursuant to the Credit Agreement from and after
the Effective Date.
(m) Independent Credit Decision.
The Assignee (i) acknowledges that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 7.01 thereof, and such other documents and information as it has
deemed appropriate to make its own independent credit and legal analysis and
decision to enter into this Agreement; and (ii) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any other
Banks and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit and legal decisions in taking or
not taking action under the Credit Agreement.
(n) Effective Date; Other Actions.
(1) The effective date for this Agreement shall be
__________________ (the "Effective Date"); provided, that the following
conditions precedent have been satisfied on or before the Effective Date:
A. This Agreement shall be executed and delivered by the
Assignor and the Assignee;
B. the requirements for an effective assignment by a Bank set
forth in Section 11.08 of the Credit Agreement shall be satisfied with
respect to the Assigned Amount;
C. the Assignee shall pay to the Assignor all amounts due to
the Assignor under this Agreement; and
D. the processing or transfer fee referred to in Section 2(b)
shall have been paid to the Agent.
(2) Each of the Assignor and the Assignee hereby agrees (i) to
use its best efforts to cooperate with the other in preparing and dispatching
any notices and obtaining any necessary consents, and (ii) to execute and
deliver all such other further agreements, instruments, notices, certificates,
documents and assurances and to perform such acts, as shall be reasonably
required to effectuate the purposes of this Agreement.
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<PAGE> 136
(o) Agent.
(1) The Assignee hereby appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the Banks pursuant to the
terms of the Credit Agreement.
(2) If the Assignor is an Issuing Bank, the Assignee shall
assume no duties or obligations held by the Assignor in its capacity as such
under the Credit Agreement or any other Loan Document.
(3) The Assignee shall assume no duties or obligations held by
the Assignor in its capacity as Agent, or Issuing Bank under the Credit
Agreement or any other Loan Document.
[NOTE: Subsection 6(c) only for assignments by BofA]
(p) Withholding Tax.
If the Assignee is organized under the laws of any jurisdiction other
than the United States or any state or other political subdivision thereof it
agrees that it will furnish to the Assignor, the Agent and the Company,
concurrently with the execution of this Agreement, either U.S. Internal Revenue
Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein the
Assignee claims entitlement to complete exemption from or a reduced rate of
U.S. federal withholding tax on all interest payments under the Credit
Agreement), as well as Form W-8 or W-9, if applicable; provided, however, that
the Assignee shall not be required to deliver Form 4224 or 1001 under this
Section 7 to the extent that delivery of such form is not authorized by law.
(q) Representations and Warranties.
(1) The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any lien, security interest or other
adverse claim; (ii) it is duly organized and existing and it has the full power
and authority to take, and has taken, all action necessary to execute and
deliver this Agreement and any other documents required or permitted to be
executed or delivered by it in connection with this Agreement
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<PAGE> 137
and to fulfill its obligations hereunder; (iii) no notices to, or consents,
authorizations or approvals of, any person are required (other than already
given or obtained) for its due execution, delivery and performance of this
Agreement, and apart from any agreements or undertaking or filings required by
the Credit Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and (iv)
this Agreement has been duly executed and delivered by it and constitutes the
legal, valid and binding obligations of the Assignor, enforceable against the
Assignor in accordance with the terms hereof, except subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.
(2) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement, any other
Loan Documents or any other instrument or document furnished in connection
therewith, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Loan Document or any
other instrument or document furnished pursuant thereto. Further, the Assignor
makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Company or any other Person, or the performance or observance by the
Company or any other Person of any of their respective obligations under the
Credit Agreement, any other Loan Documents or any other instrument or document
furnished in connection therewith.
(3) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Agreement and any other
documents required or permitted to be executed or delivered by it in connection
with this Agreement, and to fulfill its obligations hereunder; (ii) no notices
to, or consents, authorizations or approvals of, any Person are required (other
than any already given or obtained) for its due execution, delivery and
performance of this Agreement, and apart from any agreements or undertaking or
filings required by the Credit Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance; (iii) this Agreement has been duly
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<PAGE> 138
executed and delivered by it and constitutes the legal, valid and binding
obligations of the Assignee, enforceable against the Assignee in accordance
with the terms hereof, except subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles;
and (iv) it is eligible under the Credit Agreement to be an assignee of the
Loans, participations in the Letters of Credit and the Assignor's Commitment.
(r) Further Assurances.
The Assignor and the Assignee each hereby agrees to execute and
deliver such other instruments, and take such other actions, as either party
may reasonably request in connection with the transactions contemplated by this
Agreement, including, without limitation, the delivery of any notices or other
documents or instruments to the Company or the Agent which may be required in
connection with the assignment and assumption contemplated hereby.
(s) Indemnity.
The Assignee agrees to indemnify and hold harmless the Assignor
against any and all loss, cost, expense (including, without limitation,
reasonable attorneys' fees and the allocated cost and expense of in-house
counsel) and liability incurred by the Assignor in connection with or arising
in any manner from the non-performance by the Assignee of any obligation
assumed by the Assignee under this Agreement.
(t) Miscellaneous.
(1) Any amendment or waiver of any provision of this Agreement
shall be in writing signed by the parties hereto. No failure or delay by
either party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver of any breach of the provisions of this Agreement and shall
be without prejudice to any rights with respect to any other or further breach
hereof.
(2) All payments made hereunder shall be made without any
set-off or counterclaim. To the extent payment to be made by the Assignee
pursuant hereto shall not be made when due, the Assignor
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<PAGE> 139
shall be entitled to recover such amount together with interest thereon at the
Federal Funds Rate per annum accruing from the date such amount was due. For
purposes hereof, "Federal Funds Rate" shall mean, for any day, the weighted
average of the rate on overnight Federal funds transactions, with members of
the Federal Reserve System only, arranged by Federal funds brokers, as
published as of such day by the Federal Reserve Bank of New York.
(3) All communications among the parties or notices in
connection herewith shall be in writing, hand delivered, or sent by mail, telex
or facsimile, addressed as follows: (i) if to the Assignor or the Assignee, at
their respective addresses or to their respective telex or facsimile numbers
set forth in the signature pages hereof and (ii) if to the Company or to the
Agent, at their respective addresses or to their respective telex or facsimile
numbers set forth in the Credit Agreement or other Loan Documents. All such
communications and notices shall be effective upon receipt.
