<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 1998
REGISTRATION NO. 333-42829
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CYPRESS SEMICONDUCTOR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 94-2885898
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
3901 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95134-1599
(408) 943-2600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES)
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T.J. RODGERS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CYPRESS SEMICONDUCTOR CORPORATION
3901 NORTH FIRST STREET
SAN JOSE, CALIFORNIA 95134-1599
(408) 943-2600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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Copies to:
JOHN A. FORE, ESQ.
WILSON SONSINI GOODRICH & ROSATI
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94301
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
CYPRESS SEMICONDUCTOR CORPORATION
$175,000,000 6% CONVERTIBLE SUBORDINATED NOTES DUE 2002
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
This Prospectus relates to $175,000,000 aggregate principal amount of 6%
Convertible Subordinated Notes due 2002 (the "Notes") of Cypress Semiconductor
Corporation ("Cypress" or the "Company") and the shares of Common Stock, par
value $.01 per share (the "Common Stock"), of the Company issuable upon the
conversion of the Notes (the "Conversion Shares"). The Notes and the Conversion
Shares may be offered from time to time for the accounts of the holders named
herein (the "Selling Securityholders").
The Notes are convertible at the option of the holder into shares of
Common Stock of the Company, unless previously redeemed or repurchased, at any
time prior to maturity, at a conversion price of $23.625 per share (equivalent
to a conversion rate of approximately 42.33 shares per $1,000 principal amount
of Notes), subject to adjustment under certain circumstances. Interest on the
Notes is payable semi-annually in arrears on April 1 and October 1 of each year,
commencing on April 1, 1998.
The Notes are unsecured general obligations of the Company and are
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined). See "Description of Notes--Subordination." The Notes will mature
on October 1, 2002, and may be redeemed, at the option of the Company, in whole
or in part, at any time on or after October 3, 2000 at the redemption prices set
forth in this Prospectus plus accrued interest. See "Description of Notes --
Redemption -- Optional Redemption." The Notes are also redeemable by the Company
in the event of certain developments involving withholding taxes of the United
States. See "Description of Notes -- Redemption -- Redemption for Taxation
Reasons." In the event of a Fundamental Change (as defined), each Holder of
Notes may require the Company to repurchase its Notes, in whole or in part, for
cash, at the repurchase prices set forth in this Prospectus plus accrued
interest. See "Description of Notes -- Repurchase at Option of Holders Upon a
Fundamental Change."
The Notes and the Conversion Shares may be offered by the Selling
Securityholders from time to time in transactions (which may include block
transactions in the case of the Conversion Shares) on any exchange or market on
which such securities are listed or quoted, as applicable, in negotiated
transactions, through a combination of such methods of sale, or otherwise, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices. The
Selling Securityholders may effect such transactions by selling the Notes or
Conversion Shares directly or to or through broker-dealers, who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Notes or Conversion Shares
for whom such broker-dealers may act as agents or to whom they may sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). The Company will not receive any of the
proceeds from the sale of the Notes or Conversion Shares by the Selling
Securityholders. The Company has agreed to pay all expenses incident to the
offer and sale of the Notes and Conversion Shares offered by the Selling
Securityholders hereby, except that the Selling Securityholders will pay all
underwriting discounts and selling commissions, if any. See "Plan of
Distribution."
The Notes have been designated for trading on the Portal Market. Notes
sold pursuant to this Prospectus will not remain eligible for trading on the
Portal Market. The Common Stock is traded on the New York Stock Exchange under
the symbol "CY."
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THE NOTES AND THE COMMON STOCK OFFERED HEREBY INVOLVE A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is March 17, 1998
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements, and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy and information statements, and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C., as
well as the regional offices of the Commission located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois, and 7 World Trade Center,
Suite 1300, New York, New York. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a World
Wide Web site that contains reports, proxy and information statements, and other
information that are filed through the Commission's Electronic Data Gathering,
Analysis and Retrieval System. This Web site can be accessed at
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Notes and Conversion Shares offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company, the Notes and the Conversion Shares,
reference is made to the Registration Statement and the exhibits and schedules
thereto. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. Copies of the Registration Statement, including all
exhibits thereto, may be obtained from the Commission's principal office in
Washington, D.C. upon payment of the fees prescribed by the Commission, or may
be examined without charge at the offices of the Commission described above.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the Commission are hereby
incorporated by reference into this Prospectus: (i) the Company's Annual Report
on Form 10-K for the fiscal year ended December 30, 1996, (ii) the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June 30,
1997, and September 29, 1997, (iii) the Company's Current Reports on Form 8-K
dated September 26, 1997, December 19, 1997, January 29, 1998 and March 16,
1998; (iv) the Company's Current Report on Form 8-K/A filed February 3, 1998 and
(v) the Company's Form 8-A filed May 12, 1986. All documents subsequently filed
by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
prior to the termination of the offering to which this Prospectus relates shall
be deemed to be incorporated by reference into this Prospectus and to be part of
this Prospectus from the date of filing thereof.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated herein modifies or replaces such statement. Any statement so
modified or superseded shall not be deemed, in its unmodified form, to
constitute a part of this Prospectus or such Registration Statement. The Company
will provide without charge to each person to whom a copy of the Prospectus has
been delivered, and who makes a written or oral request, a copy of any and all
of the foregoing documents incorporated by reference in the Registration
Statement (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
submitted in writing or by telephone to Chief Financial Officer, Cypress
Semiconductor Corporation, 3901 North First Street, San Jose, California 95134,
Telephone: (408) 943-2600.
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THE COMPANY
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. On March 9,
1998, the Company announced a restructuring plan for which it will incur charges
in the quarter ended March 30, 1998, as discussed in the Company's Current
Report on Form 8-K dated March 16, 1998, which document is incorporated by
reference into this Prospectus.
The Company was incorporated in California in December 1982. In February
1987, the Company reincorporated in Delaware. The Company's principal executive
offices are located at 3901 North First Street, San Jose, California 95134.
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THE OFFERING
<TABLE>
<S> <C>
Securities Offered............ $175,000,000 principal amount of 6% Convertible Subordinated Notes due
2002 (the "Notes").
Interest Payment Dates........ October 1 and April 1, commencing April 1, 1998.
Conversion.................... The Notes are convertible into Common Stock at any time prior to the close
of business on the maturity date, unless previously redeemed or repurchased,
at a conversion price of $23.625 per share (equivalent to a conversion rate
of approximately 42.33 shares per $1,000 principal amount of Notes),
subject to adjustment.
Subordination................. The Notes are subordinated in right of payment to all existing and future
Senior Indebtedness (as defined). The Notes are also structurally
subordinated to the liabilities, including trade payables, of the Company's
subsidiaries. As of September 29, 1997, there was approximately $172.1
million of indebtedness of the Company outstanding that constituted Senior
Indebtedness (including $117.3 million related to certain operating lease
commitments, related first-loss clauses and certain foreign exchange
contracts) and there was approximately $50.8 million of indebtedness and
other liabilities of subsidiaries of the Company outstanding (excluding
intercompany liabilities and indebtedness included as Senior Indebtedness
as a result of guarantees by the Company) to which the Notes are structurally
subordinated. The Indenture does not restrict the Company from incurring
additional Senior Indebtedness or the Company or its subsidiaries from
incurring other indebtedness and liabilities.
Optional Redemption........... Except as described below under "Additional Amounts and Redemption for
Taxation Reasons," the Notes are not redeemable by the Company prior to
October 3, 2000. On or after October 3, 2000, the Notes may be redeemed
at the option of the Company in whole, or from time to time, in part, at the
redemption prices set forth herein plus accrued interest.
Additional Amounts and
Redemption for Taxation
Reasons....................... The Company will pay Additional Amounts (as defined), subject to certain
exceptions, in order that the Non-U.S. Holders (as defined) of Notes receive
the full amount of the principal, premium, if any, and interest specified
therein (including any amount payable upon a repurchase of the Notes as
described immediately below under "Repurchase at Option of Holders Upon
a Fundamental Change") without deduction for or on account of withholding
or other taxes of the United States. In the event that the Company must pay
such Additional Amounts as a result of a change in law, the affected Notes
will be redeemable at the option of the Company, as a whole but not in part,
at 100% of the principal amount thereof, plus any accrued interest and any
Additional Amounts then payable.
</TABLE>
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<TABLE>
<S> <C>
Repurchase at Option of
Holders Upon a Fundamental
Change........................ In the event of a Fundamental Change (as defined) each Holder of Notes may
require the Company to repurchase its Notes, in whole or in part, for cash at
the repurchase prices set forth herein, subject to adjustment in certain events
as described herein, plus accrued interest.
Use of Proceeds............... The Company will not receive any of the proceeds from the sale by the
Selling Securityholders of the Notes or the Conversion Shares.
</TABLE>
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RISK FACTORS
This Prospectus contains or incorporates by reference forward-looking statements
that involve risks and uncertainties. The statements contained or incorporated
by reference in this Prospectus that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, including, but not limited to, statements as to the future operating
results and business plans of the Company, that involve risks and uncertainties.
The Company's actual results could differ materially from those discussed
herein. Factors that could cause or contribute to such differences 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, slower than
expected growth in demand for semiconductor products, the availability and
extent of utilization of manufacturing capacity, fluctuation in manufacturing
yields, price erosion, competitive factors, the successful development, timing
and market acceptance of new product introductions, product obsolescence, costs
associated with future litigation, costs associated with protecting the
Company's intellectual property, the successful ramp up of the Company's
Philippines back-end manufacturing plant, and the ability to develop and
implement new technologies, including the continued transition to full
commercial production of the Company's new 0.5, 0.35 and 0.25 micron processes,
the impact of the Company's recently announced restructuring, as well as those
discussed elsewhere in this Prospectus and in any documents incorporated herein
by reference. In addition to the other information in this Prospectus and in any
documents incorporated herein by reference, the following factors should be
considered carefully in evaluating an investment in the Notes.
FLUCTUATION IN OPERATING RESULTS
The Company's quarterly and annual results of operations are affected by a
variety of factors that could materially and adversely affect revenues, gross
profit and income from operations. These factors include, among others, demand
for the Company's products; changes in product mix; competitive pricing pressure
(particularly in the static RAM market); fluctuations in manufacturing yields;
cost and availability of raw materials; unanticipated delays or problems in the
introduction or performance of the Company's new products; the Company's ability
to introduce new products that meet customer requirements; market acceptance of
the Company's products; product introduction by competitors; availability and
extent of utilization of manufacturing capacity; product obsolescence; the
successful ramp up of the Company's Philippines back-end manufacturing plant,
resolution of Alphatec's financial situation; the ability to develop and
implement new technologies, including the transition of the Company's new 0.5,
0.35 and 0.25 micron process and continued migration to smaller geometries; the
conversion and upgrade of the Company's existing equipment base to these
technologies including transfer of equipment and capability among sites; the
conversion and upgrade of the existing equipment set from 6-inch to 8-inch
capability; the level of expenditures for research and development and sales,
general and administrative functions of the Company; costs associated with
future litigation; and costs associated with protecting the Company's
intellectual property. Any one or more of these factors could result in the
Company failing to achieve its expectations as to future revenues, gross profit
and income from operations. Additionally, risks inherent in the cyclical nature
of the semiconductor industry may cause the Company's quarterly and annual
results of operations to vary significantly. Moreover, as is common in the
semiconductor industry, the Company frequently ships more products in the third
month of each quarter than in either of the first two months of the quarter, and
shipments in the third month are higher at the end of that month. The
concentration of sales in the last month of the quarter contributes to the
difficulty in predicting the Company's quarterly revenues and results of
operations.
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Since the Company recognizes revenues from sales to domestic distributors only
upon the distributors' sale to end customers, the Company is highly dependent on
the accuracy of distributors' estimates on their resale, which could be
materially different from the actual amounts finally reported. These factors
also contribute to the difficulty in predicting the Company's quarterly revenue
and results of operations, particularly in the last month of the quarter.
On March 9, 1998, the Company announced that for the quarter ended March 30,
1998, revenues would drop by 4%-9% from the quarter ended December 29, 1997 and
EPS to be a loss in $0.06-$0.08 range, prior to the restructuring and other
charges.
CYCLICAL NATURE OF SEMICONDUCTOR INDUSTRY
The semiconductor industry has historically been characterized by wide
fluctuations in product supply and demand. From time to time, the industry has
also experienced significant downturns, often in connection with, or in
anticipation of, maturing product cycles and declines in general economic
conditions. These downturns have been characterized by diminished product
demand, production over-capacity and subsequent accelerated erosion of average
selling prices ("ASPs"). In some cases, such downturns have lasted more than a
year. In the past, the Company's operating results have been adversely affected
by industry-wide fluctuations in the demand for semiconductors, which resulted
in under-utilization of the Company's manufacturing capacity. The Company's
results from operations for 1996 and for the first nine months of 1997 were
adversely affected as a result of a significant downturn in the semiconductor
industry, which particularly affected memory related products. A continuation of
these conditions would materially and adversely affect the Company's business,
financial condition and results of operations. In addition, the Company's
business, financial condition and results of operations could be materially and
adversely affected by industry-wide fluctuations in the future.
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DEPENDENCE ON GROWTH OF END MARKETS
The Company's continued success will depend in large part on the continued
growth of various electronics industries that use semiconductors, including data
communications and telecommunications equipment, computers and computer related
peripherals, automotive electronics, industrial controls, customer electronics
equipment and military equipment. A significant portion of the products across
the Company's product divisions are incorporated into data communications and
telecommunication end-products. Any decline in the demand for networking
applications, mass storage, telecommunications, cellular base stations, cellular
handsets and other personal communication devices which incorporate the
Company's products could adversely affect the Company's business, financial
condition and operating results. Certain of the Company's products, including
Universal Serial Bus ("USB") micro-controllers, high frequency clocks and static
RAMs, are incorporated into computer and computer-related products, which have
historically been characterized by significant fluctuations in demand. Any
decline in the demand for advanced microprocessors which utilizes these
products could materially and adversely affect the Company's operating results.
Further, any slowdown in the computer and related peripherals markets could also
materially and adversely affect the Company's operating results. There can be no
assurance that the Company will not be materially and adversely affected by
slower growth in the markets serviced by the Company's products.
