<PAGE> 1
THIS PRELIMINARY PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, BUT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-67203
SUBJECT TO COMPLETION, DATED JANUARY 18, 2000
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 29, 1999
$200,000,000
LOGO
% Convertible Subordinated Notes
Due February 1, 2005
------------------
We will pay interest on the notes each February 1 and August 1. The first
interest payment will be made on August 1, 2000.
The notes are convertible at any time prior to maturity into shares of our
common stock at a conversion price of $ per share, subject to certain
adjustments. The notes are subordinated to our senior indebtedness and
structurally subordinated to all indebtedness and other liabilities of our
subsidiaries.
We may redeem the notes on or after February 5, 2003. Holders may require
us to repurchase the notes upon a change in control.
The last reported sale price of our common stock on The New York Stock
Exchange on January 14, 2000 was $37 1/16 per share.
The underwriters have an option to purchase a maximum of $30,000,000
additional principal amount of notes to cover over-allotments of notes.
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE S-6.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS CYPRESS(1)
--------- ------------- -----------
<S> <C> <C> <C>
Per Note............................................. % % %
Total................................................ $ $ $
</TABLE>
(1) Plus accrued interest, if any, from January , 2000.
Delivery of the notes in book-entry form only will be made on or about
January , 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement is truthful or complete. Any representation to the
contrary is a criminal offense.
CREDIT SUISSE FIRST BOSTON
PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES
ROBERTSON STEPHENS
SG COWEN
The date of this prospectus supplement is January , 2000.
<PAGE> 2
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
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PROSPECTUS SUPPLEMENT SUMMARY......... S-3
RISK FACTORS.......................... S-6
RATIO OF EARNINGS TO FIXED CHARGES.... S-14
USE OF PROCEEDS....................... S-14
DESCRIPTION OF NOTES.................. S-15
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS...................... S-22
</TABLE>
<TABLE>
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<S> <C>
UNDERWRITING.......................... S-24
NOTICE TO CANADIAN RESIDENTS.......... S-26
LEGAL MATTERS......................... S-26
EXPERTS............................... S-27
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
Page
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<S> <C>
SUMMARY............................... 2
RISK FACTORS.......................... 3
WHERE YOU CAN FIND MORE INFORMATION... 10
USE OF PROCEEDS....................... 11
RATIO OF EARNINGS TO FIXED CHARGES.... 11
</TABLE>
<TABLE>
<CAPTION>
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<S> <C>
DESCRIPTION OF THE DEBT SECURITIES.... 11
DESCRIPTION OF CAPITAL STOCK.......... 23
PLAN OF DISTRIBUTION.................. 25
LEGAL MATTERS......................... 26
EXPERTS............................... 26
</TABLE>
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
------------------
This prospectus supplement, the prospectus and the documents incorporated
by reference in this prospectus supplement contain forward-looking statements
that involve risks and uncertainties. We use words such as "anticipate,"
"believes," "expects," "future," "intends" and similar expressions to identify
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus
supplement. Our actual results could differ materially from those anticipated in
these forward-looking statements for many reasons, including the risks described
below under "Risk Factors" as well as those detailed from time to time in our
filings with the SEC.
"Cypress Semiconductor Corporation," "Cypress," and the Cypress logo in the
form appearing on the cover page of this prospectus supplement are trademarks of
Cypress Semiconductor Corporation. Other brands, names and trademarks contained
in this prospectus supplement are the property of their respective owners.
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<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
You should read the following summary together with the more detailed
information and consolidated financial statements, including the notes thereto,
and other financial information, included or incorporated by reference in this
prospectus supplement and the prospectus.
Unless the context otherwise requires, references in this prospectus
supplement and the prospectus to "we," "us" or "Cypress" refer to Cypress
Semiconductor Corporation and its consolidated subsidiaries. Unless otherwise
stated, information in this prospectus supplement and the prospectus assumes no
exercise of the underwriters' over-allotment option.
CYPRESS SEMICONDUCTOR CORPORATION
We design, develop, manufacture and market 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.
We currently offer approximately 500 products from our two business segments,
memory products and non-memory products. Our products are marketed worldwide
through a network of 25 North American sales offices, 6 North American
distributors, 26 U.S. sales representative firms, 7 European sales offices, 2
Japanese sales offices, 2 Chinese sales offices, an office in Singapore, an
office in Korea, an office in Taiwan, and 39 international sales representative
firms. We sell our products to a wide range of customers, including Alcatel,
Cisco Systems, Compaq, Hewlett-Packard, IBM, Lucent Technologies, Motorola,
Nortel, Seagate, and 3Com Corporation. During the first nine months of fiscal
1999, international sales accounted for approximately 47.7% of our total sales.