(4) The Assignor and the Assignee shall each pay its own costs
and expenses incurred in connection with the negotiation, preparation and
execution of this Agreement.
(5) The representations and warranties made herein shall
survive the consummation of the transactions contemplated hereby.
(6) This Agreement shall be binding upon and inure to the
benefit of the Assignor and the Assignee and their respective successors and
assigns; provided, however that no party shall assign its rights or obligations
hereunder without the prior written consent of the other party and any
purported assignment, absent such consent, shall be void. The preceding
sentence shall not limit the right of the Assignee to assign or participate all
or part of the Assignee's Percentage Share and the Assigned Amount and any
outstanding Loans and participations in Letters of Credit attributable thereto
in the manner contemplated by the Credit Agreement.
(7) The Assignor may at any time or from time to time further
ratably grant to others, to the extent not already assigned to Assignee,
assignments or participations in Assignor's Commitment, L/C Commitment, Loans,
and participations in Letters of Credit.
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<PAGE> 140
(8) This Agreement may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(9) This Agreement shall be governed by and construed in
accordance with the law of the State of California. The Assignor and the
Assignee each irrevocably submits to the non-exclusive jurisdiction of any
California state or federal court sitting in San Francisco over any suit,
action or proceeding arising out of or relating to this Agreement and
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such California state or federal court. Each party
to this Agreement hereby irrevocably waives, to the fullest extent it may
effectively do so, any objection which it now or hereafter may have to the
laying of venue of any such action or proceeding brought in any of the
foregoing courts, and the defense of an inconvenient forum to the maintenance
of any such action or proceeding.
(10) This Agreement and any agreement, document or instrument
attached hereto or referred to herein integrate all the terms and conditions
mentioned herein or incidental hereto, constitute the entire agreement and
understanding between the parties hereto and supersede any and all prior
agreements and understandings related to the subject matter hereof. In the
event of any conflict between the terms, conditions and provisions of this
Agreement and any such agreement, document or instrument, the terms, conditions
and provisions of this Agreement shall prevail.
(11) In the event of any inconsistency between the provisions of
this Agreement and Schedule 1 hereto, this Agreement shall control. Headings
are for reference only and are to be ignored in interpreting this Agreement.
(12) The illegality or unenforceability of any provision of this
Agreement or any instrument or agreement required hereunder shall not in any
way affect or impair the legality or enforceability of the remaining provisions
of this Agreement or any instrument or agreement required hereunder.
(13) Any controversy or claim between the Assignor and the
Assignee, including but not limited to those arising out of or
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<PAGE> 141
relating to this Agreement or any agreements or instruments relating hereto or
delivered in connection herewith and any claim based on or arising from an
alleged tort, shall at the request of any party be determined by arbitration.
The arbitration shall be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrators shall give effect to statutes
of limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator. Judgment upon the
arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief. This
section shall not limit the right of either party to this Agreement to exercise
self-help remedies such as setoff, to foreclose against or sell any real or
personal property or collateral or security or to obtain provisional or
ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration or other proceeding. The exercise of a
remedy does not waive the right of either party to resort to arbitration.
(14) Schedule 1 hereto summarizes information with respect to
the Assignee's Commitment and L/C Commitment after giving effect hereto, the
outstanding Loans assigned to it and other matters, including, without
limitation, administrative information with respect to the Assignee.
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<PAGE> 142
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
_________________________________,
Assignor
By:______________________________
Name:
Title:
Address:________________________
________________________
________________________
Attn. __________________
Fax ____________________
_________________________________,
Assignee
By:______________________________
Name:
Title:
Address:________________________
________________________
Attn. __________________
Fax ____________________
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<PAGE> 143
SCHEDULE 1
to
the Assignment and Acceptance
(u) Company: Cypress Semiconductor Corporation
(v) Date of Credit Agreement: July 24, 1996
(w) Assignor: ____________________________________
(x) Assignee: ____________________________________
(y) Date of Assignment Agreement: __________, ____
(z) Effective Date: __________, ____
(aa) Assignee's Pro Rata Share: ____%
(bb) Assignee's Share of:
A. Commitment: $__________
B. L/C Commitment: $__________
C. Revolving Loans: $__________
D. L/C Advances: $__________
(cc) Payment Instructions:
Assignor: ________________________________________
Assignor: ________________________________________
(dd) Other Information:
Assignee's contact for credit matters: ___________
__________________________________________________
1.
<PAGE> 144
Assignee's address for notices under the Credit Agreement, Lending
Office(s), and other contact(s), if any, for administrative matters:
Address for notices:
____________________________________________________________
____________________________________________________________
____________________________________________________________
Attn: ______________________________________________________
Fax: ______________________________________________________
Tel.: ______________________________________________________
Domestic Lending Office:
____________________________________________________________
____________________________________________________________
____________________________________________________________
Attn: ______________________________________________________
Fax: ______________________________________________________
Tel.: ______________________________________________________
Offshore Lending Office:
____________________________________________________________
____________________________________________________________
____________________________________________________________
Attn: ______________________________________________________
Fax: ______________________________________________________
Tel.: ______________________________________________________
Other contact(s):
____________________________________________________________
____________________________________________________________
____________________________________________________________
2.
<PAGE> 145
EXHIBIT F
to the Credit Agreement
FORM OF PROMISSORY NOTE
U.S.$__________________ _________, 199_
FOR VALUE RECEIVED, the undersigned, Cypress Semiconductor Corporation,
a Delaware corporation (the "Company"), hereby promises to pay to the order of
_______________________________________ (the "Bank") the principal sum of
____________________________ United States dollars (U.S.$__________) or, if
less, the aggregate unpaid principal amount of all Loans made by the Bank to
the Company pursuant to the Credit Agreement, dated as of July 24, 1996 (such
Credit Agreement, as it may be amended, restated, supplemented or otherwise
modified from time to time, being hereinafter called the "Credit Agreement"),
among the Company, the Bank, the other banks parties thereto, and Bank of
America National Trust and Savings Association, as Issuing Bank and Agent for
the Banks, on the dates, in the amounts and in the manner provided in the
Credit Agreement. The Company further promises to pay interest on the unpaid
principal amount of the Loans evidenced hereby from time to time at the rates,
on the dates, and otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on which each
Loan is made, the maturity date therefor and each payment of principal with
respect thereto on the schedules annexed hereto and made a part hereof, or on
continuations of such schedules which continuations shall be attached hereto
and made a part hereof; provided, that any failure to endorse such information
on any such schedule or continuation thereof shall
3.