PRODUCT PRICE FLUCTUATIONS
The ASPs of the Company's products historically have decreased over the
product's lives and are expected to continue to do so. To offset such ASP
decreases, the Company relies primarily on cost reductions in the manufacture of
such products, increased unit demand to absorb fixed costs and the introduction
of new, higher priced products that incorporate advanced features. To the extent
that such cost reductions, increased unit demand or new product introductions do
not occur in a timely manner or newly introduced products do not gain market
acceptance, the Company's business, financial condition and results of
operations could be materially and adversely affected.
The selling prices for the Company's products, particularly the static RAM
products, fluctuate significantly with real and perceived changes in the balance
of supply and demand for these commodity products. Growth in worldwide supply of
static RAMs in recent periods resulted in a significant decrease in average
selling prices for the Company's static RAM products. During 1996 and the first
nine months of 1997, the Company's static RAM products (which represent
approximately 47% and 39% of the Company's revenues, respectively) declined at a
rate substantially in excess of historical rates. In the event that ASPs
continue to decline at a faster rate than that at which the Company is able to
decrease per unit manufacturing costs, the Company's business, financial
condition and results of operations will be materially and adversely affected.
The amount of capacity to be placed into production and future yield
improvements by the Company's competitors could dramatically increase worldwide
supply of static RAM products and increase downward pressure on pricing.
Further, the Company has no firm information with which to determine inventory
levels of its competitors and customers, or to determine the likelihood that
substantial inventory liquidation may occur, causing further downward pressure
on pricing.
INTELLECTUAL PROPERTY MATTERS; IMPACT OF LITIGATION
The semiconductor industry has experienced a substantial amount of litigation
regarding patent and other intellectual property rights. The Company is
currently and may in the future be involved in litigation with respect to
alleged infringement by the Company of another party's patents, or may in the
future be involved in litigation to enforce its patents or other intellectual
property rights, to protect its trade secrets and know-how, to determine the
validity or scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Such litigation has in the past and
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could in the future result in substantial costs and diversion of management
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 and results of operations.
From time to time the Company has received, and may receive in the future,
communications alleging that its products or its processes may infringe on
product or process technology rights held by others. In June 1997, the Company
commenced a declaratory judgement action in the United States District Court for
the District of Nevada against the Li Second Family Trust (the "Trust") asking
for declaratory relief to the effect that a U.S. patent relating to a portion of
the process for manufacturing semiconductors is unenforceable, invalid and not
infringed by the Company. The Trust has counterclaimed for patent infringement
on the same patent alleging such patent covers oxide-isolated integrated
circuits. In correspondence, attorneys for the Trust have argued that such
patent "is applicable to NMOS, CMOS, Bipolar, BiCMOS and other technologies". In
December 1997, the Federal Court for the Eastern District of Virginia
preliminarily ruled that Dr. Li's patent is unenforceable due to unequitable
conduct by Dr. Li and his attorneys in obtaining the patent. Dr. Li has the
right to file an appeal, although no such appeal as been filed as of March 17,
1998. The Company believes it has meritorious defenses to the counterclaim and
intends to defend itself vigorously. However, should the outcome of this action
be unfavorable, the Company's business, financial condition and results of
operations could be materially and adversely affected.
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 actions (or claims for indemnification
resulting from infringement claims) will not be asserted against the Company or
that any such assertions (including the above-described counterclaim by the
Trust) will not materially and adversely affect the Company's business,
financial condition or results of operations. Irrespective of the validity or
the successful assertion of such claims or actions (including the above-
described counterclaim by the trust), the Company could incur significant costs
with respect to the defense thereof which could have a material adverse effect
on the Company's business, financial condition and results of operations.
Moreover, although the Company may seek to obtain a license under a third
party's intellectual property rights with respect to any such claims or actions
asserted against the Company, there can be no assurance that, under such
circumstances, a license would be available under reasonable terms at all.
The Company entered into technology license agreements with third parties which
give those parties the right to use patents and other technology developed by
the Company and which give the Company the right to use patents and other
technology developed by such other parties, some of which involve payment of
royalties and some of which involve access to technology used in the Company's
operations. The Company anticipates that it will continue to enter into such
licensing arrangements in the future. There can be no assurance that such
licenses will continue to be available to the Company on commercially reasonable
terms in the future. The loss of or inability to obtain licenses to key
technology in the future could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company intends to continue to pursue patent, trade secret and mask work
protection for its semiconductor process technologies. To that end, the Company
has obtained certain patents and patent licenses and intends to continue to seek
patents on its inventions and manufacturing processes, as appropriate. The
process of seeking patent protection can be long and expensive, and there is no
assurance that patents will be issued from currently pending or future
applications or that, if patents are issued, they will be of sufficient scope or
strength to provide meaningful protection or any commercial advantage to the
Company. In particular, there can be no assurance that any patents held by the
Company will not be challenged, invalidated or circumvented. 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. The Company also relies on trade
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secret protection for its technology, in part, through confidentiality
agreements with its employees, consultants and third parties. There can be no
assurance that these agreements will not be breached, that the Company will have
adequate remedies for any breach or that the Company's trade secrets will not
otherwise become known to or independently developed by others. In addition, the
laws of certain territories in which the Company's products are or may be
developed, manufactured or sold may not protect the Company's products and
intellectual property rights to the same extent as do the laws of the United
States.
NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE
The Company's future success depends on its ability to develop and introduce new
products which compete effectively on the basis of price and performance and
which address customer requirements. The Company is continually in the process
of designing and commercializing new and improved products to maintain its
competitive position. The success of new product introductions is dependent upon
several factors, including timely completion and introduction of new product
designs, achievement of acceptable fabrication yields and market acceptance. The
development of new products by the Company and their design-in to customers'
systems can take several years, depending upon the complexity of the device and
the application. Accordingly, new product development requires a long-term
forecast of market trends and customer needs, and the successful introduction of
the Company's products may be adversely affected by competing products or
technologies serving markets addressed by the Company's products.
The Company is currently developing new products with smaller feature sizes, the
fabrication of which will be substantially more complex than fabrication of the
Company's current products. The successful introduction of these products and
other new products will depend on the Company's development and implementation
of new process technologies. For example, the Company is currently transitioning
to its 0.5 and 0.35 micron process and will continue to migrate to 0.25 micron
and smaller geometries in the future. The transition process may be coupled with
the conversion and upgrade of the existing equipment base to support the
required capability, the transfer of equipment and capability among sites and
the conversion of equipment base from 6-inch to 8-inch capability. As announced
on March 9, 1998, the Company will restructure to achieve improved efficiencies
from its new 0.35- and 0.25-micron technologies. If the implementation of such
process changes is not completed in a timely and cost-effective basis, the
Company's business, financial condition and results of operations could be
materially and adversely affected. In addition, as the Company develops its
integrated solution products, it will require more technically sophisticated
sales and marketing personnel to market these products successfully to its
customers, however, these personnel may not be available at affordable rates or
at all. If the Company is unable to design, develop, manufacture, market and
sell new products successfully, its business, financial condition and results of
operations would be materially and adversely affected.
DEPENDENCE ON LIMITED SOURCES OF SUPPLY AND INDEPENDENT ASSEMBLY CONTRACTORS
Raw materials utilized by the Company's semiconductor manufacturing operation
generally must meet exacting product specifications. The Company generally uses
multiple sources of supply, but there are only a limited number of suppliers
capable of delivering certain raw materials that meet the Company's
specifications. Any change in the Company's suppliers would require the
qualification by the Company of the new supplier. Additionally, the availability
of raw materials may decline due to the overall increase in worldwide
semiconductor demand. Although shortages have occurred from time to time in the
past and lead times in the industry have been extended on occasion, to date the
Company has not experienced any significant interruption in operations as a
result of difficulties in obtaining raw materials for its semiconductor
manufacturing operations. However, interruption of any one raw material source
could have a material adverse effect on the Company's business, financial
condition and results of operations.
A portion of the Company's products are assembled, packaged and tested at the
Company's back-end manufacturing facility located in the Philippines. The
Company relies on independent subcontractors to assemble, package and test the
balance of its products. This reliance involves significant risk, including
reduced control over
-10-
<PAGE> 12
quality and delivery schedules, capacity and discontinuance or phase-out of such
subcontractors' assembly processes. There can be no assurance that the Company's
subcontractors will continue to assemble, package and test products for the
Company.
Alphatec Electronics Pcl ("Alphatec"), one of the Company's primary back-end
manufacturing subcontract vendors, missed a number of deadlines to repay debt
through 1997, including the repayment of $43.7 million of third party
international bonds during the second quarter of 1997. Although Alphatec has
experienced recent financial difficulties, the Company has experienced no
disruption in supply from Alphatec's assembly and test operations. The Company
has consigned capital assets to Alphatec which had a net book value of
approximately $15.3 million at September 29, 1997 and Alphatec's production
represents approximately 24% of the Company's back-end manufacturing capacity.
The Company continues to evaluate alternative options and have qualified
products and processes at other subcontractors as a contingency measure. On
March 9, 1998, the Company announced its intention to consolidate its Alphatec
test manufacturing operation into its Manila plant. However, should Alphatec
cease operations or be forced to reduce its manufacturing capacity, the
Company's ability to manufacture a material portion of its products in the
future and ability to recover its consigned assets could be impaired.
RISK OF EXCESS MANUFACTURING CAPACITY; FABRICATION OF WAFERS
The fabrication of integrated circuits is a highly complex and precise process,
requiring production in a tightly controlled, clean environment. Minute
impurities, difficulties in the fabrication process, defects in the masks used
to print circuits on a wafer or other factors can cause a substantial percentage
of wafers to be rejected or numerous die on each wafer to be nonfunctional. The
Company may experience problems in achieving acceptable yields in the
manufacture of wafers, particularly in connection with the expansion of its
capacity and related transitions. The interruption of wafer fabrication or the
failure to achieve acceptable manufacturing yields at any of the Company's
facilities would have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company has made, and will continue to make, substantial capital
expenditures to increase its wafer fabrication, assembly and test manufacturing
capacity and capability. Should the need for such additional capacity and
capability not materialize because of factors such as, insufficient loading of
the wafer labs, or a significant shift in the mix of wafer fab loading, or
insufficient loading of the Philippines back-end manufacturing plant and the
network of subcontractors, to the extent that they use the Company's equipment,
or a significant shift in package mix loading, anticipated cost savings may not
be realized. Should the need for more advanced technologies require accelerated
conversion to 0.35 and 0.25 micron or smaller geometries, or the transfer of
equipment and capability among fabs, or the conversion from 6-inch to 8-inch
equipment set, higher operating expenses and the need to write-off capital
equipment made obsolete by the technology conversion may result. There can be no
assurance that market conditions will permit the Company to fully utilize this
increased capacity and capability or that the increases in fixed costs and
operating expenses related to this expansion of capacity and capability will not
materially and adversely affect the Company's business, financial condition and
results of operations.
Additionally, the Company's headquarters and some manufacturing facilities are
located near major earthquake faults. In the event of a major earthquake, the
Company could suffer damages that could materially and adversely affect the
Company's business, financial condition and results of operations.
COMPETITION
The semiconductor industry is intensely competitive and is 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
-11-
<PAGE> 13
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 a rapidly
evolving high performance end of the integrated circuit technology spectrum
depends on elements both within and outside of its control, including success in
developing new products and process technologies, product quality and price,
diversity of product line, cost effectiveness, the pace at which customers
incorporate the Company's products into their systems, the number and nature of
its competitors and general economic conditions. The Company believes it
competes favorably with respect to developing new products and process
technologies, product quality and price, diversity of product line and cost
effectiveness. Price competition in the future could further erode average
selling prices and adversely affect revenues and operating results.
INVENTORY RISK; SHORTENED CUSTOMER LEAD TIMES
The Company must order wafers and build inventory well in advance of product
shipments. Because the Company's markets are volatile and subject to rapid
technology and price changes, there is a risk that the Company will forecast
incorrectly and produce excess or insufficient inventories of products. This
inventory risk is heightened because many of the Company's customers place
orders with short lead times. These factors increase not only the inventory risk
but also the difficulty of forecasting quarterly operating results. Failure to
predict accurately the inventory required to meet customer demand could have a
material adverse effect on the Company's business, financial condition and
results of operations.
LIQUIDITY AND FUTURE CAPITAL NEEDS
Semiconductor manufacturers generally have substantial ongoing capital
requirements to maintain or increase manufacturing capacity. Due to the
capital-intensive nature of the semiconductor industry and the Company's need to
continue to invest in advanced manufacturing and test equipment, the Company
expects to spend approximately $100.0 million in capital expenditures in 1998
and anticipates significant continuing capital expenditures in the next several
years. Historically, the Company has reinvested a substantial portion of its
cash flow from operations in capacity expansion and improvement programs. The
Company's cash flows from operations depend primarily on average selling prices
and the per unit cost of the Company's products. In the event that the Company
is unable to decrease costs for its products at a rate equal to the rate of
decline in selling prices for such products, the Company may not be able to
generate sufficient cash flow from operations to maintain or increase
manufacturing capacity. There can be no assurance that the Company will not be
required to seek financing from external sources to satisfy its cash and capital
needs or that such financing will be available on terms deemed satisfactory to
the Company, the Company's business, financial condition and results of
operations will be adversely impacted.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon a limited number of key management and technical
personnel. In addition, the Company's future success will depend in part upon
its ability to attract and retain highly qualified personnel, particularly
product design engineers. The Company competes for such personnel with other
companies, academic institutions, government entities and other organizations.
There can be no assurance that the Company will be successful in hiring or
retaining qualified personnel, or that any of the Company's personnel will
remain employed by the Company. Any loss of key personnel or the inability to
hire or retain qualified personnel could have a material adverse effect on the
Company's business, financial condition and results of operations.
RISK OF INTERNATIONAL OPERATIONS
-12-
<PAGE> 14
In 1996 and for the nine months ended September 29, 1997, international sales
accounted for 27% and 35% of the Company's total sales. The Company's offshore
assembly and test operations and export sales are subject to risks associated
with foreign operations, including currency exchange fluctuations, political
instability, changes in local economic conditions, the devaluation of local
currencies, import and export controls, as well as changes in tax laws, tariffs
and freight rates. To the extent any such risks materialize, the Company's
business, financial condition and results of operations could be materially and
adversely affected.
ENVIRONMENTAL REGULATIONS
The Company is subject to a variety of federal, state and local governmental
regulations related to the storage, use, discharge and disposal of toxic,
volatile or otherwise hazardous chemicals used in its manufacturing process.