Our initial strategy upon our founding in 1982 was to provide innovative
high-performance CMOS (complementary metal-oxide silicon) integrated circuits to
niche markets that we believed were too small to attract larger competitors. In
1992, we modified our strategy to focus on selected high-volume products,
particularly memory products. This strategy was successful until 1996 when the
average selling prices of memory products began a steep decline. Today, we have
a diverse product line that is targeted at the communications market, an area
that is growing rapidly driven by the increasing amount of information on the
Internet. For the quarter ended January 2, 2000, approximately 40% of our
overall revenue was derived from memory products. Revenue from sales of
asynchronous static RAMs, which are generally viewed as commodity products, have
decreased from constituting more than 80% of our revenue from sales of memory
products during the first quarter of 1999 to approximately 50% during the fourth
quarter of 1999. Because of the highly competitive nature of the semiconductor
industry, its cyclicality and the downward trend average selling prices
typically experience over the life of any particular product, our ability to
successfully implement this strategy and achieve our revenue, earnings and gross
margin goals will depend upon a number of factors. These factors include our
ability to maintain our position in the high-performance semiconductor markets,
to increase our presence in the more competitive high-volume memory products
market, to continue to successfully design and develop new products utilizing
advanced semiconductor design and process technologies in a timely fashion, to
improve manufacturing yields and reduce manufacturing costs and product
development cycle time, and to effectively market and sell our products in light
of significant domestic and international competition.
RECENT DEVELOPMENTS
On January 18, 2000 we announced anticipated results for our fourth quarter
ended January 2, 2000. We announced that we expect our net revenue for the
fourth quarter will be between $206 million and $207 million, which would
represent an increase of approximately 12% from our third quarter of 1999 net
revenue of $184.5 million, and an increase of approximately 42% from our fourth
quarter of 1998 net revenue of $146.5 million. We attribute the increase in net
revenue to strong demand for our products particularly in the communications
segment.
We also announced that our diluted earnings per share, or EPS, for the
fourth quarter of 1999 is expected to be between $0.39 and $0.40 per share. This
EPS reflects a pre-tax, non-recurring net benefit
S-3
<PAGE> 4
of $12 million, including gains from sale of investments, which utilized
substantially all of our net operating loss tax benefits. Excluding this
non-recurring net benefit and pre-tax acquisition related charges and goodwill
of $1.7 million, our earnings before goodwill, or EBG, for the fourth quarter of
1999 is expected to be between $0.31 and $0.32 per share, representing an
improvement of 29% to 33% from our EBG for the third quarter of 1999 of $0.24
per share and an improvement from our EBG for the fourth quarter of 1998 which
was a loss of $0.02 per share.
On January 11, 2000, we signed a definitive merger agreement with
Galvantech, Inc., a privately held company, for Galvantech to merge with us.
Galvantech, a company specializing in niche high performance memories for data
communications applications, had average quarterly revenues of approximately
$10.7 million during the last three quarters. The agreement provides for us to
issue approximately 3.6 million shares in exchange for all outstanding stock and
options of Galvantech. The merger is intended to be accounted for as a pooling
of interests. The closing is subject to regulatory approvals, approval by the
shareholders of Galvantech, and other customary conditions. Accordingly, we
cannot assure you that the merger will be completed.
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<PAGE> 5
THE OFFERING
Securities Offered......... $200,000,000 principal amount of % Convertible
Subordinated Notes Due February 1, 2005 (plus up to
an additional $30,000,000 principal amount of notes
issuable upon exercise in full of the over-
allotment option by the underwriters).
Interest................... The notes will bear interest at an annual rate of
%. Interest is payable on February 1 and
August 1 of each year, beginning August 1, 2000.
Maturity Date.............. February 1, 2005.
Conversion Rights.......... The notes are convertible at any time prior to
maturity into shares of our common stock at a
conversion price of $ per share, subject to
certain adjustments.
Optional Redemption by the
Company.................. We may redeem the notes on or after February 5,
2003 at the redemption prices set forth in this
prospectus supplement.
Sinking Fund............... None.
Change in Control.......... Upon a change in control, you may require us to
purchase your notes at 100% of the principal amount
of the notes plus accrued and unpaid interest to,
but excluding, the purchase date. We may not have
sufficient funds to pay the purchase price for all
duly tendered notes upon a change in control.
Subordination.............. The notes will be general unsecured obligations of
Cypress. The notes will be subordinated in right of
payment to all existing and future senior
indebtedness and structurally subordinated to the
indebtedness and other liabilities of our
subsidiaries. As of October 3, 1999, we had
approximately $111.5 million of senior indebtedness
and our subsidiaries had approximately $86.5
million of outstanding liabilities. We are not
prohibited from incurring senior indebtedness or
other debt under the indenture.
Use of Proceeds............ We intend to use the net proceeds for general
corporate purposes, including capital expenditures
and working capital. See "Use of Proceeds."
Common Stock............... Our common stock is traded on The New York Stock
Exchange under the symbol "CY."