<PAGE> 146
not in any manner affect any obligation of the Company under the Credit
Agreement and this Promissory Note (the "Note").
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.
4.
<PAGE> 147
Unless otherwise defined in this Note, terms defined in the Credit
Agreement are used herein as therein defined.
This Note shall be governed by, and construed and interpreted in
accordance with, the laws of the State of California.
CYPRESS SEMICONDUCTOR CORPORATION
By:__________________________
Name:
Title:
5.
<PAGE> 148
Schedule A to Note
BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
<TABLE>
<CAPTION>
(3) (4)
(2) Maturity Amount of
Amount Date of Base (5)
(1) of Base Base Rate Loan Notation
Date Rate Loan Rate Loan Repaid Made By
---- ------------ --------- ------ -------
<S> <C> <C> <C>
</TABLE>
6.
<PAGE> 149
7.
<PAGE> 150
Schedule B to Note
OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS
<TABLE>
<CAPTION>
(2) (3) (4)
Amount Maturity Amount of
of Date of Offshore (5)
(1) Offshore Offshore Rate Loan Notation
Date Rate Loan Rate Loan Repaid Made By
---- --------- --------- ------ -------
<S> <C> <C> <C> <C>
</TABLE>
8.
<PAGE> 151
9.
<PAGE> 1
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
October 10, 1996, effective as of September 30, 1996, is entered into by and
among CYPRESS SEMICONDUCTOR CORPORATION, a Delaware corporation (the "Company"),
FLEET NATIONAL BANK, as Co-Agent, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as agent for itself and the Banks (the "Agent") and as letter of
credit issuing bank, and the several financial institutions party to the Credit
Agreement (collectively, the "Banks").
RECITALS
A. The Company, Banks, and Agent are parties to a Credit Agreement
dated as of July 24, 1996, (the "Credit Agreement") pursuant to which the Agent
and the Banks have extended certain credit facilities to the Company.
B. The Company has requested that the Banks agree to certain amendments
of the Credit Agreement.
C. The Banks are willing to amend the Credit Agreement, subject to the
terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
Defined Terms. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
Amendments to Credit Agreement.
Subsection 7.13(c) of the Credit Agreement shall be amended and
restated in its entitety to read as follows:
"(c) at the end of each fiscal quarter after the Closing Date, a ratio
of (I) cash plus the value of cash equivalents (other than cash
equivalents subject to any Lien securing Indebtedness) plus net
accounts receivable plus short term receivables constituting sales tax
refunds due from the State of Minnesota in connection with equipment
purchased for installation in the Company's fabrication facilities
located in the State of Minnesota, to (ii) Consolidated Current
Liabilities of not less than 1:00 to 1:00; provided, however,that
during the period from the Closing Date through December 31, 1997, the
Banks shall permit such ratio to be not less than 0.80 to 1:00 as of
the end of any two fiscal quarters during such period;"
<PAGE> 2
(b) Exhibit C to the Credit Agreement shall be amended at page C-5
thereof by adding the following clause iv) after clause iii) in paragraph 3(a)
on such page (calculating compliance with subsection 7.13(c) of the Credit
Agreement):
"iv) short term State of Minnesota sales tax receivables
____________"
3. Representation and Warranties. The Company hereby represents and
warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is
continuing.
(b) The execution, delivery and performance by the Company of
this Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Amendment constitutes the legal, valid and binding obligations
of the Company, enforceable against it in accordance with its respective terms,
without defense, counterclaim or offset.
(c) All representations and warranties of the Company
contained in the Credit Agreement are true and correct.
(d) The Company is entering into this Amendment on the basis
of its own investigation and for its own reasons, without reliance upon the
Agent and the Banks or any other Person.
4. Effective Date. This Amendment will become effective as
of September 30, 1996 (the "Effective Date"), provided that the
Agent has received from the Company and the Majority Banks a duly executed
original (or, if elected by the Agent, an executed facsimile copy) of this
Amendment.
5. Reservation of Rights. The Company acknowledges and agrees that the
execution and delivery by the Agent and the Banks of this Amendment shall not be
deemed to create a course of dealing or otherwise obligate the Agent or the
Banks to execute similar amendments under the same or similar circumstances in
the future.
6. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants
and provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to such Credit Agreement shall henceforth
refer to the Credit Agreement as amended by this Amendment. This Amendment shall
be deemed incorporated into, and a part of, the Credit Agreement.
2
<PAGE> 3
(b) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and thereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Amendment.
(c) This Amendment shall be governed by and construed in
accordance with the law of the State of California.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of a Bank or the Company shall bind such Bank or the
Company, respectively, with the same force and effect as the delivery of a hard
copy original. Any failure by the Agent to receive the hard copy executed
original of such document shall not diminish the binding effect of receipt of
the facsimile transmitted executed original of such document of the party whose
hard copy page was not received by the Agent.
(e) This Amendment, together with the Credit Agreement,
contains the entire and exclusive agreement of the parties hereto with reference
to the matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 11.01 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the Agent
within 30 Business Days after demand, for reasonable all costs and expenses
(including allocated costs of in-house counsel) incurred in connection with the
development, preparation, negotiation, execution and delivery of this Amendment.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
CYPRESS SEMICONDUCTOR CORPORATION
By:
-------------------------------------
Title:
-------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
-------------------------------------
Title:
-------------------------------------
FLEET NATIONAL BANK, as Co-Agent
By:
-------------------------------------
Title:
-------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank and as Issuing Bank
By:
-------------------------------------
Title:
-------------------------------------
FLEET NATIONAL BANK,
as a Bank
By:
-------------------------------------
Title:
-------------------------------------
BANQUE NATIONALE DE PARIS
By:
-------------------------------------
Title:
-------------------------------------
4
<PAGE> 5
THE SUMITOMO TRUST & BANKING CO.,
LTD., LOS ANGELES AGENCY
By:
-------------------------------------
Title:
-------------------------------------
5
<PAGE> 1
EXHIBIT 4.22
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as
of March 21, 1997, is entered into by and among CYPRESS SEMICONDUCTOR
CORPORATION, a Delaware corporation (the "Company"), FLEET NATIONAL BANK, as
Co-Agent, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for
itself and the Banks (the "Agent") and as letter of credit issuing bank, and
the several financial institutions party to the Credit Agreement (collectively,
the "Banks").