Increasing public attention has been focused on the environmental impact of
semiconductor manufacturing operations. There can be no assurance that changes
in environmental regulations will not impose the need for additional capital
equipment or other requirements. Any failure by the Company to control the use
of, or to adequately restrict the discharge of, hazardous substances under
present or future regulations could subject the Company to substantial liability
or could cause its manufacturing operations to be suspended. Such liability or
suspension of manufacturing operations could have a material adverse effect on
the Company's business, financial conditions and results of operations.
SIGNIFICANT LEVERAGE; DEBT SERVICE
In connection with the sale of the Notes in the initial private placement, the
Company incurred $175 million indebtedness which resulted in a ratio of
long-term debt to total capitalization at September 29, 1997 of approximately
22.1%. Such ratio would be substantially greater if the Company's operating
lease obligations were treated as long-term debt. As a result of this additional
indebtedness in connection with the sale of the Notes in the initial placement,
the Company's principal and interest obligations have increased substantially.
The degree to which the Company is leveraged could materially and adversely
affect the Company's ability to obtain financing for working capital,
acquisitions or other purposes and could make it more vulnerable to industry
downturns and competitive pressures. The Company's ability to meet its debt
service obligations will be dependent upon the Company's future performance,
which will be subject to financial, business and other factors affecting the
operations of the Company, many of which are beyond its control.
The Company will require substantial amounts of cash to fund scheduled payments
of principal and interest on its outstanding indebtedness, including the Notes,
future capital expenditures and any increased working capital requirements. If
the Company is unable to meet its cash requirements out of cash flow from
operations and its available borrowings, there can be no assurance that it will
be able to obtain alternative financing or that it, will be permitted to do so
under the terms of its existing financing arrangements. In the absence of such
financing, the Company's ability to respond to changing business and economic
conditions, to make future acquisitions, to absorb adverse operating results or
to fund capital expenditures or increased working capital requirements may be
adversely affected. If the Company does not generate sufficient increases in
cash flow from operations to repay the Notes at maturity, it could attempt to
refinance the Notes; however, no assurance can be given that such a refinancing
would be available on terms acceptable to the Company, if at all. Any failure by
the Company to satisfy its obligations with respect to the Notes at maturity
(with respect to payments of principal and accrued interest) or prior thereto
(with respect to payments of interest or required repurchases) would constitute
a default under the Indenture and could cause a default under agreements
governing other indebtedness, if any, of the Company.
SUBORDINATION AND ABSENCE OF FINANCIAL COVENANTS
The Notes are unsecured and subordinated in right of payment to all existing and
future Senior Indebtedness of the Company. The Notes are also structurally
subordinated to the existing and future liabilities, including trade payables of
the Company's subsidiaries, and the Company conducts a significant portion of
its operations through subsidiaries. As of September 29, 1997, there was
approximately $172.1 million of indebtedness of the Company outstanding that
constituted Senior Indebtedness (including $117.3 million related to certain
operating lease commitments, related first-loss clauses and certain foreign
exchange contracts) and approximately $50.8 million of indebtedness and other
liabilities of subsidiaries of the Company outstanding
-13-
<PAGE> 15
(excluding intercompany liabilities and indebtedness included as Senior
Indebtedness as a result of guarantees by the Company,) to which the Notes are
structurally subordinated. The Indenture does not prohibit or limit the
incurrence of Senior Indebtedness or the incurrence of other indebtedness and
liabilities by the Company or its subsidiaries, and the incurrence of any such
additional indebtedness or liabilities could adversely affect the Company's
ability to pay its obligations on the Notes. The Company anticipates that from
time to time it will incur additional indebtedness, including Senior
Indebtedness, and that it and its subsidiaries will from time to time incur
other additional indebtedness and liabilities. See "Description of Notes --
Subordination."
The Indenture does not contain any financial covenants or restrictions
on the payment of dividends, the incurrence of indebtedness, including Senior
Indebtedness, by the Company or the issuance or repurchase of securities by the
Company. The Indenture contains no covenants or other provisions to afford
protection to holders of the Notes in the event of a highly leveraged
transaction or a change in control of the Company except to the extent described
under "Description of Notes -- Repurchase at Option of Holders Upon a
Fundamental Change." The term "Fundamental Change" is limited to certain
specified transactions and may not include other events that might adversely
affect the financial condition of the Company, nor would the requirement that
the Company offer to repurchase the Notes upon a Fundamental Change necessarily
afford Holders of the Notes protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving the
Company.
LIMITATIONS ON REPURCHASE OF NOTES
Upon a Fundamental Change (as defined), each Holder of Notes will have
certain rights, at the Holder's option, to require the Company to repurchase all
or a portion of such Holder's Notes. If a Fundamental Change were to occur,
there can be no assurance that the Company would have or be able to obtain
sufficient funds to pay the repurchase price for all Notes tendered by the
Holders thereof. The Company's future credit agreements or agreements relating
to other indebtedness (including other Senior Indebtedness) to which the Company
becomes a party may contain restrictions and provisions which prohibit the
Company from repurchasing or redeeming any Notes and may provide that certain
transactions constituting a Fundamental Change would constitute an event of
default thereunder. In the event a Fundamental Change occurs at a time when the
Company is prohibited from repurchasing or redeeming Notes, the Company could
seek the consent of its lenders to the repurchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company would remain
prohibited from repurchasing or redeeming Notes. In such case, the Company's
failure to repurchase tendered Notes may constitute an Event of Default under
the Indenture, which may, in turn, constitute a further default under the terms
of certain of the Senior Indebtedness. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the Holders of the
Notes. See "Description of Notes -- Repurchase at Option of Holders Upon a
Fundamental Change."
POTENTIAL VOLATILITY OF NOTES AND COMMON STOCK PRICE
The market price for the Common Stock has been volatile. The market
price of the Common Stock and, in turn, the market price of the Notes could be
subject to significant fluctuations in response to variations in quarterly
operating results, shortfalls in revenues or earnings from levels expected by
securities analysts and other factors, such as announcements of technological
innovations or new products by the Company or by the Company's competitors,
government regulations and developments in patent or other proprietary rights.
The securities markets have experienced volatility which is often unrelated to
the operating performance of particular companies, and such volatility may in
the future adversely affect the market price of the Common Stock and, in turn,
the market price of the Notes. Also in the past, following a period of
volatility in the market price of a company's securities, securities class
action lawsuits have been instituted against some companies. A class action
lawsuit was brought against the Company in 1995. Although such litigation was
determined in the Company's favor, it resulted in legal expenses and other costs
and diversion of management resources. Should the Company be subject to such
lawsuits
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<PAGE> 16
in the future, the costs of defending such litigation or any adverse judgment
against the Company or any diversion of management resources could have a
material adverse effect on the Company's business, financial condition and
results of operations.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes were issued in September 1997 in a private placement to a
small number of institutional buyers. The Notes issued in the initial private
placement have been designated for trading on the Portal Market. Notes sold
pursuant to this Prospectus will not remain eligible for trading on the Portal
Market. The Company does not intend to list the Notes on any national securities
exchange or on The Nasdaq Stock Market. There can be no assurance that an active
trading market for the Notes will develop or, if one does develop, that it will
be maintained. If an active trading market for the Notes fails to develop or be
sustained, the trading price of such Notes could be adversely affected, and
holders of the Notes may experience difficulty in reselling the Notes or may be
unable to sell them at all. If a public trading market develops for the Notes,
future trading prices of the Notes will depend upon many factors, including,
among other things, prevailing interest rates and the market price of the shares
of Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale by the Selling
Securityholders of the Notes or the Conversion Shares.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratio of
earnings to fixed charges for the periods shown.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ----------------------------
-------------------------------- SEPTEMBER 30, SEPTEMBER 29,
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges..... N/A 8.7x 14.4x 19.7x 9.3x 13.0x 4.1x
</TABLE>
For purposes of calculating the ratio of earnings to fixed charges (i)
earnings consist of earnings before taxes adjusted for fixed charges, minority
interest and investment accounted for by the equity method and (ii) fixed
charges consist of interest expense incurred, plus the portion of rent expense
under operating leases deemed by the Company to be representative of the
interest factor, plus amortization of debt issuance costs and amortization of
the bond discount relating to the 1994 Convertible Subordinated Notes. The
calculation for the nine month period ended September 29, 1997 includes a $1.6
million write-off of unamortized debt issuance costs related to the March 1997
redemption of the 1994 Convertible Subordinated Notes. Excluding this write-off,
earnings to fixed charges ratio would have been 5.1x for the nine month period
ended September 29, 1997. For the fiscal year ended December 28, 1992, earnings
were insufficient to cover fixed charges by $30.9 million.
-15-
<PAGE> 17
SELLING SECURITYHOLDERS
The Notes were originally issued by the Company in a private placement
and were resold by the initial purchasers thereof to qualified institutional
buyers (within the meaning of Rule 144A under the Securities Act) or other
institutional accredited investors (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act) in transactions exempt from registration under the
Securities Act, and in sales outside the United States to persons other than
U.S. persons in reliance upon Regulation S under the Securities Act. The Notes
and the Conversion Shares that may be offered pursuant to this Prospectus will
be offered by the Selling Securityholders. The following table sets forth
certain information concerning the principal amount of Notes beneficially owned
by each Selling Securityholder and the number of Conversion Shares that may be
offered from time to time pursuant to this Prospectus.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF NOTES NUMBER OF
BENEFICIALLY PERCENTAGE OF CONVERSION
OWNED THAT NOTES SHARES THAT
NAME MAY BE SOLD OUTSTANDING MAY BE SOLD(1)(2)
---- --------------- ------------- -----------------
<S> <C> <C> <C>
BancAmerica Robertson Stephens ............ $ 2,790,000 1.6% 118,095
Brown & Williamson Tobacco Corp.
Master Retirement Trust................... 175,000 * 7,407
BTI-Bankers Trust International............ 10,000,000 5.7% 423,280
Canadian Imperial Holdings, Inc. .......... 6,000,000 3.4% 253,968
CFW-C, L.P. ............................... 2,500,000 1.4% 105,820
Consolidated Press International, LTD ..... 2,315,000 1.3% 97,989
Credit Suisse First Boston Corporation .... 1,150,000 * 48,677
Deutsche Morgan Grenfell Inc. ............. 8,030,000 4.6% 339,894
Donaldson, Lufkin & Jenrette Securities
Corp. .................................... 200,000 * 8,465
Farallon Capital Institutional Partners, LP 6,725,000 3.8% 284,656
Farallon Capital Institutional Partners
II, LP ................................... 1,205,000 * 51,005
Farallon Capital Institutional Partners
III, LP .................................. 150,000 * 6,349
Farallon Capital Offshore Investors, Inc. . 11,125,000 6.4% 470,899
Farallon Capital Partners, LP.............. 6,835,000 3.9% 289,312
First Indemnity of America Insurance ...... 500,000 * 21,164
KA Management Ltd. ........................ 2,080,497 1.2% 88,063
KA Trading L.P. ........................... 1,569,503 * 66,433
Lazard Freres & Co. ....................... 300,000 * 12,698
Lipper Convertible, L.P. .................. 1,850,000 1.1% 78,306
Lipper Offshore Convertibles, L.P. ........ 1,000,000 * 42,328
Mainstay Convertible Fund ................. 3,325,000 1.9% 140,740
Mainstay VP Convertible Portfolio ......... 500,000 * 21,164
Merrill Lynch Pierce Fenner and Smith ..... 11,020,000 6.3% 466,455
NATWEST Securities Limited ................ 5,000,000 2.9% 211,640
New York Life Separate Account #7 ......... 3,000,000 1.7% 126,984
North Star Hedge Fund, LP ................. 1,500,000 * 63,492
Paloma Securities L.L.C. .................. 3,900,000 2.2% 165,079
Salomon Brothers Asset Management, Inc. ... 12,600,000 7.2% 533,333
Silverton International Fund Limited ...... 2,600,000 1.5% 110,052
Smith Barney Inc. ......................... 3,200,000 1.8% 135,449
Societe Generale Securities Corp. ......... 7,450,000 4.3% 315,343
The Common Fund ........................... 595,000 * 25,185
Tinicum Partners, LP ...................... 50,000 * 2,116
Any other holders of Notes or future
transferee, pledgee, donee or successor
of or from any such other holder (3)(4) 53,760,000 30.7% 2,275,567
TOTAL ..................................... $175,000,000
</TABLE>
- --------
* Less than 1%.
(1) Assumes conversion of the full amount of Notes held by such holder at the
initial conversion price of $23.625 per share; such conversion price is
subject to adjustment as described under "Description of the
Notes--Conversion." Accordingly, the number of shares of Common Stock
issuable upon conversion of the Notes may increase or decrease from time to
time. Under the terms of the Indenture, fractional shares will not be issued
upon conversion of the Notes; cash will be paid in lieu of fractional
shares, if any.
(2) The number of Conversion Shares held by each holder named herein is less
than 1% of the Company's Outstanding Common Stock as of September 29, 1997.
(3) Information concerning other Selling Securityholders will be set forth in
supplements to this Prospectus from time to time, if required.
(4) Assumes that any other holders of Notes, or any future transferees,
pledgees, donees or successors of or from any such other holders of Notes,
do not beneficially own any Common Stock other than the Common Stock
issuable upon conversion of the Notes at the initial conversion price.
-16-
<PAGE> 18
The preceding table has been prepared based upon the information
furnished to the Company by the Selling Securityholders named therein.
From time to time, both BancAmerica Robertson Stephens and Deutsche
Morgan Grenfell Inc. or their affiliates have provided, and may continue to
provide, investment banking services to the Company, for which they received or
will receive customary fees. None of the other Selling Securityholders has had
any position, office or other material relationship with the Company or its
affiliates within the past three years.
The Selling Securityholders identified above may have sold, transferred
or otherwise disposed of, in transactions exempt from the registration
requirements of the Securities Act, all or a portion of their Notes since the
date on which the information in the preceding table is presented. Information
concerning the Selling Securityholders may change from time to time and any such
changed information will be set forth in supplements to this Prospectus if and
when necessary. Because the Selling Securityholders may offer all or some of the
Notes that they hold and/or Conversion Shares pursuant to the offering
contemplated by this Prospectus, no estimate can be given as to the amount of
the Notes or Conversion Shares that will be held by the Selling Securityholders
upon the termination of this offering. See "Plan of Distribution."