S-5
<PAGE> 6
RISK FACTORS
You should carefully consider the risks described below before
participating in this offering. If any of the following risks actually occur,
our business, financial condition and operating results could be seriously
harmed, the trading price of our common stock could decline, and you might lose
all or part of your investment.
RISKS RELATED TO OUR BUSINESS
OUR FUTURE OPERATING RESULTS ARE VERY LIKELY TO FLUCTUATE AND THEREFORE MAY FAIL
TO MEET EXPECTATIONS.
Our operating results have varied widely in the past and may continue to
fluctuate in the future. In addition, our operating results may not follow any
past trends. Our future operating results will depend on many factors and may
fluctuate and fail to meet our expectations or those of others for a variety of
reasons, including the following:
- the intense competitive pricing pressure to which our products are
subject, which can lead to rapid and unexpected declines in average
selling prices;
- the complexity of our manufacturing processes and the sensitivity of our
production costs to declines in manufacturing yields, which make yield
problems both possible and costly when they occur; and
- the need for constant, rapid new product introductions, which present an
ongoing design and manufacturing challenge, which can be significantly
impacted by even relatively minor errors, and which may result in
products never achieving expected market demand.
As a result of these or other factors we could fail to achieve our
expectations as to future revenues, gross profit and income from operations. Any
downward fluctuation or failure to meet expectations will likely adversely
affect the value of your investment in the notes and the underlying common
stock. Also, the performance of the semiconductor industry as a whole is
characterized by cyclical swings in revenue and profitability and these swings
may harm us.
Because we recognize revenues from sales to our domestic distributors only
when these distributors make a sale to customers, we are highly dependent on the
accuracy of their resale estimates. The occurrence of inaccurate estimates also
contributes to the difficulty in predicting our quarterly revenue and results of
operations.
WE FACE PERIODS OF INDUSTRY-WIDE SEMICONDUCTOR OVER-SUPPLY THAT HARM OUR
RESULTS.
The semiconductor industry has historically been characterized by wide
fluctuations in the demand for, and supply of, semiconductors, and these
fluctuations have helped produce many occasions when supply and demand for
semiconductors have not been in balance. In the past, our operating results have
been harmed by these industry-wide fluctuations in the demand for
semiconductors, which have resulted in under-utilization of our manufacturing
capacity. In some cases, industry downturns with these characteristics have
lasted more than a year. If these cycles continue, they will seriously harm our
business, financial condition and results of operations.
OUR FINANCIAL RESULTS COULD BE SERIOUSLY HARMED IF THE MARKETS IN WHICH WE SELL
OUR PRODUCTS DO NOT GROW.
Our continued success depends in large part on the continued growth of
various electronics industries that use our semiconductors, including the
following industries:
- data communications and telecommunications equipment;
- computers and computer related peripherals;
- automotive electronics;
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<PAGE> 7
- industrial controls; and
- consumer electronics equipment and military equipment.
A significant portion of our products are incorporated into data
communications and telecommunications end-products. Any decline in the demand
for networking applications, mass storage, telecommunications, cellular base
stations, cellular handsets and other personal communication devices that
incorporate our products could seriously harm our business, financial condition
and operating results. In addition, certain of our products, including Universal
Serial Bus microcontrollers, high-frequency clocks and static RAMs, are
incorporated into computer and computer-related products, which have
historically experienced significant fluctuations in demand. We may also be
seriously harmed by slower growth in the other markets in which we sell our
products.
WE ARE AFFECTED BY A GENERAL PATTERN OF PRODUCT PRICE DECLINE AND FLUCTUATIONS,
WHICH CAN HARM OUR BUSINESS.
Even in the absence of an industry downturn, the average selling prices of
our products have historically decreased during the products' lives, and we
expect this trend to continue. In order to offset these average selling price
decreases, we attempt to decrease manufacturing costs of our products, and to
introduce new, higher priced products that incorporate advanced features. If
these efforts are not successful or do not occur in a timely manner, or if our
newly introduced products do not gain market acceptance, our business, financial
condition and results of operations could be seriously harmed.
In addition to following the general pattern of decreasing average selling
prices, the selling prices for certain products, particularly commodity static
RAM products, fluctuate significantly with real and perceived changes in the
balance of supply and demand for these products. Growth in the worldwide supply
of static RAMs in recent periods resulted in a decrease in average selling
prices for such products. In the event we are unable to decrease per unit
manufacturing costs faster than the rate at which average selling prices
continue to decline, our business, financial condition and results of operations
will be seriously harmed. In addition, we expect our competitors to invest in
new manufacturing capacity and achieve significant manufacturing yield
improvements in the future. These developments could dramatically increase the
worldwide supply of static RAM products and result in associated downward
pressure on prices.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND MAY
FACE SIGNIFICANT EXPENSES AS A RESULT OF ONGOING OR FUTURE LITIGATION.