RECITALS
A. The Company, Banks, and Agent are parties to a Credit Agreement
dated as of July 24, 1996, as amended by a First Amendment to Credit Agreement
dated as of October 10, 1996, effective as of September 30, 1996 (as so
amended, the "Credit Agreement") pursuant to which the Agent and the Banks have
extended certain credit facilities to the Company.
B. The Company has requested that the Banks agree to certain
amendments of the Credit Agreement.
C. The Banks are willing to amend the Credit Agreement, subject to
the terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings, if any, assigned to them in the
Credit Agreement.
2. Amendments to Credit Agreement.
(a) The definition of Applicable Margin in Section 1.01
shall be amended and restated in its entirety to read as follows:
"'Applicable Margin' means
(i) with respect to Base Rate Loans, 0%; and
1
<PAGE> 2
(ii) with respect to Offshore Rate Loans, as follows:
(A) 0.45%, if the Facility Utilization is less
than 25%,
(B) 0.525%, if the Facility Utilization is
greater than or equal to 25% and less
than 50%,
(C) 0.60%, if the Facility Utilization is greater
than or equal to 50% and less than 75%, or
(D) 0.70%, if the Facility Utilization is
greater than or equal to 75%;
provided, however, that if at any time the Company's Total
Debt/Capitalization Ratio as reported in the Company's most recent
Compliance Certificate delivered to the Agent and the Banks as
provided in Section 7.02 exceeds 0.35 to 1.00, then 0.10% shall be
added to the Applicable Margin with respect to Offshore Rate Loans,
effective 90 days after the last day of the fiscal year or 45 days
after the last day of the fiscal quarter, as the case may be, to which
such Compliance Certificate relates. For the period from the Closing
Date until the date on which a change in the Total Debt/Capitalization
Ratio becomes effective as provided in the preceding proviso, the
Total Debt/Capitalization Ratio shall be as reported in the Company's
Compliance Certificate delivered to the Agent and the Banks on the
Closing Date."
(b) The first sentence of Subsection 3.08(a) shall be
amended and restated in its entirety to read as follows:
"(a) The Company shall pay to the Agent for the
account of each of the Banks a letter of credit fee with respect to
the Letters of Credit at a rate per annum equal to:
(i) 0.45%, if the Facility Utilization is
less than 25%;
(ii) 0.525%, if the Facility Utilization is
greater than or equal to 25% and less than 50%;
2
<PAGE> 3
(iii) 0.60%, if the Facility Utilization is
greater than or equal to 50% and less than 75%; or
(iv) 0.70%, if the Facility Utilization is
greater than or equal to 75%,
of the average daily maximum amount available to be drawn under
the outstanding Letters of Credit, computed on a 360-day
basis in arrears on the last Business Day of each calendar
quarter based upon Letters of Credit oustanding for that
quarter as calculated by the Agent."
(c) Section 7.12 of the Credit Agreement shall
be amended by deleting the period and inserting the following at the end
thereof:
"; including, for the avoidance of doubt, for the redemption
of the outstanding Convertible Subordinated Notes to the
extent permitted by Section 8.13."
(d) Subsection 7.13(d) of the Credit Agreement shall be
amended and restated in its entirety to read as follows:
"(d) (i) at the end of each fiscal quarter after the
Closing Date through and including the quarter ending December
31, 1996, on a rolling four-quarter basis, a ratio of (x)
earnings before interest income and interest expense and taxes
plus lease expense, to (y) interest expense plus lease expense
plus current maturities of long term debt plus outstanding
Loans and issued and outstanding Letters of Credit hereunder,
of not less than 1.25 to 1.00; and (ii) at the end of each
fiscal quarter after the Closing Date commencing with the
fiscal quarter ending March 31, 1997, on a rolling
four-quarter basis, a ratio of (x) earnings before interest
income and interest expense and taxes plus lease expense, to
(y) interest expense plus lease expense plus current
maturities of long term debt, of not less than 1.25 to 1.00."
(e) Section 8.01 of the Credit Agreement shall be
amended as follows:
(i) The word "and" at the end of Subsection (l)
shall be deleted, the periods at the end of Subsections (m)
3
<PAGE> 4
and (n) shall be deleted and replaced with semi-colons, and the
period at the end of Subsection (o) shall be deleted and replaced
with "; and".
(ii) A new Subsection (p) shall be added which reads
as follows:
"(p) Liens on equipment owned by the Company
or one or more of its Subsidiaries given solely to secure new
financing pursuant to which the present market value of such
equipment plus the present market value of equipment disposed
of in sale and leaseback transactions permitted by Subsection
8.02(h) does not exceed $100,000,000; provided that the amount
of debt secured thereby does not exceed the value of the
equipment subject to the Liens permitted hereby."
(f) Section 8.02 of the Credit Agreement shall be
amended as follows:
(i) The word "and" at the end of Subsection (f)
shall be deleted, and the period at the end of Subsection (g) shall be
deleted and replaced with "; and".
(ii) A new Subsection (h) shall be added which reads
as follows:
"(h) dispositions of equipment made as a
part of sale and leaseback transactions conducted by the
Company or one or more of its subsidiaries pursuant to which
the present market value of such equipment plus the present
market value of equipment subjected to Liens permitted by
Subsection 8.01(p) does not exceed $100,000,000."
(g) Section 8.05 of the Credit Agreement shall be
amended as follows:
(i) The word "and" at the end of
Subsection (c) shall be deleted, and the period at the end of
Subsection (d) shall be deleted and replaced with "; and"".
(ii) A new Subsection (e) shall be added
which reads as follows:
4
<PAGE> 5
"Indebtedness secured by the Permitted Liens which are set
forth in Subsections 8.01 (i), (j), (n), and (p)."
(h) Section 8.13 of the Credit Agreement shall be
amended by deleting the period and adding the following proviso at the end of
the first sentence thereof:
"; and provided further that on or before March 31, 1997, the
Company shall be permitted to redeem for cash the outstanding
Convertible Subordinated Notes for a redemption price of up to
$100,000,000 for which a call was issued on February 24,
1997."