DESCRIPTION OF NOTES
The Notes were issued under an indenture dated as of September 15, 1997
(the "Indenture"), between the Company and State Street Bank and Trust Company
of California, N.A., as trustee (the "Trustee"). The form of the Indenture and
the Registration Rights Agreement (as defined below) have been filed as exhibits
to the Registration Statement. The following summaries of certain provisions of
the Notes, the Indenture and the Registration Rights Agreement do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Notes, the Indenture and the Registration
Rights Agreement, including the definitions therein of certain terms which are
not otherwise defined in this Prospectus. Wherever particular provisions or
defined terms of the Indenture (or the form of Note which is a part thereof) or
the Registration Rights Agreement are referred to, such provisions or defined
terms are incorporated herein by reference. References in this section to the
"Company" are solely to Cypress Semiconductor Corporation, a Delaware
corporation, and not its subsidiaries.
GENERAL
The Notes are unsecured subordinated obligations of the Company, are
limited to $175,000,000 aggregate principal amount, will mature on October 1,
2002 and will be payable at a price of 100% of the principal amount thereof. The
Notes will bear interest at 6% from September 24, 1997, payable semiannually on
April 1 and October 1 of each year, commencing on April 1, 1998.
The Notes are convertible into Common Stock initially at a conversion
price of $23.625 per share, subject to adjustment upon the occurrence of certain
events described under "-- Conversion," at any time prior to the close of
business on the maturity date, unless previously redeemed or repurchased.
The Notes are redeemable (a) at the option of the Company in the event
of certain developments involving withholding taxes of the U.S. as described
below under "-- Redemption -- Redemption for Taxation Reasons" at a redemption
price of 100% of the principal amount of the Notes to be redeemed, plus accrued
interest to, but excluding, the Redemption Date (as defined) and (b) at the
option of the Company under the circumstances and at the redemption prices set
forth below under "-- Redemption -- Optional Redemption," plus accrued interest
to, but excluding, the Redemption Date.
The Indenture does not contain any financial covenants or restrictions
on the payment of dividends by the Company, the incurrence of indebtedness,
including Senior Indebtedness (as defined), by the Company or the issuance or
repurchase of securities by the Company. The Indenture contains no covenants or
other provisions to afford protection to Holders of the Notes in the event of a
highly leveraged transaction or a change in control of
-17-
<PAGE> 19
the Company except to the extent described below under "-- Repurchase at Option
of Holders Upon a Fundamental Change."
CONVERSION
The Holder of any Note has the right at the Holder's option to convert
any Note (in denominations of $1,000 or any multiple thereof) into shares of
Common Stock at any time prior to the close of business on the maturity date,
unless previously redeemed or repurchased, at a conversion price of $23.625 per
share (equivalent to a conversion rate of approximately 42.33 shares per $1,000
principal amount of Notes). The conversion price is subject to adjustment from
time to time as described below. The right to convert a Note called for
redemption or delivered for repurchase will terminate at the close of business
on the Business Day prior to the Redemption Date or the Repurchase Date (as
defined) for such Note, as the case may be.
Beneficial owners of interests in a Note in global form may exercise
their right of conversion by delivering to DTC the appropriate instruction form
for conversion pursuant to DTC's conversion program. To convert a Note held in
certificated form into shares of Common Stock, a Holder must (i) complete and
manually sign the conversion notice on the back of the Note (or complete and
manually sign a facsimile thereof) and deliver such notice to the Trustee at the
office or agency of the Trustee in New York, New York or the Corporate Trust
Office of the Trustee in Los Angeles, California or any Conversion Agent, (ii)
surrender the Note to the Trustee at the office or agency of the Trustee in New
York, New York or the Corporate Trust Office of the Trustee in Los Angeles,
California or to any Conversion Agent, as the case may be, (iii) if required,
furnish appropriate endorsements and transfer documents, (iv) if required, pay
all transfer or similar taxes, and (v) if required, pay funds equal to interest
payable on the next interest payment date. Pursuant to the Indenture, the date
on which all of the foregoing requirements have been satisfied is the date of
surrender for conversion. Such notice of conversion can be obtained from the
Trustee at the Corporate Trust Office or the office of any Conversion Agent. As
promptly as practicable on or after the conversion date, the Company will issue
and deliver to the Trustee a certificate or certificates for the number of full
shares of Common Stock issuable upon conversion, together with payment in lieu
of any fraction of a share in an amount determined as set forth below. Such
certificate will be sent by the Trustee to the appropriate Conversion Agent for
delivery to the Holder. Such Common Stock issuable upon conversion of the Notes
will be fully paid and nonassessable. Any Note surrendered for conversion during
the period from the close of business on any Regular Record Date to the opening
of business on the next succeeding Interest Payment Date (except Notes called
for redemption on a Redemption Date or to be repurchased on a Repurchase Date
during such period) must be accompanied by payment of an amount equal to the
interest payable on such Interest Payment Date on the principal amount of Notes
being surrendered for conversion. In the case of any Note which has been
converted after any Regular Record Date, but on or before the next Interest
Payment Date, interest the Stated Maturity of which is on such Interest Payment
Date shall be payable on such Interest Payment Date notwithstanding such
conversion. Such interest shall be paid to the Holder of such Note on such
Regular Record Date. As a result, a Holder that surrenders Notes for conversion
on a date that is not an Interest Payment Date will not receive any interest for
the period from the Interest Payment Date next preceding the date of conversion
to the date of conversion or for any later period, even if the Notes are
surrendered after a notice of redemption (except for the payment of interest on
Notes called for redemption on a Redemption Date or to be repurchased on a
Repurchase Date between a Regular Record Date and the Interest Payment Date to
which it relates). No other payment or adjustment for interest, or for any
dividends in respect of Common Stock, will be made upon conversion. Holders of
Common Stock issued upon conversion will not be entitled to receive any
dividends payable to holders of Common Stock as of any record time before the
close of business on the conversion date. No fractional shares will be issued
upon conversion but, in lieu thereof, an appropriate amount will be paid in cash
by the Company based on the market price of Common Stock on the day of
conversion.
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<PAGE> 20
A Holder delivering a Note for conversion will not be required to pay
any taxes or duties in respect of the issue or delivery of Common Stock on
conversion but will be required to pay any tax or duty that may be payable in
respect of any transfer involved in the issue or delivery of the Common Stock in
a name other than that of the Holder of the Note. Certificates representing
Common Stock will not be issued or delivered unless all taxes and duties, if
any, payable by the Holder have been paid.
The initial conversion price of $23.625 per share of Common Stock
(equivalent to a conversion rate of approximately 42.33 shares per $1,000
principal amount of the Notes) is subject to adjustment (under formulae set
forth in the Indenture) in certain events, including: (i) the issuance of Common
Stock as a dividend or distribution on Common Stock; (ii) certain subdivisions
and combinations of the Common Stock; (iii) the issuance to all holders of
Common Stock of certain rights or warrants to purchase Common Stock (provided
that the conversion price will be readjusted to the extent that such rights or
warrants are not exercised prior to the expiration thereof); (iv) the
distribution to all holders of Common Stock of shares of capital stock of the
Company (other than Common Stock) or evidences of indebtedness of the Company or
assets (including securities, but excluding those rights, warrants, dividends
and distributions referred to above or paid in cash); (v) distributions
consisting of cash, excluding any quarterly cash dividend on the Common Stock to
the extent that the aggregate cash dividend per share of Common Stock in any
quarterly period does not exceed the greater of (x) the amount per share of
Common Stock of the next preceding quarterly cash dividend on the Common Stock
to the extent that such preceding quarterly dividend did not require an
adjustment of the conversion price pursuant to this clause (v), and (y) 3.75% of
the average of the daily Closing Prices (as defined) of the Common Stock for the
ten consecutive Trading Days (as defined) immediately prior to the date of
declaration of such dividend, and excluding any dividend or distribution in
connection with the liquidation, dissolution or winding up of the Company; (vi)
payment in respect of a tender or exchange offer by the Company for the Common
Stock to the extent that the cash and value of any other consideration included
in such payment per share of Common Stock exceeds the Current Market Price (as
defined) per share of Common Stock on the Trading Day next succeeding the last
date on which tenders or exchanges may be made pursuant to such tender or
exchange offer; and (vii) payment in respect of a tender offer or exchange offer
by a person other than the Company in which, as of the closing date of the
offer, the Board of Directors is not recommending rejection of the offer. If an
adjustment is required to be made as set forth in clause (v) above as a result
of a distribution that is a quarterly dividend, such adjustment would be based
upon the amount by which such distribution exceeds the amount of quarterly cash
dividends permitted to be excluded pursuant to such clause (v). In the event of
a distribution to substantially all holders of Common Stock of rights to
subscribe for additional shares of the Company's capital stock as provided in
clause (iii) above, the Company may, instead of making any adjustment in the
conversion price, make proper provision so that each Holder of a Note who
converts such Note after the record date for such distribution and prior to the
expiration or redemption of such rights shall be entitled to receive upon such
conversion, in addition to shares of Common Stock, an appropriate number of such
rights. If an adjustment is required to be made as set forth in clause (v) above
as a result of a distribution that is not a quarterly dividend, such adjustment
would be based upon the full amount of the distribution. The adjustment referred
to in clause (vii) above will only be made if the tender offer or exchange offer
is for an amount which increases that person's ownership of Common Stock to more
than 25% of the total shares of Common Stock outstanding and if the cash and
value of any other consideration included in such payment per share of Common
Stock exceeds the Current Market Price per share of Common Stock on the business
day next succeeding the last date on which tenders or exchanges may be made
pursuant to such tender or exchange offer. The adjustment referred to in clause
(vii) above will not be made, however, if, as of the closing of the offer, the
offering documents with respect to such offer disclose a plan or an intention to
cause the Company to engage in a consolidation or merger of the Company or a
sale of all or substantially all of the Company's assets.
In case of any consolidation or merger of the Company with or into
another Person or any merger of another Person into the Company (other than a
merger which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in case of any sale or transfer of all or
substantially all of the
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<PAGE> 21
assets of the Company, each Note then outstanding will, without the consent of
the Holder of any Note, become convertible only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer by a holder of the number of Common Stock into which such Note
was convertible immediately prior thereto (assuming such holder of Common Stock
failed to exercise any rights of election and that such Note was then
convertible).
The Company from time to time may to the extent permitted by law reduce
the conversion price by any amount for any period of at least 20 days, in which
case the Company shall give at least 15 days notice of such reduction, if the
Board of Directors of the Company has made a determination that such reduction
would be in the best interests of the Company which determination shall be
conclusive. The Company may, at its option, make such reductions in the
conversion price, in addition to those set forth above, as the Board of
Directors of the Company deems advisable to avoid or diminish any Income tax to
holders of Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes.
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing.
SUBORDINATION
The indebtedness evidenced by the Notes is subordinated in right of
payment to the extent provided in the Indenture to the prior payment in full of
all Senior Indebtedness (as defined). Upon any distribution of assets of the
Company resulting from any dissolution, winding up, liquidation or
reorganization (including any of the foregoing as a result of bankruptcy or
moratorium of payment), the payment on account of the principal of, redemption
of, liquidated damages, if any, or premium, if any, and interest on the Notes
(including on account of a Fundamental Change) is to be subordinated to the
extent provided in the Indenture in right of payment to the prior payment in
full in cash of all Senior Indebtedness. In the event of any acceleration of the
Notes because of an Event of Default (as defined), the holders of any Senior
Indebtedness then outstanding would be entitled to payment in full in cash of
all obligations in respect of such Senior Indebtedness before the Holders of the
Notes are entitled to receive any payment or other distribution in respect
thereof. The Indenture will require that the Company promptly notify the Trustee
if payment of the Notes is accelerated because of an Event of Default.
The Company also may not make any payment upon, redemption of, or
payment of liquidated damages, if any, on or purchase or otherwise acquire the
Notes if (i) a default in the payment of the principal of, premium, if any,
interest, rent or other obligations in respect of Senior Indebtedness occurs and
is continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness (as
defined) that permits the holders of the Designated Senior Indebtedness as to
which such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company or other
person permitted to give such notice under the Indenture. Payments on the Notes
may and shall be resumed (a) in case of a payment default, upon the date on
which such default is cured or waived or ceases to exist and (b) in case of a
nonpayment default, the earlier of the date on which such nonpayment default is
cured or waived or ceases to exist or 179 days after the date on which the
applicable Payment Blockage Notice is received. No new period of payment
blockage may be commenced pursuant to a Payment Blockage Notice unless and until
365 days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice.
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<PAGE> 22
By reason of the subordination provisions described above, in the event
of the Company's bankruptcy, dissolution or reorganization, holders of Senior
Indebtedness may receive more, ratably, and Holders of the Notes may receive
less, ratably, than the other creditors of the Company. Such subordination will
not prevent the occurrence of any Event of Default under the Indenture.
In the event that, notwithstanding the foregoing, the Trustee or any
Holder of the Notes receives any payment or distribution of assets of the
Company of any kind in contravention of any of the subordination provisions of
the Indenture, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Notes before all
Senior Indebtedness is paid in full, then such payment or distribution will be
held by the recipient in trust for the benefit of holders of Senior Indebtedness
of the Company or their representative or representatives to the extent
necessary to make payment in full of all Senior Indebtedness of the Company
remaining unpaid, after giving effect to any concurrent payment or distribution,
or provision therefor, to or for the holders of Senior Indebtedness of the
Company.
The Notes are unsecured and subordinated in right of payment to all
existing and future Senior Indebtedness of the Company. The Notes are also
structurally subordinated to the existing and future liabilities, including
trade payables, of the Company's subsidiaries, and the Company conducts a
significant portion of its operations through subsidiaries. As of September 29,
1997, there was approximately $172.1 million of indebtedness of the Company
outstanding constituting Senior Indebtedness (including $117.3 million related
to certain operating lease commitments, related first-loss clauses and certain
foreign exchange contracts) and there was approximately $50.8 million of
indebtedness and other liabilities of subsidiaries of the Company outstanding
(excluding intercompany liabilities and indebtedness included as Senior
Indebtedness as a result of guarantees by the Company) to which the Notes would
have been structurally subordinated. The Indenture does not prohibit or limit
the incurrence of Senior Indebtedness or the incurrence of other indebtedness
and other liabilities by the Company or its subsidiaries, and the incurrence of
any such additional indebtedness or liabilities could adversely affect the
Company's ability to pay its obligations on the Notes. The Company anticipates
that from time to time it will incur additional indebtedness, including Senior
Indebtedness, and that it and its subsidiaries will from time to time incur
other additional indebtedness and liabilities. See "Risk Factors--Subordination
and Absence of Financial Covenants."