Protection of our intellectual property rights is essential to keep others
from copying the innovations that are central to our existing and future
products. Consequently, we may become involved in litigation to enforce our
patents or other intellectual property rights, to protect our trade secrets and
know-how, to determine the validity or scope of the proprietary rights of
others, or to defend against claims of invalidity. This type of litigation can
be expensive, regardless of whether we win or lose.
Also, we are now and may again become involved in litigation relating to
alleged infringement by us of others' patents or other intellectual property
rights. This type of litigation is frequently expensive to both the winning
party and the losing party and takes up significant amounts of management's time
and attention. In addition, if we lose such a lawsuit, a court could require us
to pay substantial damages and/or royalties or prohibit us from using essential
technologies. For these and other reasons, this type of litigation could
seriously harm our business, financial condition and results of operations.
Also, although we may seek to obtain a license under a third party's
intellectual property rights in order to bring an end to certain claims or
actions asserted against us, we may not be able to obtain such a license on
reasonable terms or at all.
We have entered into technology license agreements with third parties that
give those parties the right to use patents and other technology developed by
us, and that give us the right to use patents and other technology developed by
them. We anticipate that we will continue to enter into these kinds of licensing
S-7
<PAGE> 8
arrangements in the future. It is possible however, that licenses we want will
not be available to us on commercially reasonable terms. If we lose existing
licenses to key technology, or are unable to enter into new licenses which we
deem important, our business, financial condition and results of operations
could be seriously harmed.
Because it is critical to our success that we are able to prevent
competitors from copying our innovations, we intend to continue to seek patent,
trade secret and mask work protection for our semiconductor manufacturing
technologies. The process of seeking patent protection can be long and
expensive, and we cannot be certain that any currently pending or future
applications will actually result in issued patents, or that, even if patents
are issued, they will be of sufficient scope or strength to provide meaningful
protection or any commercial advantage to us. Furthermore, others may develop
technologies that are similar or superior to our technology or design around the
patents we own.
We also rely on trade secret protection for our technology, in part through
confidentiality agreements with our employees, consultants and third parties.
However, these parties may breach these agreements, and we may not have adequate
remedies for any breach. Also, others may come to know about or determine our
trade secrets through a variety of methods. In addition, the laws of certain
territories in which we develop, manufacture or sell our products may not
protect our intellectual property rights to the same extent as the laws of the
United States.
OUR FINANCIAL RESULTS COULD BE ADVERSELY IMPACTED IF WE FAIL TO DEVELOP,
INTRODUCE AND SELL NEW PRODUCTS OR FAIL TO DEVELOP AND IMPLEMENT NEW
MANUFACTURING TECHNOLOGIES.
Like many semiconductor companies, which frequently operate in a highly
competitive, quickly changing environment marked by rapid obsolescence of
existing products, our future success depends on our ability to develop and
introduce new products that customers choose to buy. We introduce significant
numbers of product each year, which are an important source of revenue for us.
If we fail to compete and introduce new product designs in a timely manner or
are unable to manufacture products according to the requirements of these
designs (discussed more below), or if our customers do not successfully
introduce new systems or products incorporating ours, or market demand for our
new products does not exist as anticipated, our business, financial condition
and results of operations could be seriously harmed.
For us and many other semiconductor companies, introduction of new products
is a major manufacturing challenge. The new products the market requires tend to
be increasingly complex, incorporating more functions and operating at faster
speeds than prior products. Increasing complexity generally requires smaller
features on a chip. This makes manufacturing new generations of products
substantially more difficult than prior products. Ultimately, whether we can
successfully introduce these and other new products depends on our ability to
develop and implement new ways of manufacturing semiconductors. If we are unable
to design, develop, manufacture, market and sell new products successfully, our
business, financial condition and results of operations would be seriously
harmed.
INTERRUPTIONS IN THE AVAILABILITY OF RAW MATERIALS CAN SERIOUSLY HARM OUR
FINANCIAL PERFORMANCE.
Our semiconductor manufacturing operations require raw materials that must
meet exacting standards. We generally have available more than one source of
these materials, but there are only a limited number of suppliers capable of
delivering certain raw materials that meet our standards. If we need to use
other companies as suppliers, they must go through a qualification process. In
addition, the raw materials we need for our business could become scarcer as
worldwide demand for semiconductors increases. Interruption of our sources of
raw materials could seriously harm our business, financial condition and results
of operations.
PROBLEMS IN THE PERFORMANCE OF OTHER COMPANIES WE HIRE TO PERFORM CERTAIN
MANUFACTURING TASKS CAN SERIOUSLY HARM OUR FINANCIAL PERFORMANCE.