(i) Exhibit C to the Credit Agreement shall be amended
at Schedule 1 thereof by amending and restating such Schedule 1 in its entirety
to read as set forth in Schedule 1 attached hereto.
3. Representations and Warranties. The Company hereby
represents and warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is
continuing.
(b) The execution, delivery and performance by the
Company of this Amendment have been duly authorized by all necessary corporate
and other action and do not and will not require any registration with, consent
or approval of, notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Amendment constitutes the legal, valid and binding obligations
of the Company, enforceable against it in accordance with its respective terms,
without defense, counterclaim or offset.
All representations and warranties of the Company contained
in the Credit Agreement are in all material respects true and correct.
(d) The Company is entering into this Amendment on the
basis of its own investigation and for its own reasons, without reliance upon
the Agent and the Banks or any other Person.
4. Effective Date. This Amendment will become effective as of
March 21, 1997 (the "Effective Date"), provided that (a) the
5
<PAGE> 6
Agent has received from the Company and the Majority Banks a duly executed
original (or, if elected by the Agent, an executed facsimile copy) of this
Amendment, (b) the Agent has received payment of an amendment fee equal to
0.10% of the aggregate Commitments for the benefit of the Banks each in
accordance with its Pro Rata Share, and (c) BofA shall have received the
Arrangement Fee to be paid pursuant to that certain Fee Letter dated March 19,
1997.
5. Reservation of Rights. The Company acknowledges and
agrees that the execution and delivery by the Agent and the Banks of this
Amendment shall not be deemed to create a course of dealing or otherwise
obligate the Agent or the Banks to execute similar amendments under the same or
similar circumstances in the future.
6. Miscellaneous.
(a) Except as herein expressly amended, all terms,
covenants and provisions of the Credit Agreement are and shall remain in full
force and effect and all references therein to such Credit Agreement shall
henceforth refer to the Credit Agreement as amended by this Amendment. This
Amendment shall be deemed incorporated into, and a part of, the Credit
Agreement.
(b) This Amendment shall be binding upon and inure to
the benefit of the parties hereto and thereto and their respective successors
and assigns. No third party beneficiaries are intended in connection with this
Amendment.
(c) This Amendment shall be governed by and construed
in accordance with the law of the State of California.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each
of the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of a Bank or the Company shall bind such Bank or the
Company, respectively, with the same force and effect as the delivery of a hard
copy
6
<PAGE> 7
original. Any failure by the Agent to receive the hard copy executed original
of such document shall not diminish the binding effect of receipt of the
facsimile transmitted executed original of such document of the party whose
hard copy page was not received by the Agent.
(e) This Amendment, together with the Credit Agreement,
contains the entire and exclusive agreement of the parties hereto with
reference to the matters discussed herein and therein. This Amendment
supersedes all prior drafts and communications with respect thereto. This
Amendment may not be amended except in accordance with the provisions of
Section 11.01 of the Credit Agreement.
(f) If any term or provision of this Amendment shall be
deemed prohibited by or invalid under any applicable law, such provision shall
be invalidated without affecting the remaining provisions of this Amendment or
the Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the
Agent within 30 Business Days after demand, for all reasonable costs and
expenses (including allocated costs of in-house counsel) incurred in connection
with the development, preparation, negotiation, execution and delivery of this
Amendment.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
CYPRESS SEMICONDUCTOR CORPORATION
By: __________________________
Title: _______________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Agent
By: _________________________
Title: ______________________
FLEET NATIONAL BANK, as Co-Agent
By: _________________________
Title: ______________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank and as Issuing Bank
By: _________________________
Title: ______________________
FLEET NATIONAL BANK,
as a Bank
8
<PAGE> 9
By: _________________________
Title: ______________________
BANQUE NATIONALE DE PARIS
By: _________________________
Title: ______________________
By: _________________________
Title: ______________________
THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By: _________________________
Title: ______________________
9
<PAGE> 1
EXHIBIT 4.3
CONFIDENTIAL
February 7, 1997
QuickLogic Corporation
1277 Orleans Drive
Sunnyvale, CA 94089-1138
Attention: E. Thomas Hart, President and Chief Executive Officer
LETTER OF INTENT
Dear Mr. Hart:
This Letter of Intent, when executed by Cypress Semiconductor
Corporation, a Delaware corporation ("Cypress") and QuickLogic Corporation, a
California corporation ("QuickLogic") will constitute a binding letter of
intent which sets forth the terms in which the parties propose to terminate the
Technical Transfer, Joint Development License and Foundry Supply Agreement
dated October 2, 1992 (the "Existing Agreement") and enter into a new foundry
agreement and license agreement (collectively, the "Transaction"). The rights
and obligations of the parties with respect to the Transaction will be set
forth in definitive agreements to be negotiated in good faith by the parties
and will include customary terms and conditions as further specified in Section
18.
1. Agreement Termination. At the closing (the "Closing"), the
Existing Agreement will terminate and in connection therewith Cypress will
relinquish to QuickLogic all of the tangible and intangible rights and
intellectual property rights (collectively, the "Rights") to QuickLogic's
antifuse field programmable gate array ("FPGA") technology. In connection with
the Transaction, QuickLogic will acquire all inventories of FPGA products and
the other assets as listed on Exhibit A. Cypress will use its reasonable best
efforts to transfer to QuickLogic all purchase orders from customers for FPGA
products as expeditiously as possible and will submit a plan to effect such
transition, which plan must be approved by QuickLogic prior to the Closing.
QuickLogic will assume as of the closing date (the "Closing Date") the
obligations set forth in Exhibit B (the "Obligations") (i) of Cypress under
purchase orders to sell FPGA products to Cypress' customers which are unfilled
as of the Closing to the extent transferable and (ii) which arise after the
Closing Date in connection with the performance by QuickLogic of such
transferred purchase orders; provided, that all
-1-
<PAGE> 2
such orders shall not include any responsibility for any returns of product
shipped by Cypress, and provided further, if Cypress has received payment for
the Obligations, it shall remit such payments to QuickLogic. Cypress will pay
the reasonable costs, approved in advance by Cypress, incurred for test and
finish rework required on the inventory transferred to QuickLogic to make it
salable by QuickLogic. QuickLogic will sell to Cypress FPGA products to the
extent needed by Cypress to fill purchase orders received by Cypress and which
cannot be transferred to QuickLogic because of customer demands. For such
sales, Cypress will receive a handling fee for the six-month period following
the Closing Date equal to a percentage of the sales price (22.5% for the first
three months, 10% for the second three months), plus reimbursement of any test
and finish costs incurred by Cypress.