The Company is obligated to pay reasonable compensation to the Trustee
and to indemnify the Trustee against any losses, liabilities or expenses
incurred by it in connection with its duties relating to the Notes. The
Trustee's claims for such payments will be senior to those of Holders of the
Notes in respect of all funds collected or held by the Trustee.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, Indebtedness (as defined) of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by the Company (including all
deferrals, renewals, extensions or refundings of, or amendments, modifications
or supplements to, the foregoing), unless in the case of any particular
Indebtedness the instrument creating or evidencing the same or the assumption or
guarantee thereof expressly provides that such Indebtedness shall not be senior
in right of payment to the Notes or expressly provides that such Indebtedness is
pari passu or "junior" to the Notes. Notwithstanding the foregoing, Senior
Indebtedness shall not include Indebtedness of the Company to any subsidiary of
the Company.
The term "Indebtedness" means, with respect to any Person, and without
duplication, (a) all indebtedness, obligations and other liabilities (contingent
or otherwise) of such Person for borrowed money (including obligations
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<PAGE> 23
of the Person in respect of overdrafts, foreign exchange contracts, currency
exchange agreements, interest rate protection agreements, and any loans or
advances from banks, whether or not evidenced by notes or similar instruments)
or evidenced by bonds, debentures, notes or similar instruments (whether or not
the recourse of the lender is to the whole of the assets of such Person or to
only a portion thereof) other than any account payable or other accrued current
liability or obligation incurred in the ordinary course of business in
connection with the obtaining of materials or services, (b) all reimbursement
obligations and other liabilities (contingent or otherwise) of such Person with
respect to letters of credit, bank guarantees or bankers' acceptances, (c) all
obligations and liabilities (contingent or otherwise) in respect of leases of
such Person required, in conformity with generally accepted accounting
principles, to be accounted for as capitalized lease obligations on the balance
sheet of such Person or under other leases for facilities, equipment or related
assets, whether or not capitalized, entered into or leased for financing
purposes (as determined by the Company) and all obligations and other
liabilities (contingent or otherwise) under any lease or related document
(including a purchase agreement) in connection with the lease of real property
or improvements thereon which provides that such Person is contractually
obligated to purchase or cause a third party to purchase the leased property and
thereby guarantee a minimum residual value of the leased property to the lessor
and the obligations of such Person under such lease or related document to
purchase or to cause a third party to purchase such leased property, (d) all
obligations of such Person (contingent or otherwise) with respect to an interest
rate or other swap, cap or collar agreement or other similar instrument or
agreement or foreign currency hedge, exchange, purchase or similar instrument or
agreement, (e) all direct or indirect guaranties or similar agreements by such
Person in respect of, and obligations or liabilities (contingent or otherwise)
of such Person to purchase or otherwise acquire or otherwise assure a creditor
against loss in respect of, indebtedness, obligations or liabilities of another
Person of the kind described in clauses (a) through (d), (f) any indebtedness or
other obligations described in clauses (a) through (d) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
such Person, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person, and (g) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any indebtedness, obligation or liability of the kind described
in clauses (a) through (f).
The term "Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument agreement or other document may place limitations and conditions
on the right of such Senior Indebtedness to exercise the rights of Designated
Senior Indebtedness).
REDEMPTION
Optional Redemption
At any time on or after October 3, 2000, the Notes will be redeemable at
the Company's option on at least 20 and not more than 60 days notice, in whole,
or from time to time, in part, at the following prices (expressed as percentages
of the principal amount), together with accrued interest to, but excluding, the
Redemption Date.
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<PAGE> 24
If redeemed during the 12-month period beginning October 1 (beginning
October 3, 2000 and ending September 30, 2001, in the case of the first such
period):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ----- -----------
<S> <C>
2000.................................. 102.4%
2001.................................. 101.2
</TABLE>
and 100% at October 1, 2002; provided that any semi-annual payment of interest
becoming due on the Redemption Date shall be payable to the Holders of record on
the Regular Record Date of the Notes being redeemed.
If fewer than all the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed by lot. If any Note is to be redeemed in part only, a
new Note or Notes in principal amount equal to the unredeemed principal portion
thereof will be issued at the office or agency of the Trustee in the City of New
York or the Corporate Trust Office of the Trustee in Los Angeles, California. If
a portion of a Holder's Notes is selected for partial redemption and such Holder
converts a portion of such Notes, such converted portion shall be deemed to be
taken from the portion selected for redemption.
There is no sinking fund provided for the Notes.
Redemption for Taxation Reasons
If, as a result of any change in, or amendment to, the laws or
regulations prevailing in the United States or any political subdivision or
taxing authority thereof or therein, which change or amendment becomes effective
on or after September 19, 1997 or as a result of any application or official
interpretation of such laws or regulations not generally known before that date
(a "Tax Law Change") the Company is or would be required on the next succeeding
Interest Payment Date to pay Additional Amounts (as defined), and such
requirement or obligation cannot be avoided by the Company taking reasonable
measures available to it, the Company may redeem the affected Notes in whole,
but not in part, at any time, on giving not less than 20 days notice, at a
redemption price equal to 100% of the principal amount thereof plus accrued
interest to, but excluding, the Redemption Date and any Additional Amounts then
payable, provided that no such notice of redemption shall be given earlier than
90 days prior to the earliest date on which the Company would be obligated to
withhold or pay additional amounts were a payment in respect of the Notes then
made.
Prior to the publication of any notice of redemption with respect to a
Tax Law Change, the Company shall deliver to the Trustee (a) a certificate
stating that the Company is entitled to effect such redemption and setting forth
a statement of facts showing that the conditions precedent to the right of the
Company so to redeem have occurred and (b) an opinion of counsel selected by the
Company and reasonably acceptable to the Trustee, to the effect that the Company
has or will become obligated to pay such Additional Amounts as a result of a Tax
Law Change. The Company's right to redeem the affected Notes shall continue as
long as the Company is obligated to pay Additional Amounts, notwithstanding that
the Company shall have theretofore made payments of Additional Amounts.
PAYMENT AND CONVERSION
The principal of Notes will be payable in United States dollars, against
surrender thereof at the office or the agency of the Trustee in The City of New
York or the Corporate Trust Office of the Trustee in Los Angeles, California,
or, subject to any applicable laws and regulations, at the office of any Paying
Agent, by dollar check drawn on, or by transfer to a dollar account (such
transfer to be made only to Holders of an aggregate principal
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<PAGE> 25
amount of Notes in excess of $2,000,000) maintained by the Holder with, a bank
in The City of New York. Payment of any installment of interest on Notes will be
made to the Person in whose name such Notes or any predecessor Note is
registered at the close of business on March 15 or September 15 (whether or not
a Business Day) immediately preceding the relevant Interest Payment Date (a
"Regular Record Date"). Payments of such interest will be made by a dollar check
drawn on a bank in The City of New York mailed to the Holder at such Holder's
registered address or, upon application by the Holder thereof to the Trustee not
later than the applicable Regular Record Date, by transfer to a dollar account
(such transfer to be made only to Holders of an aggregate principal amount of
Notes in excess of $2,000,000) maintained by the Holder with a bank in The City
of New York. No such transfer to a dollar account will be made unless the
Trustee has received written wire instructions not less than 15 days prior to
the relevant payment date.
Any payment on the Notes due on any day which is not a Business Day need
not be made on such day, but may be made on the next succeeding Business Day
with the same force and effect as if made on such due date, and no interest
shall accrue on such payment for the period from and after such date. "Business
Day," when used with respect to any place of payment, place of conversion or any
other place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in such place of
payment, place of conversion or other place, as the case may be, are authorized
or obligated by law or executive order to close; provided, however, that a day
on which banking institutions in New York, New York are authorized or obligated
by law or executive order to close shall not be a Business Day for certain
purposes.
Notes may be surrendered for conversion, subject to any applicable laws
and regulations, at the office of any Conversion Agent outside the U.S. In
addition, Notes may be surrendered for conversion at the office or agency of the
Trustee in The City of New York or the Corporate Trust Office of the Trustee in
Los Angeles, California. Notes surrendered for conversion must be accompanied by
appropriate notices and any payments in respect of interest or taxes, as
applicable, as described above under "--Conversion."
The Company has initially appointed as Paying Agent and Conversion Agent
the Trustee at its Corporate Trust Office in Los Angeles, California or at the
office or agency of the Trustee in The City of New York. The Company may at any
time terminate the appointment of any Paying Agent or Conversion Agent and
appoint additional or other Paying Agents and Conversion Agents, provided that
until the Notes have been delivered to the Trustee for cancellation, or moneys
sufficient to pay the principal of, premium, if any, and interest on the Notes
have been made available for payment and either paid or returned to the Company
as provided in the Indenture, it will maintain offices or agencies in The City
of New York for payments with respect to the Notes and for the surrender of
Notes for conversion. Notice of any such termination or appointment and of any
change in the office through which any Paying Agent or Conversion Agent will act
will be given in accordance with "--Notices" below.
Interest payable on Notes on any Redemption Date or Repurchase Date that
is an Interest Payment Date will be paid to the Holders of record as of the
immediately preceding Regular Record Date.
All moneys deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of principal of, premium, if any, or
interest on any Notes which remain unclaimed at the end of the earlier of the
date on which such money escheats to the state or two years after such payment
has become due and payable will be repaid to the Company, and the Holder of such
Note will thereafter look only to the Company for payment thereof.
PAYMENT OF ADDITIONAL AMOUNTS
The Company will pay to a Non-U.S. Holder (as defined in "Certain United
States Federal Income Tax Considerations" below) of any Note such additional
amounts ("Additional Amounts") as may be necessary in order
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<PAGE> 26
that every net payment of the principal of, premium, if any, and interest on
such Note, after deduction or withholding for or on account of any present or
future tax, assessment or governmental charge imposed upon or as a result of
such payment by the United States or any political subdivision or taxing
authority thereof or therein, will not be less than the amount provided for in
such Note to be then due and payable; provided however, that the foregoing
obligation to pay Additional Amounts will not apply to:
(a) any tax, assessment or other governmental charge which would
not have been so imposed but for (i) the existence of any present or
former connection between such Non-U.S. Holder (or between a fiduciary,
settlor, beneficiary, member, shareholder of or possessor of a power
over such Non-U.S. Holder, if such Non-U.S. Holder is a trust, an
estate, a partnership or a corporation) and the United States or any
political subdivision or taxing authority thereof or therein, including,
without limitation, such Non-U.S. Holder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having been a
citizen, domiciliary or resident of the United States or treated as a
resident thereof, or being or having been engaged in trade or business
or present therein, or having or having had a permanent establishment
therein; or (ii) such Non-U.S. Holder's present or former status as a
personal holding company, a foreign personal holding company with
respect to the United States, a controlled foreign corporation, a
passive foreign investment company, or a foreign private foundation or
foreign tax exempt entity for United States tax purposes, or a
corporation which accumulates earnings to avoid United States federal
income tax;
(b) any tax, assessment or other governmental charge which would
not have been so imposed but for the presentation by the Non-U.S. Holder
of such Notes for payment on a date more than 15 days after the date on
which such payment became due and payable or the date on which payment
thereof is duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which would
not have been imposed but for the failure to comply with a request by
the Company addressed to such Non U.S. Holder (or such fiduciary,
settler, beneficiary, member, shareholder or possessor) to provide any
certification, identification or other reporting concerning the
nationality, residence, identity or connection with the United States of
such Non-U.S. Holder (or beneficial owner of such Note), if compliance
is required or imposed by a statute, treaty, regulation or
administrative practice of the United States or any political
subdivision or taxing authority thereof or therein as a precondition to
exemption from all or part of such tax, assessment or other governmental
charge;
(e) any tax, assessment or other governmental charge which is
payable otherwise than by deduction or withholding from payments of
principal of, premium, if any, or interest on such Note;
(f) any tax, assessment or other governmental charge imposed on
interest received by a Non-U.S. Holder actually or constructively
holding 10% or more of the total combined voting power of all classes of
stock of the Company entitled to vote;
(g) any tax, assessment or other governmental charge imposed on a
Non-U.S. Holder that is a partnership or a fiduciary or other than the
sole beneficial owner of such payment, but only to the extent that any
beneficial owner or member of the partnership or beneficiary or settlor
with respect to the fiduciary would not have been entitled to the
payment of Additional Amounts had the beneficial owner,
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<PAGE> 27
member, beneficiary or settlor directly been the holder of the Note; or
(h) any combination of items (a), (b), (c), (d), (e), (f) and (g).
Notwithstanding the foregoing, the Company shall not be obligated to pay
Additional Amounts in respect of payments becoming due on the Notes more than 15
days after the Redemption Date with respect to any redemption of the Notes
described in the first paragraph under "--Redemption--Redemption for Taxation
Reasons" to the extent that the Company's obligation to pay such Additional
Amounts arises from the Tax Law Change that resulted in such redemption.
REPURCHASE AT OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE
If a Fundamental Change (as defined) occurs, each Holder of Notes shall
have the right, at the Holder's option, to require the Company to repurchase all
of such Holder's Notes, or any portion of a Note that is $1,000 or an integral
multiple of $1,000 in excess thereof, on the date (the "Repurchase Date") that
is 45 days after the date of the Company Notice (as defined), at a price (the
"Repurchase Price") (expressed as a percentage of the principal amount) equal to
(i) 106% if the Repurchase Date is during the 12-month period beginning October
1, 1997, (ii) 104.8% if the Repurchase Date is during the 12-month period
beginning October 1, 1998, (iii) 103.6% if the Repurchase Date is during the
12-month period beginning October 1, 1999 and (iv) thereafter at the redemption
price set forth under "--Redemption--Optional Redemption" which would be
applicable to a redemption at the option of the Company on the Repurchase Date;
provided that, if the Applicable Price (as defined) is less than the Reference
Market Price (as defined), the Company shall repurchase such Notes at a price
equal to the foregoing redemption price multiplied by the fraction obtained by
dividing the Applicable Price by the Reference Market Price. In each case, the
Company shall also pay accrued interest on the redeemed Notes to, but excluding,
the Repurchase Date. Any Notes repurchased by the Company shall be canceled.