A high percentage of our products are assembled, packaged and tested at our
manufacturing facility located in the Philippines. We rely on independent
subcontractors to assemble, package and test the
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<PAGE> 9
balance of our products. This reliance involves certain risks, because we have
less control over manufacturing quality and delivery schedules, whether these
companies have adequate capacity to meet our needs and whether or not they
discontinue or phase-out assembly processes we require. We cannot be certain
that these subcontractors will continue to assemble, package and test products
for us, and it might be difficult for us to find alternatives if they do not do
so.
THE COMPLEX NATURE OF OUR MANUFACTURING ACTIVITIES MAKES US HIGHLY SUSCEPTIBLE
TO MANUFACTURING PROBLEMS AND THESE PROBLEMS CAN HAVE SUBSTANTIAL NEGATIVE
IMPACT ON US WHEN THEY OCCUR.
Making semiconductors is a highly complex and precise process, requiring
production in a tightly controlled, clean environment. Even very small
impurities in our manufacturing materials, difficulties in the wafer 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 chips on
each wafer to be nonfunctional. We may experience problems in achieving an
acceptable success rate in the manufacture of wafers, and the likelihood of
facing such difficulties is higher in connection with the transition to new
manufacturing methods. The interruption of wafer fabrication or the failure to
achieve acceptable manufacturing yields at any of our facilities would seriously
harm our business, financial condition and results of operations. We may also
experience manufacturing problems in our assembly and test operations and in the
introduction of new packaging materials.
WE MAY NOT BE ABLE TO USE ALL OF OUR EXISTING OR FUTURE MANUFACTURING CAPACITY,
WHICH CAN NEGATIVELY IMPACT OUR BUSINESS.
We have spent, and expect to continue to spend, significant amounts of
money to upgrade and increase our wafer fabrication, assembly and test
manufacturing capability and capacity. If we do not need some of this capacity
and capability for any of a variety of reasons, including inadequate demand or a
significant shift in the mix of product orders that makes our existing capacity
and capability inadequate or in excess of our actual needs, our fixed costs per
semiconductor produced will increase, which will harm us. In addition, if the
need for more advanced products requires accelerated conversion to technologies
capable of manufacturing semiconductors having smaller features, or requires the
use of larger wafers, we are likely to face higher operating expenses and may
need to write-off capital equipment made obsolete by the technology conversion,
either of which could seriously harm our business and results of operations.
OUR OPERATIONS AND FINANCIAL RESULTS COULD BE SEVERELY HARMED BY CERTAIN NATURAL
DISASTERS.
Our headquarters and some manufacturing facilities and some of our major
vendors' facilities are located near major earthquake faults. If a major
earthquake or other natural disaster occurs, we could suffer damages that could
seriously harm our business, financial condition and results of operations.
OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION WILL BE SERIOUSLY
HARMED IF WE FAIL TO SUCCESSFULLY COMPETE IN OUR HIGHLY COMPETITIVE INDUSTRY AND
MARKETS.
The semiconductor industry is intensely competitive. This intense
competition results in a difficult operating environment for us and most other
semiconductor companies that is marked by erosion of average selling prices over
the lives of each product, rapid technological change, limited product life
cycles and strong domestic and foreign competition in many markets. A primary
cause of this highly competitive environment is the strengths of our
competitors. The industry consists of major domestic and international
semiconductor companies, many of which have substantially greater financial,
technical, marketing, distribution and other resources than we do. We face
competition from other domestic and foreign high-performance integrated circuit
manufacturers, many of which have advanced technological capabilities and have
increased their participation in markets that are important to us. If we are
unable to compete successfully in this environment, our business, operating
results and financial condition will be seriously harmed.
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Our ability to compete successfully in the rapidly evolving high
performance portion of the semiconductor technology industry depends on many
factors, including:
- our success in developing new products and manufacturing technologies;
- the quality and price of our products;
- the diversity of our product lines;
- the cost-effectiveness of our design, development, manufacturing and
marketing efforts;
- the pace at which customers incorporate our products into their systems;
and
- the number and nature of our competitors and general economic conditions.
Although we believe we currently compete effectively in the above areas to the
extent they are within our control, given the pace of change in the industry,
our current abilities are not a guarantee of future success.
WE MUST BUILD SEMICONDUCTORS BASED ON OUR FORECASTS OF DEMAND, AND IF OUR
FORECASTS ARE INACCURATE, WE MAY HAVE LARGE AMOUNTS OF UNSOLD PRODUCTS OR WE MAY
NOT BE ABLE TO FILL ALL ORDERS.
We order materials and build semiconductors based primarily on our internal
forecasts, and secondarily on existing orders, which may be cancelled under many
circumstances. Consequently, we depend on our forecasts to determine inventory
levels for our products and the amount of manufacturing capacity that we need.
Because our markets are volatile and subject to rapid technological and price
changes, our forecasts may be wrong, and we may make too many or too few of
certain products or have too much or too little manufacturing capacity. Also,
our customers frequently place orders requesting product delivery almost
immediately after the order is made, which makes forecasting customer demand
even more difficult. The above factors also make it difficult to forecast
quarterly operating results. If we are unable to predict accurately the
appropriate amount of product required to meet customer demand, our business,
financial condition and results of operations could be seriously harmed.