2. Consideration. The consideration for the Transaction will
comprise: (i) $4.5 million in cash, which is already in Cypress's possession
(ii) a promissory note (the "Promissory Note") for certain inventory as set
forth below in paragraph 3, (iii) the issuance of 18,226,716 shares (the
"Shares") of Common Stock of QuickLogic as set forth below in paragraph 4 below
and (iv) the assumption of the Obligations.
3. Promissory Note. QuickLogic shall issue Cypress a Promissory
Note in the amount of $___________ for all of the finished and work-in-process
inventory related to FPGA products, which represents in the aggregate
QuickLogic's standard cost of such finished and work-in-process inventory.
The Promissory Note shall be non-interest bearing and shall be repayable in
nine (9) equal monthly installments beginning one (1) month following the
Closing. The Promissory Note may be prepaid at any time without penalty.
4. Delivery of Capital Stock. QuickLogic shall represent that the
Shares after delivery equal twenty percent (20%) of the outstanding capital
stock of QuickLogic on a fully-diluted basis, which shall include all options,
warrants and other rights to acquire QuickLogic's capital stock outstanding on
the date hereof (other than any issuances to Cypress hereunder). The Shares
shall be delivered to Cypress by QuickLogic as follows: (a) in the event
QuickLogic does not complete an initial public offering ("IPO") by July 1,
1997, QuickLogic shall deliver all of the Shares to Cypress as Common Stock; or
(b) in the event QuickLogic completes an IPO by July 1, 1997, QuickLogic shall
deliver to Cypress in connection with the IPO such number of Shares that may be
registered for resale on behalf of Cypress in the IPO, and the balance of the
Shares shall be delivered upon the lapse of the Lockup Period (defined below)
following the effective date of the IPO of QuickLogic; provided, in the event
QuickLogic undertakes a registered public offering of its Common Stock
following an IPO (a "Follow-on Offering") prior to the lapse of the lockup
period
-2-
<PAGE> 3
agreed to by QuickLogic's directors, officers and more than 1% shareholders for
the IPO (the "Lockup Period"), QuickLogic shall deliver such number of Shares
that may be registered for resale on behalf of Cypress in the Follow-on
Offering, and the remaining balance of Shares shall be delivered to Cypress
upon the expiration of the lock-up agreements executed in connection with such
Follow-on Offering. In the event that the Lockup Period provides for a set
number of days where the Lockup Period would expire in a period where the
Company's directors and officers are prevented from trading because of the set
"blackout" period between earnings releases provided in QuickLogic's insider
trading policy, then the directors, officers and more than 1% shareholders
shall agree to a Lockup Period that does not expire until the date that trading
can commence under QuickLogic's insider trading policy. Any early releases of
any lockup shall include the pro-rata release of Shares on based on the total
number of shares that are locked-up, and such early-released Shares shall not,
at the time of such early release, be subject to any blackout provision on
Cypress's released Shares, which shall be registered as provided in Section 5.
5. Registration Rights. The Fifth Amended and Restated
Registration Rights Agreement of QuickLogic dated November 27, 1996 (the
"Registration Rights Agreement") shall be amended to provided that the Shares
will be deemed "Registrable Securities" (as defined in the Registration
Agreement), the effect of which includes the grant to Cypress of piggyback
registration rights with respect to the Shares in the same manner as the other
parties to the agreement, such that Cypress shall have the right to sell the
Shares as part of any public equity stock offering undertaken by QuickLogic.
In addition, in connection with any public equity stock offering undertaken by
QuickLogic, Cypress will have the right to include such number of shares as
shall represent one-third (1/3) of the total number of shares to be registered
in such offering. In addition, in any Follow-on Offering Cypress shall be
entitled to cause such number of Shares as shall represent one-third (1/3) of
the total number of shares to be registered in such offering. QuickLogic shall
use its best efforts to promptly register all of the issuable or issued but
unsold Shares of Cypress pursuant to a shelf registration statement to be filed
at least forty-five (45) days before, and to be effective concurrent with, the
expiration of the Lockup Period (including any extension to such period in the
event of a Follow-on Offering). QuickLogic shall instruct its transfer agent
to deliver the Shares deliverable at the expiration of the Lockup Period at
least sixty (60) days prior to such date. QuickLogic shall maintain the
effectiveness of such registration statement until the earlier of the date all
Shares are sold or three (3) years following the date of the Closing or such
date as Cypress is able to sell all of its Shares it holds pursuant to Rule 144
in a three-month period. QuickLogic may suspend Cypress' ability to sell under
such registration statement (i) during the period from expiration of the Lockup
Period until one year from the
-3-
<PAGE> 4
effective date of the IPO for the last four weeks of each fiscal quarter until
the day after the end of the set "blackout" period with respect to such fiscal
quarter's earnings release provided in QuickLogic's insider trading policy and
(ii) beginning one year after the effective date of the IPO for up to
forty-five (45) days if such registration would be detrimental to QuickLogic
based upon the good faith determination of its Board of Directors; provided,
QuickLogic's right to suspend use of such registration (a) shall terminate
earlier upon the public disclosure of such material information (by a party
other than Cypress) underlying the need for suspension, and (b) once exercised,
may not be again exercised for one hundred twenty (120) days. Cypress shall
also have the right to an additional demand registration that is in addition to
the demand registration rights provided for in the Registration Rights
Agreement, which demand may include any or all of the Shares and any or all of
other shares of QuickLogic common stock owned by Cypress. QuickLogic shall pay
the "Registration Expenses" (as defined in the Registration Rights Agreements),
and Cypress shall be responsible for its "Selling Expenses" (as defined in the
Registration Rights Agreements) in connection with any piggyback or demand
registration other than underwriting discounts and commissions.