Within 30 days after the occurrence of a Fundamental Change, the Company
is obligated to give to all Holders of the Notes notice, as provided in the
Indenture (the "Company Notice"), of the occurrence of such Fundamental Change
and of the repurchase right arising as a result thereof. The Company must also
deliver a copy of the Company Notice to the Trustee. To exercise the repurchase
right, a Holder of Notes must deliver on or before the 30th day after the date
of the Company Notice irrevocable written notice to the Trustee or any Paying
Agent of the Holder's exercise of such right, together with the Notes with
respect to which the right is being exercised. Beneficial owners of an interest
in a Global Note may exercise the repurchase right by delivering the appropriate
instruction form for repurchases at the election of Holders pursuant to the DTC
book entry repurchase program.
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which all or substantially all of the Common Stock
shall be exchanged for, converted into, acquired for or constitute solely the
right to receive, consideration (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock or shares which are (or, upon consummation of or immediately following
such transaction or event, will be) listed on a United States national
securities exchange or approved for quotation on the Nasdaq National Market or
any similar United States system of automated dissemination of quotations of
securities prices. The term "Applicable Price" means (i) in the event of a
Fundamental Change in which the holders of Common Stock receive only cash, the
amount of cash received by the holder of one share of Common Stock and (ii) in
the event of any other Fundamental Change, the average of the last reported sale
price for the Common Stock during the ten Trading Days prior to the record date
for the determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Fundamental Change
or, if no such record date exists, the date upon which the holders of the Common
Stock shall have the right to receive such cash, securities, property or other
assets in connection with the Fundamental Change. The term
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"Reference Market Price" shall initially mean $10.625 (which is equal to 66 2/3%
of the last sale price of the Common Stock on September 18, 1997) and in the
event of any adjustment to the conversion price described above pursuant to the
provisions of the Indenture, the Reference Market Price shall also be adjusted
so that the ratio of the Reference Market Price to the conversion price after
giving effect to any such adjustment shall always be the same as the ratio of
$10.625 to the conversion price of $23.625 (without regard to any adjustment
thereto).
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to Holders of
the Notes. The Company will comply with this rule and any other securities laws
to the extent applicable at that time.
Upon a Fundamental Change, each Holder of Notes will have certain
rights, at the Holder's option, to require the Company to repurchase all or a
portion of such Holder's Notes. If a Fundamental Change were to occur, there can
be no assurance that the Company would have or be able to obtain sufficient
funds to pay the repurchase price for all Notes tendered by the Holders thereof.
The Company's future credit agreements or other agreements relating to other
indebtedness (including other Senior Indebtedness) to which the Company becomes
a party may contain restrictions and provisions which prohibit the Company from
repurchasing or redeeming any Notes, and future agreements relating to
indebtedness may also provide that certain transactions constituting a
Fundamental Change would constitute an event of default thereunder. In the event
a Fundamental Change occurs at a time when the Company is prohibited from
repurchasing or redeeming Notes, the Company could seek the consent of its
lenders to the repurchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company would remain prohibited from repurchasing or
redeeming Notes. In such case, the Company's failure to repurchase tendered
Notes would constitute an Event of Default under the Indenture, which could, in
turn, constitute a further default under the other Indebtedness that the Company
may enter into from time to time. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the Holders of
Notes.
The repurchase option upon a Fundamental Change feature of the Notes may
in certain circumstances make more difficult or discourage a takeover of the
Company and, thus, the removal of incumbent management. The Fundamental Change
repurchase feature, however, is not the result of management's knowledge of any
specific effort to accumulate the Company's stock or to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise, or part
of a plan by management to adopt a series of anti-takeover provisions. Instead,
the Fundamental Change repurchase feature is a result of negotiations between
the Company and the initial purchasers. Management has no present intention to
engage in a transaction involving a Fundamental Change, although it is possible
that the Company could decide to do so in the future. Subject to the limitations
on mergers, consolidations and sale of assets described herein, the Company
could, in the future, enter into certain transactions, including acquisitions,
refinancings or other recapitalizations, that would not constitute a Fundamental
Change under the Indenture, but that could increase the amount of indebtedness
(including Senior Indebtedness) outstanding at such time or otherwise affect the
Company's capital structure or credit ratings. The payment of the repurchase
price in the event of a Fundamental Change is subordinated to the prior payment
of Senior Indebtedness as described under "--Subordination" above.
The term "Fundamental Change" is limited to certain specified
transactions and may not include other events that might adversely affect the
financial condition of the Company nor would the requirement that the Company
offer to repurchase the Notes upon a Fundamental Change necessarily afford
Holders of the Notes protection in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving the Company.
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MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other Person (in
a transaction in which the Company is not the surviving entity) or transfer or
lease its properties and assets substantially as an entirety to any Person
unless (i) the Person formed by such merger or into which the Company is merged
or the Person to which the properties and assets of the Company are so
transferred or leased shall expressly assume the payment of the principal of,
premium, if any, and interest on the Notes, (ii) no default and no Event of
Default shall have occurred and be continuing as a result of such consolidation,
merger, transfer or lease, and (iii) the performance of the other covenants of
the Company under the Indenture and certain other conditions are met.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure
to pay principal of or premium, if any, on any Note when due; (b) failure to pay
any interest on, or Additional Amounts with respect to, any Note when due,
continuing for 30 days; (c) failure to perform any other covenant of the Company
in the Indenture, continuing for 60 days after written notice as provided in the
Indenture; and (d) certain events of bankruptcy, insolvency or reorganization.
Subject to the provisions of the Indenture relating to the duties of the Trustee
in case an Event of Default shall occur and be continuing, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable indemnity. Subject to such provisions
providing for the indemnification of the Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
If an Event of Default (other than as specified in clause (d) above)
shall occur and be continuing, either the Trustee or the Holders of at least 25%
in aggregate principal amount of the Outstanding Notes may accelerate the
maturity of all Notes; provided, however, that after such acceleration, but
before a judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of Outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the non-payment of accelerated principal, have been cured or waived
as provided in the Indenture. If an Event of Default as specified in clause (d)
above occurs and is continuing, then the principal of, and accrued interest on,
all the Notes shall ipso facto become immediately due and payable without any
declaration or other act on the part of the Holders of the Notes or the Trustee.
For information as to waiver of defaults, see "--Meetings, Modification and
Waiver."
No Holder of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder unless such Holder
shall have previously given to the Trustee written notice of a continuing Event
of Default and the Holders of at least 25% in aggregate principal amount of the
Outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, and the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the Outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder of a
Note, for the enforcement of payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note or of the right to convert such Note in accordance with the Indenture.
The Company will be required to furnish to the Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance.
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MODIFICATION AND WAIVER
The Indenture contains provisions for convening meetings of the Holders
of Notes to consider matters affecting their interests.
Modifications and amendments of the Indenture may be made, and certain
past defaults by the Company may be waived, either (i) with the written consent
of the Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes or (ii) by the adoption of a resolution, at a meeting of
Holders of the Notes at which a quorum is present, by the Holders of at least
the lesser of a majority in aggregate principal amount of the Outstanding Notes
and 66 2/3% of the aggregate principal amount of the Notes represented and
entitled to vote at such meeting. However, no such modification or amendment
may, without the consent of the Holder of each Outstanding Note, (a) change the
Stated Maturity of the principal of, or any installment of interest on, any
Note, (b) reduce the principal amount of, or the premium, if any, or interest
on, any Note, (c) reduce the amount payable upon a redemption or repurchase, (d)
modify the provisions with respect to the repurchase right of the Holders in a
manner adverse to the Holders, (e) change the obligation of the Company to pay
Additional Amounts described above in a manner adverse to the Holders, (f)
change the place or currency of payment of principal of, or premium, if any, or
interest on, any Note, (g) impair the right to institute suit for the
enforcement of any payment on or with respect to any Note, (h) modify the
obligation of the Company to maintain an office or agency in The City of New
York, (i) adversely affect the right to convert Notes, (j) modify the
subordination provisions in a manner adverse to the Holders of the Notes, (k)
reduce the above-stated percentage of Outstanding Notes necessary to modify or
amend the Indenture, (l) reduce the percentage of aggregate principal amount of
Outstanding Notes necessary for waiver of compliance with certain provisions of
the Indenture or for waiver of certain defaults, (m) reduce the percentage in
aggregate principal amount of Outstanding Notes required for the adoption of a
resolution or the quorum required at any meeting of Holders of Notes at which a
resolution is adopted, or (n) modify the obligation of the Company to deliver
information required under Rule 144A to permit resales of Notes and Common Stock
issuable upon conversion thereof in the event the Company ceases to be subject
to certain reporting requirements under the United States securities laws. The
quorum at any meeting called to adopt a resolution will be persons holding or
representing a majority in aggregate principal amount of the Outstanding Notes
and, at any reconvened meeting adjourned for lack of a quorum, 25% of such
aggregate principal amount.
The Indenture may also be modified or amended without the consent of the
Holders: (i) to evidence the succession of another Person to the Company as
otherwise permitted by the Indenture; (ii) to add to the covenants of the
Company for the benefit of the Holders of the Notes or to surrender any power
conferred upon the Company; (iii) to add any Events of Default; (iv) to secure
the Notes; (v) to make provision with respect to the conversion and repurchase
rights of Holders in accordance with the provisions of the Indenture; (vi) to
comply with the requirements of the Trust Indenture Act; or (vii) to cure any
ambiguity, to correct or supplement any provision which may be inconsistent with
any other provision or to make any other provisions with respect to matters or
questions arising under the Indenture, provided such action shall not adversely
affect the interest of Holders of Notes in any material respect.
The Holders of a majority in aggregate principal amount of the
Outstanding Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture by written consent. The Holders of a majority in
aggregate principal amount of the Outstanding Notes also may waive any past
default under the Indenture, except a default in the payment of principal,
premium, if any, or interest, by written consent.
REGISTRATION RIGHTS
The Company has entered into a registration rights agreement with the
initial purchasers (the "Registration Rights Agreement") pursuant to which the
Company is required, at the Company's expense for the benefit of the
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Holders of the Notes and the Common Stock issuable upon conversion thereof
(together, the "Registrable Securities"), (i) file with the Commission within 90
days after the date of original issuance of the Notes, a registration statement
(the "Shelf Registration Statement") covering resales of the Registrable
Securities, (ii) use its reasonable efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act within 180 days
after the date of original issuance of the Notes and (iii) use its reasonable
efforts to keep effective the Shelf Registration Statement until the second
anniversary of the last date of original issuance of Notes or such earlier date
as all Registrable Securities shall have been disposed of or on which all
Registrable Securities held by Persons that are not affiliates of the Company
may be resold without registration pursuant to Rule 144(k) under the Securities
Act (the "Effectiveness Period"). This Registration Statement has been filed
pursuant to the Company's obligations under the Registration Rights Agreement.
The Company will be permitted to suspend the use of the prospectus which is part
of the Shelf Registration Statement in connection with the sales of the
Registrable Securities during certain periods of time under certain
circumstances relating to pending corporate developments, public filings with
the Commission and other events. The Company will provide to each holder of
Registrable Securities copies of the prospectus that is a part of the Shelf
Registration Statement, notify each holder when the Shelf Registration Statement
has become effective and take certain other actions as are required to permit
public resales of the Registrable Securities. A holder of Registrable Securities
that sells such Registrable Securities pursuant to the Shelf Registration
Statement will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration Rights
Agreement, including certain indemnification obligations.
If (i) on or prior to 90 days following the date of original issuance of
the Notes a Shelf Registration Statement has not been filed with the Commission
or (ii) on or prior to the 180th day following the date of original issuance of
the Notes, such Shelf Registration Statement is not declared effective (each, a
"Registration Default"), additional interest ("Liquidated Damages") will accrue
on the Notes, from and including the day following such Registration Default
until such time as such Shelf Registration Statement is filed or such Shelf
Registration Statement is declared effective, as the case may be. Liquidated
Damages will be paid semi-annually in arrears, with the first semi-annual
payment due on the first interest payment date following the date on which such
Liquidated Damages begin to accrue, and will accrue at a rate per annum equal to
an additional one-quarter of one percent (0.25%) of the principal amount, to and
including the 90th day following such Registration Default and one-half of one
percent (0.50%) thereof from and after the 91st day following such Registration
Default. In the event that during the Effectiveness Period the Shelf
Registration Statement ceases to be effective for more than 90 days or the
Company suspends the use of the prospectus which is a part thereof for more than
90 days, whether or not consecutive, during any 12-month period, then the
interest rate borne by Notes will increase by an additional one-half of one
percent (0.50%) per annum from the 91st day of the applicable 12-month period
such Shelf Registration Statement ceases to be effective or the Company suspends
the use of the Prospectus which is a part thereof, as the case may be, until the
earlier of such time as (i) the Shelf Registration Statement again becomes
effective, (ii) the use of the related prospectus ceases to be suspended or
(iii) the Effectiveness Period expires. The Company will agree in the
Registration Rights Agreement to use its reasonable efforts to cause such Common
Stock issuable upon conversion of the Notes to be quoted on the New York Stock
Exchange, or, if the Common Stock is not then quoted on the New York Stock
Exchange, to be listed on such exchange or market in the United States as the
Common Stock is then listed, upon effectiveness of the Shelf Registration
Statement.
This summary of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all the provisions of the Registration Rights Agreement, a copy
of which has been filed as an exhibit to the Registration Statement.
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<PAGE> 32
TRANSFER AND EXCHANGE
At the option of the Holder upon request confirmed in writing, Notes
will be exchangeable at any time into an equal aggregate principal amount of
Notes of different authorized denominations.
Notes may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed) or exchange, at the office of the Note
Registrar, without service charge but, in the case of a transfer, upon payment
of any taxes and other governmental charges as described in the Indenture. Any
registration of transfer or exchange will be effected upon the Note Registrar
being satisfied with the documents of title and identity of the Person making
the request, and subject to such reasonable regulations as the Company may from
time to time agree upon with the Note Registrar, all as described in the
Indenture. Notes may be transferred in whole or in part in authorized
denominations at the office or agency of the Trustee in The City of New York or
the Corporate Trust Office of the Trustee in Los Angeles, California.