WE MUST SPEND HEAVILY ON EQUIPMENT TO STAY COMPETITIVE, AND WILL BE ADVERSELY
IMPACTED IF WE ARE UNABLE TO SECURE FINANCING FOR SUCH INVESTMENTS.
In order to remain competitive semiconductor manufacturers generally must
spend heavily on equipment to maintain or increase manufacturing capacity and
capability. In particular, we have budgeted for $200 million in expenditures on
equipment in 2000 and anticipate significant continuing capital expenditures in
subsequent years. In the past, we have reinvested a substantial portion of our
cash flow from operations in capacity expansion and improvement programs.
However, our cash flows from operations depend primarily on average selling
prices, which generally decline over time, and the per-unit cost of our
products.
If we are unable to decrease costs for our products at a rate at least as
fast as the rate of the decline in selling prices for such products, we may not
be able to generate enough cash flow from operations to maintain or increase
manufacturing capability and capacity as necessary. In such a situation we would
need to seek financing from external sources to satisfy our needs for
manufacturing equipment and, if cash flow from operations declines too much, for
operational cash needs as well. However, such financing may not be available on
terms which are satisfactory to us or at all, in which case our business,
financial condition and results of operations will be seriously harmed.
WE COMPETE WITH OTHERS TO ATTRACT AND RETAIN KEY PERSONNEL, AND ANY LOSS OF, OR
INABILITY TO ATTRACT, SUCH PERSONNEL WOULD HARM US.
To a greater degree than most non-technology companies, we depend on the
efforts and abilities of certain key management and technical personnel. Our
future success depends, in part, upon our ability to retain such personnel, and
to attract and retain other highly qualified personnel, particularly product and
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process engineers. We compete for these individuals with other companies,
academic institutions, government entities and other organizations. Competition
for such personnel is intense and we may not be successful in hiring or
retaining new or existing qualified personnel. If we lose existing qualified
personnel or are unable to hire new qualified personnel as needed, our business,
financial condition and results of operations could be seriously harmed.
WE FACE ADDITIONAL PROBLEMS AND UNCERTAINTIES ASSOCIATED WITH INTERNATIONAL
OPERATIONS THAT COULD SERIOUSLY HARM US.
International sales represented approximately 47.7% of our revenues during
the first nine months of fiscal 1999 and approximately 42.8% of our revenues
during the same period in fiscal 1998. Our offshore assembly and test
operations, as well as our international sales, face risks frequently associated
with foreign operations, including:
- currency exchange fluctuations;
- political instability;
- changes in local economic conditions;
- the devaluation of local currencies;
- import and export controls; and
- changes in tax laws, tariffs and freight rates.
To the extent any such risks materialize, our business, financial condition
and results of operations could be seriously harmed.
WE ARE SUBJECT TO MANY DIFFERENT ENVIRONMENTAL REGULATIONS, AND COMPLIANCE WITH
THEM MAY BE COSTLY.
We are subject to many different governmental regulations related to the
storage, use, discharge and disposal of toxic, volatile or otherwise hazardous
chemicals used in our manufacturing process. Compliance with these regulations
can be costly. In addition, over the last several years, the public has paid a
great deal of attention to the potentially negative environmental impact of
semiconductor manufacturing operations. This attention and other factors may
lead to changes in environmental regulations that could force us to purchase
additional equipment or comply with other potentially costly requirements. If we
fail to control the use of, or to adequately restrict the discharge of,
hazardous substances under present or future regulations, we could face
substantial liability or suspension of our manufacturing operations, which could
seriously harm our business, financial condition and results of operations.
WE DEPEND ON THIRD PARTIES TO TRANSPORT OUR PRODUCTS AND COULD BE HARMED IF
THESE PARTIES EXPERIENCE PROBLEMS.
We rely on independent carriers and freight haulers to move our products
between manufacturing plants and to our customers. We have limited control over
these parties; however, any transport or delivery problems because of their
errors, or because of unforeseen interruptions in their activities due to
factors such as strikes, political instability, natural disasters and accidents,
could seriously harm our business, financial conditions and results of
operations and ultimately impact our relationship with our customers.
WE MAY FAIL TO INTEGRATE OUR BUSINESS AND TECHNOLOGIES WITH THOSE OF COMPANIES
THAT WE HAVE RECENTLY ACQUIRED AND THAT WE MAY ACQUIRE IN THE FUTURE.
We completed four acquisitions in calendar 1999, recently announced the
pending acquisition of Galvantech, Inc. and intend to pursue additional
acquisitions in the future. If we fail to successfully or properly integrate
these businesses, our quarterly and annual results may be seriously harmed.