6. Shareholders Agreement. Cypress is currently a party to the
Fifth Amended and Restated Shareholders Agreement of QuickLogic dated November
27, 1996 (the "Shareholders Agreement"). The Shareholders Agreement provides
for the right to participate in future financings of QuickLogic (subject to
certain exceptions) based upon a party's holdings of Capital Stock (as defined
in the Shareholders Agreement, and which includes both Preferred Stock and
Common Stock), a right of co-sale with respect to transfers by Founders (as
defined in the Shareholders Agreement) and the obligation to vote for certain
designees to the Board. The delivery of the Shares shall be assumed for
purposes of all calculations of the right of participation and the co-sale
right in the Shareholders Agreement.
7. Closing Conditions. The Transaction will be subject to
certain closing conditions including (i) entering into a definitive agreement
(the "Transaction Agreement") as to all of the essential terms of the
Transaction, (ii) entering into a definitive Wafer Foundry Agreement, based
upon the term sheet attached here to as Exhibit B, and a License Agreement
based upon the term sheet attached hereto as Exhibit C, (iii) terminating the
Technical Transfer, Joint Development License and Foundry Supply Agreement
dated October 2, 1992, (iv) entering into the Registration Rights Agreement and
any appropriate ancillary agreements, and (v) any necessary board and
shareholder approvals and (vi) third party or governmental consents have been
obtained, including Hart-Scott-Rodino clearance if required.
-4-
<PAGE> 5
8. Due Diligence. Each party agrees to cooperate with the other
party's due diligence investigation and to provide the other party and its
representatives with prompt and reasonable access to key employees and to
books, records, contracts and other information (the "Diligence Information").
9. Confidentiality. Each party will use the Due Diligence
Information solely for the purpose of their respective due diligence
investigation, and each party and its affiliates, directors, officers,
employees, advisors, and agents (the "Representatives") will keep the Due
Diligence Information strictly confidential. Each party will disclose the Due
Diligence Information only to those Representatives who need to know such
information for the purpose of consummating the Transaction. Each party agrees
to be responsible for any breach of this paragraph by any of its
Representatives. In the event the Transaction is not consummated, each party
will return to the other any materials containing Due Diligence Information, or
will certify in writing that all such materials or copies of such materials
have been destroyed. Neither party will use any due Diligence Information to
compete with the other party as their businesses are constituted after the
Transaction has been consummated.
10. Non-solicitation. Each party agrees not to solicit or recruit
the employees of the other party's business for twelve (12) months following
the Closing Date or the date the parties terminate negotiations, as applicable.
11. Non-competition. Cypress shall not compete with QuickLogic in
the manufacturing, marketing or selling of antifuse FPGAs or pin-compatible
PASIC 1 or PASIC 2 products (specifically, 1K, 2K, 3K, 4K, 5K, 7K, 8K and 9K)
for a period of ten (10) years following the Closing Date; provided that the
Transaction Agreement will provide that Cypress may continue to sell antifuse
FPGA products to certain customers until QuickLogic has been qualified to
manufacture and sell products to such customers in accordance with Section 1 of
this Letter of Intent.
12. Public Announcement. All press releases and public
announcements relating to the transaction contemplated by this letter of intent
will be mutually agreed to by Cypress and QuickLogic, provided that either
party may make any public announcement if required by law including, without
limitation, pursuant to the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, in connection with QuickLogic's
initial public offering.
-5-
<PAGE> 6
13. Expenses. Each party will pay all of its expenses, including
legal fees, incurred in connection with the Transaction, whether or not the
Transaction is consummated.
14. Notices. All notices and other communications hereunder shall
be in writing and shall be furnished by hand delivery or by facsimile with a
confirming copy by mail or registered or certified mail to the parties at the
addresses set forth below. Any such notice shall be deemed duly given upon the
date it is delivered to the address shown below, addressed as follows:
If to QuickLogic:
1277 Orleans Drive
Sunnyvale, CA 94089-1138
Fax: (408) 990-4040
Attention: E. Thomas Hart
If to Cypress:
3901 N. First Street
San Jose, CA 95134-1599
Fax: (408) 943-2796
Attention T.J. Rodgers
The addresses set forth above may be changed by either party
upon furnishing to the other party a notice of change of address in accordance
with the terms of this paragraph.
15. Counterparts. This letter of intent may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
16. Severability. If any term, provision, covenant or restriction
of this letter of intent is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this letter of intent shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
-6-
<PAGE> 7
17. Entire Agreement. This letter of intent constitutes the
entire agreement between QuickLogic and Cypress, with respect to the matters
covered herein and supersedes any prior negotiations, understandings or
agreements with respect to the matters contemplated hereby, specifically
including all prior versions of this letter of intent.
18. Binding Effect; Definitive Documentation. The purpose of this
letter of intent is to set forth the agreements reached by the parties
regarding the Transaction. This letter of intent is intended to create binding
obligations of the parties as to the matters set forth herein. The parties
shall negotiate in good faith to complete and sign definitive agreements
including those identified in paragraph 8 hereof (collectively, "Definitive
Agreements") based on the terms set forth in this letter of intent. The
Definitive Agreements shall include such representations, warranties and
covenants as are customary in a transaction of this nature, including, without
limitation, representations regarding the status of the assets and the
inventory to be transferred hereunder, the provisions for returns and/or
warranties and appropriate cross-indemnities regarding the conduct of the
business before and after the Closing. In this regard, Cypress agrees in good
faith to use its reasonable best efforts to maintain intact all of its current
business relationships relating to the FPGA technology including, without
limitation, all customer relationships prior to the Closing. Cypress also
agrees not to make any material changes to its FPGA business without the prior
written consent of Quicklogic. To the extent a party fails to act in good
faith and consummate the transaction, the non-breaching party shall be entitled
to obtain injunctive relief to enforce the terms of this letter of intent.
19. Termination. This letter of intent may be terminated by a
party in the event the other party fails to negotiate in good faith and the
parties have failed to enter into the Definitive Agreements by March 1, 1997.
Notwithstanding a termination pursuant to this paragraph, the provisions of
paragraphs 9, 10, 12, 13, 17, 18 and 20 herein shall survive such termination
and each party shall remain liable for any breach prior to termination of this
letter of intent.
21. Governing Law. This letter of intent shall be governed by and
construed under the laws of the State of California as applied to contracts
entered into solely between residents of and to be performed entirely in such
state.
22. Joint Preparation. This letter of intent has been jointly
prepared by the parties and the provisions hereof shall not be construed more
strictly against either party hereto as a result of its participation in such
preparation.