The Company has initially appointed the Trustee as Note Registrar. The
Company reserves the right to vary or terminate the appointment of the Note
Registrar or to appoint additional or other Note Registrars or to approve any
change in the office through which any Note Registrar acts, provided that there
will at all times be a Note Registrar in the City of New York.
In the event of a redemption of less than all of the Notes for any of
the reasons set forth above under "--Redemption," the Company will not be
required (a) to register the transfer or exchange of Notes for a period of 15
days immediately preceding the date notice is given identifying the serial
numbers of the Notes called for such redemption or (b) to register the transfer
of or exchange any Note, or portion thereof, called for redemption.
TITLE
The Company, the Trustee, any Paying Agent, any Conversion Agent and any
Note Registrar may treat the registered owner (as reflected in the Note
Register) of any Note as the absolute owner thereof (whether or not such Note
shall be overdue) for the purpose of making payment and for all other purposes.
NOTICES
Notice to Holders of Notes will be given by mail to the addresses of
such Holders as they appear on the Note Register. Such notices will be deemed to
have been given on the date of such mailing or on the date of the first such
publication, as the case may be.
Notice of a redemption of Notes will be given at least once not less
than 20 nor more than 60 days prior to the Redemption Date (which notice shall
be published in accordance with the procedures described in the preceding
paragraph) and shall be irrevocable and will specify the Redemption Date.
REPLACEMENT OF NOTES
Notes that become mutilated, destroyed, stolen or lost will be replaced
by the Company at the expense of the Holder upon delivery to the Trustee of the
mutilated Notes or evidence of the loss, theft or destruction thereof
satisfactory to the Company and the Trustee. In the case of a lost, stolen or
destroyed Note, indemnity satisfactory to the Trustee and the Company may be
required at the expense of the Holder of such Note before a replacement Note
will be issued.
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PAYMENT OF STAMP AND OTHER TAXES
The Company will pay all stamp and other duties, if any, which may be
imposed by the United States or any political subdivision thereof or taxing
authority thereof or therein with respect to the issuance of the Notes or the
issuance of Common Stock upon any conversion of Notes. Except as described under
"--Payment of Additional Amounts," the Company will not be required to make any
payment with respect to any other tax, assessment or governmental charge imposed
by any government or any political subdivision thereof or taxing authority
thereof or therein.
GOVERNING LAW
The Indenture, the Notes and the Registration Rights Agreement will be
governed by and construed in accordance with the laws of the State of New York,
United States of America.
INFORMATION CONCERNING THE TRUSTEE
State Street Bank and Trust Company of California, N.A., is the Trustee
under the Indenture. The Company may maintain deposit accounts and conduct other
banking transactions with the Trustee and its affiliates in the normal course of
business.
In case an Event of Default shall occur (and shall not be cured or
waived in a timely manner), the Trustee will be required to use the degree of
care of a prudent person in the conduct of his own affairs in the exercise of
its powers. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any of the Holders of Notes, unless they shall have offered to the Trustee
reasonable security or indemnity.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax
considerations relevant to holders of the Notes and Common Stock into which the
Notes may be converted. This discussion is based upon the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue Service
("IRS") rulings and judicial decisions now in effect, all of which are subject
to change (possibly with retroactive effect) or different interpretations. There
can be no assurance that the IRS will not challenge one or more of the tax
consequences described herein, and the Company has not obtained, nor does it
intend to obtain, a ruling from the IRS with respect to the U.S. federal income
tax consequences of acquiring or holding Notes or Common Stock. This discussion
does not purport to deal with all aspects of U.S. federal income taxation that
may be relevant to a particular holder in light of the holder's circumstances
(for example, persons subject to the alternative minimum tax provisions of the
Code). Also, it is not intended to be wholly applicable to all categories of
investors, some of which (such as dealers in securities, banks, insurance
companies, tax-exempt organizations, and persons holding Notes or Common Stock
as part of a hedging or conversion transaction or straddle or persons deemed to
sell Notes or Common Stock under the constructive sale provisions of the Code)
may be subject to special rules. The discussion also does not discuss any aspect
of state, local or foreign law, or U.S. federal estate and gift tax law as
applicable to U.S. Holders (as defined below). In addition, this discussion is
limited to original purchasers of Notes who acquire the Notes at their original
issue price within the meaning of Section 1273 of the Code, and who will hold
the Notes and Common Stock as "capital assets" within the meaning of Section
1221 of the Code.
ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK.
U.S. HOLDERS
As used herein, the term "U.S. Holder" means the beneficial holder of a
Note or Common Stock that for United States federal income tax purposes is (i) a
citizen or resident (as defined in Section 7701(b) of the Code) of the United
States, (ii) a corporation, partnership or other entity formed under the laws of
the United States or any political subdivision thereof, (iii) an estate the
income of which is subject to U.S. federal income taxation regardless of its
source, and (iv) in general, a trust subject to the primary supervision of a
court within the United States and the control of a United States person as
described in Section 7701(a)(30) of the Code. A "Non-U.S. Holder" is any holder
other than a U.S. Holder.
Interest
Stated interest on the Notes will generally be includable in a U.S.
Holder's gross income and taxable as ordinary income for U.S. federal income tax
purposes at the time it is paid or accrued in accordance with the U.S. Holder's
regular method of accounting. There are several circumstances under which the
Company could make a payment on a Note which would affect the yield to maturity
of a Note, including (as described under "Description of Notes") the payment of
Liquidated Damages, the payment of Additional Amounts, the redemption of a Note
by the Company, or the repurchase of a Note at the option of a Holder in the
event of a Fundamental Change. According to Treasury Regulations, the
possibility of a change in the interest rate will not affect the amount of
interest income recognized by a holder (or the timing of such recognition) if
the likelihood of the change, as of the date the debt obligations are issued, is
remote. The Company believes that the likelihood of a change in the interest
rate on the Notes is remote and does not intend to treat the possibility of a
change in the interest rate as affecting the yield to maturity of any Note.
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Conversion of Notes Into Common Stock
A U.S. Holder generally will not recognize any income, gain or loss upon
conversion of a Note into Common Stock except to the extent the Common Stock is
considered attributable to accrued interest not previously included in income
(which is taxable as ordinary income) or with respect to cash received in lieu
of a fractional share of Common Stock. The adjusted basis of shares of Common
Stock received on conversion will equal the adjusted basis of the Note converted
(reduced by the portion of adjusted basis allocated to any fractional share of
Common Stock exchanged for cash) and the holding period of the Common Stock
received on conversion will generally include the period during which the
converted Notes were held. However, a U.S. Holder's tax basis in shares of
Common Stock considered attributable to accrued interest as described above
generally will equal the amount of such accrued interest included in income, and
the holding period for such shares shall begin as of the date of conversion.
The conversion price of the Notes is subject to adjustment under certain
circumstances. Section 305 of the Code and the Treasury Regulations issued
thereunder may treat the holders of the Notes as having received a constructive
distribution, resulting in ordinary income (subject to a possible dividends
received deduction in the case of corporate holders) to the extent of the
Company's current and/or accumulated earnings and profits, if, and to the extent
that certain adjustments in the conversion price that may occur in limited
circumstances (particularly an adjustment to reflect a taxable dividend to
holders of Common Stock) increase the proportionate interest of a holder of
Notes in the fully diluted Common Stock, whether or not such holder ever
exercises its conversion privilege. Moreover, if there is not a full adjustment
to the conversion ratio of the Notes to reflect a stock dividend or other event
increasing the proportionate interest of the holders of outstanding Common Stock
in the assets or earnings and profits of the Company, then such increase in the
proportionate interest of the holders of the Common Stock generally will be
treated as a distribution to such holders, taxable as ordinary income (subject
to a possible dividends received deduction in the case of corporate holders) to
the extent of the Company's current and/or accumulated earnings and profits.
Sale, Exchange or Retirement of the Notes
Each U.S. Holder generally will recognize gain or loss upon the sale,
exchange, redemption, retirement or other disposition of Notes measured by the
difference (if any) between (i) the amount of cash and the fair market value of
any property received (except to the extent that such cash or other property is
attributable to the payment of accrued interest not previously included in
income, which amount will be taxable as ordinary income) and (ii) such holder's
adjusted tax basis in the Notes. Any such gain or loss recognized on the sale,
exchange, redemption, retirement or other disposition of a Note should be
capital gain or loss and will generally be long-term capital gain or loss if the
Note has been held or deemed held for more than one year at the time of the sale
or exchange. On August 5, 1997, legislation was enacted which, among other
things, reduces to 20% the maximum rate of U.S. federal tax on long-term capital
gains on most capital assets held by an individual for more than 18 months. In
addition, under this legislation, gain on most capital assets held by an
individual more than one year and up to 18 months is subject to U.S. federal tax
at a maximum rate of 28%. A holder's initial basis in a Note will be the amount
paid therefor.
The Common Stock
Distributions, if any, paid on the Common Stock after a conversion, to
the extent made from current and/or accumulated earnings and profits of the
Company, as determined for U.S. federal income tax purposes, will be included in
a U.S. Holder's income as ordinary income (subject to a possible dividends
received deduction in the case of corporate holders) as they are paid. Gain or
loss realized on the sale or exchange of Common Stock will equal the difference
between the amount realized on such sale or exchange and the U.S. Holder's
adjusted tax basis
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in such Common Stock. Such gain or loss will generally be long-term capital gain
or loss if the holder has held or is deemed to have held the Common Stock for
more than one year. On August 5, 1997, legislation was enacted that reduces to
20% the maximum U.S. federal rate of tax on long-term capital gains on most
capital assets held by an individual for more than 18 months. In addition, under
this legislation, gain on most capital assets held by an individual more than
one year and up to 18 months is subject to U.S. federal tax at a maximum rate of
28%.
Information Reporting and Backup Withholding
A U.S. Holder of Notes or Common Stock may be subject to "backup
withholding" at a rate of 31% with respect to certain "reportable payments,"
including interest payments, dividend payments and, under certain circumstances,
principal payments on the Notes. These backup withholding rules apply if the
holder, among other things (i) fails to furnish a social security number or
other taxpayer identification number ("TIN") certified under penalties of
perjury within a reasonable time after the request therefor, (ii) furnishes an
incorrect TIN, (iii) fails to report properly interest or dividends, or (iv)
under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN furnished is the correct number and
that such holder is not subject to backup withholding. A holder who does not
provide the Company with its correct TIN also may be subject to penalties
imposed by the IRS. Any amount withheld from a payment to a holder under the
backup withholding rules is creditable against the holder's federal income tax
liability, provided that the required information is furnished to the IRS.
Backup withholding will not apply, however, with respect to payments made to
certain holders, including corporations, tax-exempt organizations and certain
foreign persons, provided their exemptions from backup withholding are properly
established.
The Company will report to the U.S. Holders of Notes and Common Stock
and to the IRS the amount of any "reportable payments" for each calendar year
and the amount of tax withheld, if any, with respect to such payments.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a Non-U.S. Holder.
For purposes of withholding tax on interest and dividends discussed
below, a Non-U.S. Holder (as defined above) includes a non-resident fiduciary of
an estate or trust. For purposes of the following discussion, interest,
dividends and gain on the sale, exchange or other disposition of a Note or
Common Stock will be considered to be "U.S. trade or business income" if such
income or gain is (i) effectively connected with the conduct of a U.S. trade or
business or (ii) in the case of a treaty resident, attributable to a permanent
establishment (or, in the case of an individual, a fixed base) in the United
States.
Stated Interest
Generally any interest paid to a Non-U.S. Holder of a Note that is not
U.S. trade or business income will not be subject to U.S. tax if the interest
qualifies as "portfolio interest." Generally interest on the Notes will qualify
as portfolio interest if (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total voting power of all voting stock of
the Company and is not a "controlled foreign corporation" with respect to which
the Company is a "related person" within the meaning of the Code, (ii) the
beneficial owner, under penalty of perjury, certifies that the beneficial owner
is not a U.S. person and such certificate provides the beneficial owner's name
and address, (iii) the Non-U.S. Holder is not a bank receiving interest on an
extension of credit made pursuant to a loan agreement made in the ordinary
course of its trade or business, and (iv) the Notes are in registered form.
-35-
<PAGE> 37
The gross amount of payments to a Non-U.S. Holder of interest that do
not qualify for the portfolio interest exemption and that are not U.S. trade or
business income will be subject to U.S. federal income tax at the rate of 30%,
unless a U.S. income tax treaty applies to reduce or eliminate withholding. U.S.
trade or business income will be taxed at regular U.S. rates rather than the 30%
gross rate. In the case of a Non-U.S. Holder that is a corporation, such U.S.
trade or business income may also be subject to the branch profits tax (which is
generally imposed on a foreign corporation on the actual or deemed repatriation
from the United States of earnings and profits attributable to U.S. trade or
business income) at a 30% rate. The branch profits tax may not apply (or may
apply at a reduced rate) if a recipient is a qualified resident of certain
countries with which the United States has an income tax treaty. To claim the
benefit of a tax treaty or to claim exemption from withholding because the
income is U.S. trade or business income, the Non-U.S. Holder must provide a
properly executed Form 1001 or 4224 (or such successor forms as the IRS
designates), as applicable, prior to the payment of interest. These forms must
be periodically updated. Under recently issued Treasury Regulations that will
generally be effective after December 31, 1998 (the "New Regulations"), the
Forms 1001 and 4224 will be replaced by a new Form W-8. Under the New
Regulations, a Non-U.S. Holder who is claiming the benefits of a treaty may be
required to obtain a U.S. taxpayer identification number and make certain
certifications. Special procedures are provided in the New Regulations for
payments through qualified intermediaries. Prospective investors should consult
their tax advisors regarding the effect, if any, of the New Regulations.
Dividends
In general, dividends paid to a Non-U.S. Holder of Common Stock will be
subject to withholding of U.S. federal income tax at a 30% rate unless such is
reduced by an applicable income tax treaty. Dividends that are connected with
such holder's conduct of a trade or business in the United States (U.S. trade or
business income) are generally subject to U.S. federal income tax at regular
rates, but are not generally subject to the 30% withholding tax if the Non-U.S.