Integrating
S-11
<PAGE> 12
additional businesses, products and services could be expensive, time-consuming
and a strain on our resources. Specific issues that we face with regard to prior
and future acquisitions include:
- the difficulty of integrating acquired technology or products;
- the difficulty of assimilating the personnel of the acquired companies;
- the difficulty of coordinating and integrating geographically dispersed
operations;
- our ability to retain customers of the acquired company;
- the potential disruption of our on-going business and distraction of
management;
- the maintenance of brand recognition of acquired businesses;
- the failure to successfully develop acquired in-process technology,
resulting in the impairment of amounts currently capitalized as
intangible assets;
- unanticipated expenses related to technology integration;
- the maintenance of uniform standards, corporate cultures, controls,
procedures and policies;
- the impairment of relationships with employees and customers as a result
of any integration of new management personnel; and
- the potential unknown liabilities associated with acquired businesses.
Our inability to address any of these risks could seriously harm our business.
Moreover, we cannot assure you that the acquisition of Galvantech, Inc. will be
completed.
WE FACE A NUMBER OF UNKNOWN RISKS ASSOCIATED WITH YEAR 2000 PROBLEMS.
The year 2000 computer issue creates a variety of risks for us. The year
2000 computer problem refers to the potential for system and processing failures
of date-related data as a result of computer-controlled systems using two digits
rather than four to define the applicable year. For example, computer programs
that have time-sensitive software may recognize a date represented as "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including among other
things, interruptions in manufacturing, design and process development
operations, disruptions in processing business transactions, and disruptions in
other normal business activities. Issues related to the year 2000 computer
problem could still arise. The risks involve:
- potential warranty or other claims by customers with respect to errors in
our products;
- errors in systems we use to run our business;
- errors in systems used by our suppliers;
- errors in systems used by customers; and
- potential reduced spending by customers as a result of concerns about
potential year 2000 problems.
We have designed most of our products to be year 2000 compliant and have
developed corrective measures for other products that were not originally
designed to be year 2000 compliant. However, our products may be integrated into
or used in conjunction with products supplied by other vendors. We cannot
evaluate whether all of the products of other vendors are year 2000 compliant.
We may face claims based on year 2000 problems in other companies' products or
based on issues arising from the integration or use of multiple products. We may
in the future be required to defend our products in legal proceedings which
could be expensive regardless of the merits of these claims.
If our suppliers, vendors, partners, customers and service providers fail
to correct their year 2000 problems, these failures could result in an
interruption in, or a failure of, our normal business activities or operations.
If a year 2000 problem occurs, it may be difficult to determine which party's
products have
S-12
<PAGE> 13
caused the problem. These failures could interrupt our operations and damage our
relationships with customers. Due to the general uncertainty inherent in the
year 2000 problem resulting from the readiness of third-party suppliers and
vendors, we are unable to determine at this time whether third-party year 2000
failures could harm our business, results of operations and financial condition.
RISKS RELATED TO THIS OFFERING
THE NOTES ARE SUBORDINATED.
The notes will be unsecured and subordinated in right of payment to all of
our existing and future senior indebtedness. In the event of our bankruptcy,
liquidation or reorganization or upon acceleration of the notes due to an event
of default under the indenture and in certain other events, our assets will be
available to pay obligations on the notes only after all senior indebtedness has
been paid. As a result, there may not be sufficient assets remaining to pay
amounts due on any or all of the outstanding notes. The notes also will be
effectively subordinated to the liabilities, including trade payables, of our
subsidiaries. Neither we nor our subsidiaries are prohibited from incurring
debt, including senior indebtedness, under the indenture. If we or our
subsidiaries were to incur additional debt or liabilities, our ability to pay
our obligations on the notes could be adversely affected. As of October 3, 1999,
we had approximately $111.5 million of senior indebtedness outstanding, and our
subsidiaries had approximately $86.5 million of outstanding indebtedness and
other liabilities, including trade payables and excluding intercompany
liabilities, as to which the notes are effectively subordinated. We may from
time to time incur additional debt, including senior indebtedness. See
"Description of Notes -- Subordination of Notes."
WE MAY BE UNABLE TO REDEEM THE NOTES UPON A CHANGE IN CONTROL.
Upon a change in control, you may require us to redeem all or a portion of
your notes. If a change in control were to occur, we may not have enough funds
to pay the purchase price for all tendered notes. Any future credit agreements
or other agreements relating to our indebtedness may contain provisions that
prohibit the repurchase of the notes upon a change in control or may provide
that a change in control constitutes an event of default under that agreement.