-7-
<PAGE> 8
If you are in agreement with the terms of this letter of intent,
please sign in the space provided below and return a signed copy to me. If we
do not receive a signed copy of this letter on or before February 9, 1997, we
will assume that you have no further interest in pursuing this transaction.
Upon receipt of a signed copy of this letter of intent, we will proceed with
our plans for consummating the Transaction in a timely manner.
Sincerely,
CYPRESS SEMICONDUCTOR CORPORATION
By: ____________________________
QUICKLOGIC CORPORATION
By: _____________________
Dated: February __, 1997
-8-
<PAGE> 9
EXHIBIT A
Asset List
All product inventory including work in process and finished goods excluding
wafers in process and PCI bus devises. The purchase price for this inventory
will be based on QuickLogic standards as of 12/31/96. The aggregated cost will
be discounted by $1,000,000. Such inventory will be transferred to QuickLogic
in accordance with the customer transition plan agreed upon between QuickLogic
and Cypress, and in any event two weeks after the Closing Date. Cypress will
hold inventory to the extent necessary to fulfill purchase orders that can't be
transferred to QuickLogic. Remaining inventory shall be transferred 90 and 180
days after the Closing Date.
All raw materials related to FPGA products at the price paid by Cypress.
Equipment utilized for FPGA products at book value if capitalized and at a
negotiated price for items that were expensed.
<PAGE> 1
EXHIBIT 10.1
April 1, 1996
Mr. Fred Bialek
200 Winding Way
Woodside, CA 94062
Dear Fred:
Since your prior consulting agreement terminated April 1, 1996, this will set
forth the current terms and conditions of your consulting agreement with
Cypress (the "Company").
1) You shall provide consulting services to perform the Company's Board
of Directors duties, division and subsidiary duties, and whatever
mergers and acquisitions activity that the Company's management asks
of you until this agreement is terminated. You are expected to work
generally on your own and to employ your own methods and to work the
hours and schedule necessary to complete the services. You will do
most of your work out of your own office, but when necessary, the
Company will provide an office space, other facilities and a phone for
your use.
2) You may provide your consulting services to any non-related Company
entity with the exception of a direct competitor to the Company.
3) In return for the services listed above and until this agreement is
terminated, the Company shall compensate you as follows:
a) You shall receive the same standard monetary compensation as
the outside directors of the Company's Board of Directors.
b) You shall be granted stock options consistent with those
granted to the outside directors of the Company's Board of
Directors. You will be granted a nonstatutory option to
purchase 20,000 shares on May 29th of each year, exercisable at
the fair market value on the date of grant and vesting on a
date four years after the date of grant. If the resolution
Number 2 put forth to the stockholders for the May 3, 1996,
stockholder's meeting is approved, the vesting of these shares
will be 5 years at the rate of 20% per year.
c) You shall receive an annualized fixed retainer for your
services of $284,160, payable on the first day of each month.
d) You shall be reimbursed for your out-of-pocket business
expenses for travel, lodging, phone and administrative support
upon receipt of invoice.
4) This agreement is valid until April 1, 1997, unless terminated by
either party with 30 days written notice. This agreement may be
extended for one-year periods
<PAGE> 2
(subject to a 30-day right to terminate) only by an Extension to
Consulting Agreement in the form of Exhibit A signed by you and
Cypress.
Fred Bialek
April 1, 1996
Page 2
5) This agreement supersedes all prior consulting agreements, which shall
now be deemed terminated.
6) In carrying out services under this agreement, you shall be and act as
an independent contractor, and shall be subject to the Company's
direction only as to specific areas that the Company desires your
services and advice.
Please indicate your acceptance of this agreement by signing a copy and
returning it to me.
Sincerely,
___________________________________________
T.J. Rodgers
President and CEO
Cypress Semiconductor Corporation
I accept the terms and conditions of this agreement.
__________________________________ _________________________
Fred Bialek Dated
<PAGE> 3
Fred Bialek
April 1, 1996
Page 3
Exhibit A
Extension to Consulting Agreement
We agree to extend the Consulting Agreement dated April 1, 1996 for an
additional year from April 1, 199___ to April ___, 199___.
As of this extension, your annualized fixed retainer in Section 3b) shall be $
_______________.
Cypress Semiconductor Corporation
By:________________________________________
Dated:____________________________
Fred Bialek
By:________________________________________
Dated:____________________________
<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
Cypress Semiconductor Round Rock, Inc. . . . . . . . . . . . . . . . . . . . . . . Delaware
Cypress Export, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Barbados
Cypress Investment Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Cypress Semiconductor International, Inc. . . . . . . . . . . . . . . . . . . . . Delaware
Cypress Semiconductor SARL . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Cypress Semiconductor GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
Cypress Semiconductor India Private Limited. . . . . . . . . . . . . . . . . . . . India
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 Semiconductor Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
Cypress Semiconductor Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . Korea
Cypress Semiconductor Philippines Inc. (CSPI) . . . . . . . . . . . . . . . . . . Philippines
Cyland Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Philippines
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (No. 33-54637, 33-57499, 33-59153 and No. 333-535) of
our report dated January 20, 1997, except as to Note 8, which is as of February
25, 1997, appearing on page 35 of Cypress Semiconductor Corporation Annual
Report on Form 10-K for the year ended December 30, 1996.
PRICE WATERHOUSE LLP
San Jose, California
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1996
<PERIOD-START> JAN-02-1996
<PERIOD-END> DEC-30-1996
<CASH> 20,119
<SECURITIES> 73,667
<RECEIVABLES> 71,440
<ALLOWANCES> 3,887
<INVENTORY> 53,107
<CURRENT-ASSETS> 281,412
<PP&E> 732,399
<DEPRECIATION> 294,833
<TOTAL-ASSETS> 794,047
<CURRENT-LIABILITIES> 155,406
<BONDS> 98,241
0
0
<COMMON> 914
<OTHER-SE> 510,746
<TOTAL-LIABILITY-AND-EQUITY> 794,047
<SALES> 528,385
<TOTAL-REVENUES> 528,385
<CGS> 305,174
<TOTAL-COSTS> 305,174
<OTHER-EXPENSES> 84,334
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,895
<INCOME-PRETAX> 83,505
<INCOME-TAX> 30,476
<INCOME-CONTINUING> 53,029
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,029
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.62
</TABLE>