Holder files the appropriate form with the payor, as discussed above. Any U.S.
trade or business income received by a Non-U.S. Holder that is a corporation may
also, under certain circumstances, be subject to an additional "branch profits
tax" at a 30% rate or such lower rate as may be applicable under an income tax
treaty. Currently, dividends paid to an address in a foreign country generally
are presumed (absent actual knowledge to the contrary) to be paid to a resident
of such country for purposes of the withholding discussed above and for purposes
of determining the applicability of a tax treaty rate. Under the New
Regulations, a Non-U.S. Holder claiming the benefits of a treaty generally will
be required to provide a Form W-8 (or suitable substitute form) certifying such
Non-U.S. Holder's entitlements to treaty benefits. Other recently adopted
regulations that will be effective with respect to payments made after December
31, 1997, provide special rules to determine whether, for purposes of
determining the applicability of a tax treaty, dividends paid to a Non-U.S.
Holder that is an entity should be treated as paid to the entity or those
holding an interest in that entity. Prospective investors should consult their
tax advisors regarding the effect, if any, of these new regulations.
A Non-U.S. Holder of Common Stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income treaty may obtain a refund of any
amounts currently withheld by filing an appropriate claim for a refund with the
IRS.
Conversion
A Non-U.S. Holder generally will not be subject to U.S. federal income
tax on the conversion of Notes into Common Stock, except with respect to cash
(if any) received in lieu of a fractional share or interest not previously
included in income. Cash received in lieu of a fractional share may give rise to
gain that would be subject to the rules described below for the sale of Common
Stock. Cash or Common Stock treated as issued for accrued interest would be
treated as interest under the rules described above.
-36-
<PAGE> 38
Sale, Exchange or Redemption of Notes or Common Stock
Except as described below and subject to the discussion concerning
backup withholding, any gain realized by a Non-U.S. Holder on the sale, exchange
or redemption of a Note or Common Stock generally will not be subject to U.S.
federal income tax, unless (i) such gain is U.S. trade or business income, (ii)
subject to certain exceptions, the Non-U.S. Holder is an individual who holds
the Note or Common Stock as a capital asset and is present in the United States
for 183 days or more in the taxable year of the disposition, (iii) the Non-U.S.
Holder is subject to tax pursuant to the provisions of U.S. tax law applicable
to certain U.S. expatriates (including certain former citizens or residents of
the United States), or (iv) in the case of the disposition of Common Stock, the
Company is a U.S. real property holding corporation. The Company does not
believe that it is currently a "United States real property holding
corporation," or that it will become one in the future.
Federal Estate Tax
Notes held (or treated as held) by an individual who is not a citizen or
resident of the United States (for federal estate tax purposes) at the time of
his or her death will not be subject to U.S. federal estate tax provided that
the interest thereon qualifies as portfolio interest and was not U.S. trade or
business income. Common Stock owned or treated as owned by an individual who is
not a citizen or resident of the United States (for federal estate tax purposes)
will be included in such individual's estate for U.S. federal income tax
purposes unless an applicable estate tax treaty otherwise applies.
Information Reporting and Backup Withholding
The Company must report annually to the IRS and to each Non-U.S. Holder
any interest or dividend that is subject to withholding, or that is exempt from
U.S. withholding tax pursuant to a tax treaty, or interest that is exempt from
U.S. tax under the portfolio interest exception. Copies of these information
returns may also be made available under the provisions of a specific treaty or
agreement to the tax authorities of the country in which the Non-U.S. Holder
resides.
Treasury Regulations provide that backup withholding and additional
information reporting will not apply to payments of principal on the Notes by
the Company to a Non-U.S. Holder if the holder certifies as to its Non-U.S.
status under penalties of perjury or otherwise establishes an exemption
(provided that neither the Company nor its Paying Agent has actual knowledge
that the holder is a U.S. person or that the conditions of any other exemption
are not, in fact, satisfied).
The payment of the proceeds from the disposition of Notes or Common
Stock to or through the U.S. office of any broker, U.S. or foreign, will be
subject to information reporting and possible backup withholding unless the
owner certifies as to its Non-U.S. Holder status under penalty of perjury or
otherwise establishes an exemption, provided that the broker does not have
actual knowledge that the holder is a U.S. person or that the conditions of any
other exemption are not, in fact, satisfied. The payment of the proceeds from
the disposition of a Note or Common Stock to or through a non-U.S. office of a
non-U.S. broker that is not a U.S. related person will not be subject to
information reporting or backup withholding. For this purpose, a "U.S. related
person" is (i) a "controlled foreign corporation" for U.S. federal income tax
purposes, (ii) a foreign person 50% or more of whose gross income from all
sources for the three-year period ending with the close of its taxable year
preceding the payment (or for such part of the period that the broker has been
in existence) is derived from activities that are effectively connected with the
conduct of a U.S. trade or business, or (iii) with respect to payments made
after December 31, 1998, a foreign partnership that, at any time during its
taxable year, is 50% or more (by income or capital interest) owned by United
States persons or is engaged in the conduct of a United States trade or
business.
-37-
<PAGE> 39
In the case of the payment of proceeds from the disposition of Notes or
Common Stock to or through a non-U.S. office of a broker that is either a U.S.
person or a U.S. related person, information reporting is required on the
payment unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Holder and the broker has no knowledge to the contrary.
Any amounts withheld under the backup withholding rules from a payment
to a Non-U.S. Holder will be allowed as a refund or a credit against such
Non-U.S. Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISER AS TO PARTICULAR
TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND THE
COMMON STOCK OF THE COMPANY, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE
LAWS.
-38-
<PAGE> 40
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds of the sale of the
Notes and the Conversion Shares (the "Securities") offered hereby. The
Securities may be sold from time to time to purchasers directly by the Selling
Securityholders. Alternatively, the Selling Securityholders may from time to
time offer the Securities through brokers, dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Securities for whom they
may act as agent. The Selling Securityholders and any such brokers, dealers or
agents who participate in the distribution of the Securities may be deemed to be
"underwriters," and any profits on the sale of the Securities by them and any
discounts, commissions or concessions received by any such brokers, dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the Selling Securityholders may be deemed to be
underwriters, the Selling Securityholders may be subject to certain statutory
liabilities of, including, but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Exchange Act.
The Securities offered hereby may be sold from time to time in one or
more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
The Securities may be sold by one or more of the following methods, without
limitation: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the Securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (d) an exchange
distribution in accordance with the rules of such exchange; (e) face-to-face
transactions between sellers and purchasers without a broker-dealer; and (f)
through the writing of options. At any time a particular offer of the Securities
is made, a revised Prospectus or Prospectus Supplement, if required, will be
distributed which will set forth the aggregate amount and type of Securities
being offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, any discounts, commissions, concessions and
other items constituting compensation from the Selling Securityholders and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
Such Prospectus Supplement and, if necessary, a post-effective amendment to the
Registration Statement of which this Prospectus is a part, will be filed with
the Commission to reflect the disclosure of additional information with respect
to the distribution of the Securities. In addition, the Securities covered by
this Prospectus may be sold in private transactions or under Rule 144 rather
than pursuant to this Prospectus.
To the best knowledge of the Company, there are currently no plans,
arrangement or understandings between any Selling Securityholders and any
broker, dealer, agent or underwriter regarding the sale of the Securities by the
Selling Securityholders. There is no assurance that any Selling Securityholder
will sell any or all of the Securities offered by it hereunder or that any such
Selling Securityholder will not transfer, devise or gift such Securities by
other means not described herein.
The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M which may limit the timing of purchases and sales of any of the Securities by
the Selling Securityholders and any other such person. Furthermore, Regulation M
of the Exchange Act may restrict the ability of any person engaged in the
distribution of the Securities to engage in market-making activities with
respect to the particular Securities being distributed for a period of up to
five business days prior to the commencement of such distribution. All of the
foregoing may affect the marketability of the Securities and the ability of any
person or entity to engage in market-making activities with respect to the
Securities.
Pursuant to the Registration Rights Agreement entered into in connection
with the offer and sale of the Notes by the Company, each of the Company and the
Selling Securityholders will be indemnified by the other
-39-
<PAGE> 41
against certain liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith.
The Company has agreed to pay substantially all of the expenses
incidental to the registration, offering and sale of the Securities to the
public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Notes and the
Conversion Shares offered hereby will be passed upon for the Company by Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the fiscal year ended December
30, 1996 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
-40-
<PAGE> 42
================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information and representations must not be relied upon as having
been authorized by the Company. This Prospectus does not constitute an offer to
sell or a solicitation of any offer to buy the securities described herein by
anyone in any jurisdiction in which such offer or solicitation is not
authorized, or in and which the person making the offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. Under no circumstances shall the delivery of this Prospectus or
any sale made pursuant to this Prospectus create any implication that the
information contained in this Prospectus is correct as of any time subsequent to
the date of this Prospectus.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information....................................................... 2
Documents Incorporated by Reference......................................... 2
The Company................................................................. 3
The Offering................................................................ 4
Risk Factors................................................................ 6
Use of Proceeds............................................................. 15
Ratio of Earnings to Fixed Charges.......................................... 15
Selling Securityholders..................................................... 16
Description of Notes........................................................ 17
Certain United States Federal Income
Tax Considerations........................................................ 33
Plan of Distribution........................................................ 39
Legal Matters............................................................... 40
Experts..................................................................... 40
</TABLE>
CYPRESS
SEMICONDUCTOR
CORPORATION
$175,000,000
6% CONVERTIBLE SUBORDINATED
NOTES DUE 2002
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
----------------------
PROSPECTUS
----------------------
MARCH 17, 1998
================================================================================
<PAGE> 43
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the Selling Stockholders. All amounts are estimated except the
Securities and Exchange Commission registration fee.
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
SEC registration fee ............................................ $ 51,625
Accounting fees and expenses .................................... $ 25,000
Legal fees and expenses ......................................... $ 35,000
Miscellaneous fees and expenses ................................. $ 3,375
----------
Total ........................................................... $ 115,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 11 of the Company's Certificate of Incorporation provides that,
to the fullest extent permitted by Delaware law, as the same now exists or may
hereafter be amended, a director shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Delaware law provides that directors of a corporation will
not be personally liable for monetary damages for breach of their fiduciary
duties as directors, except for liability (i) for any breach of their duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law,
or (iv) for any transaction from which the director derived an improper personal
benefit.
Article VI of the Company's Bylaws provides that the Company (i) shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a director
or officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, and (ii) may indemnify any person who was or
is a, party or is threatened to be made a party to any threatened, pending or
contemplated action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was an employee or agent of the corporation, or
is or was serving at the request of the corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Bylaws provide that
the termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably
II-1
<PAGE> 44
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Article VI of the Company's Bylaws also provides that the Company (1)
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director or officer of the corporation, or is or was serving at
the request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, and (2) may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was an employee or agent of the corporation, or is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
The Bylaws further provide that, to the extent that a director or
officer of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to above, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith and to the extent that an employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim, issue
or matter therein, he may be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
The Company's Bylaws also permit the Company to secure insurance on
behalf of any officer, director, employee or other agent for any liability
arising out of his or her actions in such capacity, regardless of whether the
Bylaws would permit indemnification. The Company currently maintains liability
insurance for its officers and directors.
The Company has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Certificate of Incorporation and Bylaws. These agreements, among other things,
indemnify the Company's directors and officers for certain expenses (including
attorney's fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or officer of
the Company, any subsidiary of the Company or any other company or enterprise to
which the person provides services at the request of the Company.
II-2
<PAGE> 45
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------
<S> <C>
4.1 Indenture, dated as of September 15, 1997, between the Company and
State Street Bank and Trust Company of California, N.A., as Trustee,
including the form of Note.*
4.2 Form of Note (included in Exhibit 4.1).*
4.3 Registration Rights Agreement, dated as of September 15, 1997, among
the Company, Deutsche Morgan Grenfell Inc., Prudential Securities
Incorporated and Robertson, Stephens & Company LLC.*
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.*
12.1 Statement re computation of ratios of earnings to fixed charges.*
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).*
23.2 Consent of Price Waterhouse LLP.
24.1 Power of Attorney (see page II-5).*
25.1 Statement of Eligibility Under the Trust Indenture Act of 1939 of
a Corporation Designated to Act as Trustee on Form T-1.*
</TABLE>
- --------------
* Previously filed.
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933 (the "Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
II-3
<PAGE> 46
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that the undertakings set forth in clauses (i) and (ii) above
shall not apply if the information required to be included in a post-effective
amendment by these clauses is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. Insofar as indemnification of liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item 15 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
4. The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(b) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE> 47
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has caused this Amendment to
the Registration Statement (No. 333-42829) to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Santa Clara, State of
California, on March 17, 1998.
CYPRESS SEMICONDUCTOR CORPORATION
By /s/ T.J. Rodgers
----------------------------------------
T.J. Rodgers
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement (No. 333-42829) has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ T.J. Rodgers President, Chief Executive Officer March 17, 1998
- ----------------------------------- and Director (Principal Executive Officer)
T.J. Rodgers
* Chief Financial Officer, Vice President, March 17, 1998
- ----------------------------------- Finance and Administration (Principal
Emmanuel Hernandez Financial and Accounting Officer)
* Director March 17, 1998
- -----------------------------------
Pierre R. Lamond
* Director March 17, 1998
- -----------------------------------
John C. Lewis
* Director March 17, 1998
- -----------------------------------
Fred B. Bialek
* Director March 17, 1998
- -----------------------------------
Eric A. Benhamou
*By: /s/ T.J. Rodgers
-------------------------------
T.J. Rodgers, Attorney-in-Fact
</TABLE>
II-5
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------
<S> <C>
4.1 Indenture, dated as of September 15, 1997, between the Company and
State Street Bank and Trust Company of California, N.A., as Trustee,
including the form of Note.*
4.2 Form of Note (included in Exhibit 4.1).*
4.3 Registration Rights Agreement, dated as of September 15, 1997, among
the Company, Deutsche Morgan Grenfell Inc., Prudential Securities
Incorporated and Robertson, Stephens & Company LLC.*
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.*
12.1 Statement re computation of ratios of earnings to fixed charges.*
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).*
23.2 Consent of Price Waterhouse LLP.
24.1 Power of Attorney (see page II-5).*
25.1 Statement of Eligibility Under the Trust Indenture Act of 1939 of
a Corporation Designated to Act as Trustee on Form T-1.*
</TABLE>
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* Previously filed.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF PRICE WATERHOUSE LLP
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 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's Annual Report on
Form 10-K for the year ended December 30, 1996. We also consent to the
references to us under the headings "Experts" in such Prospectus.
Price Waterhouse LLP
San Jose, California
March 16, 1998
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