If a change in control occurs at a time when we are prohibited from purchasing
the notes, we could seek the consent of our lenders to purchase the notes or
could attempt to refinance this debt. If we do not obtain a consent, we could
not purchase the notes. Our failure to purchase tendered notes would constitute
an event of default under the indenture, which might constitute a default under
the terms of our other debt. In such circumstances, or if a change in control
would constitute an event of default under our senior indebtedness, the
subordination provisions of the indenture would restrict payments to you. The
term "change in control" is limited to certain specified transactions and may
not include other events that might harm our financial condition. Our obligation
to offer to purchase the notes upon a change in control would not necessarily
afford you protection in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving us.
A PUBLIC MARKET MAY NOT DEVELOP FOR THE NOTES.
Prior to the offering there has been no trading market for the notes. The
underwriters have advised us that they currently intend to make a market in the
notes. However, the underwriters are not obligated to make a market and may
discontinue this market making activity at any time without notice. In addition,
market-making activity by the underwriters will be subject to the limits imposed
by the Securities Act and the Exchange Act. As a result, we cannot assure you
that any market for the notes will develop or, if one does develop, that it will
be maintained. If an active market for the notes fails to develop or be
sustained, the trading price of the notes could decline significantly.
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<PAGE> 14
THE NOTES MAY NOT BE RATED OR MAY RECEIVE A LOWER RATING THAN ANTICIPATED.
We believe it is likely that one or more rating agencies may rate the
notes. If one or more rating agencies assign the notes a rating lower than
expected by investors, the market price of the notes and our common stock would
be harmed.
THE PRICE OF OUR NOTES AND OUR COMMON STOCK MAY BE VOLATILE.
The trading price of our common stock has been and could in the future be
subject to significant fluctuations in response to variations in quarterly
operating results, developments in the semiconductor industry, general economic
conditions, changes in securities analysts' recommendations regarding our
securities and other factors. In addition, the stock market in recent years has
experienced significant price and volume fluctuations which have affected the
market prices of technology companies and which have often been unrelated to or
disproportionately impacted by the operating performance of such companies.
These broad market fluctuations may harm the market price of the notes and the
common stock into which the notes are convertible.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
OCT. 3,
1994 1995 1996 1997 1998(2) 1999
---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1).................. 16.6x 20.7x 8.2x 1.9x -- 4.8x
</TABLE>
- ------------------
(1) Reflects the acquisition of IC Works, Inc. in April 1999 which was accounted
for as a pooling of interests.
(2) Earnings were inadequate to cover fixed charges by $118.4 million.
These computations include us and our consolidated subsidiaries, and
companies of which we own 50% or less of the equity. For these ratios,
"earnings" is determined by adding "total fixed charges," excluding interest
capitalized, income taxes, minority common stockholders' equity in net income
and amortization of interest capitalized to income from continuing operations
after eliminating equity in undistributed earnings and adding back losses of
companies of which we own at least 20% but less than 50% of the equity. For this
purpose, "total fixed charges" consists of (i) interest on all indebtedness and
amortization of debt discount and expense, (ii) interest capitalized and (iii)
an interest factor attributable to rentals.
USE OF PROCEEDS
The net proceeds to us from the sale of the notes are estimated to be
approximately $ million (or approximately $ million if the underwriters'
over-allotment option is exercised in full), after deducting the underwriting
discounts and commissions and the estimated offering expenses payable by us.
The net proceeds from the sale of securities will be used for general
corporate purposes, including capital expenditures and working capital needs. We
expect from time to time to evaluate the acquisition of businesses, products and
technologies for which a portion of the net proceeds may be used. Currently,
however, we do not have any understandings, commitments or agreements with
respect to any significant acquisitions except as described under "Prospectus
Supplement Summary -- Recent Developments." Pending such uses, we will invest
the net proceeds in interest-bearing securities.
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<PAGE> 15
DESCRIPTION OF NOTES
We will issue the notes under a subordinated indenture to be dated as of
January 15, 2000, as supplemented by the supplemental indenture to be dated as
of January 15, 2000. When we refer to the indenture in this prospectus
supplement, we are referring to the subordinated indenture as supplemented by
the supplemental indenture. The following summarizes some, but not all, of the
provisions of the notes, the subordinated indenture and the supplemental
indenture. The notes are a series of debt securities described in the
accompanying prospectus. The following description supplements, and to the
extent it is inconsistent with supersedes, the statements under "Description of
Debt Securities" in the accompanying prospectus. As used in this description,
the words "we," "us," "our" or Cypress do not include any current or future
subsidiary of Cypress Semiconductor Corporation.
GENERAL
The notes will be unsecured general obligations of Cypress and will be
subordinate in right of payment as described under "Subordination of Notes." The
notes are convertible into common stock as described under "Conversion of
Notes." The notes will be limited to $200,000,000 aggregate principal amount
($230,000,000 if the underwriters' over-allotment option is exercised in full).
The notes will be issued only in denominations of $1,000 or in multiples of
$1,000. The notes will mature on February 1, 2005, unless earlier redeemed at
our option by us or purchased by us at your option upon a change in control.
We are not restricted from paying dividends, incurring debt, or issuing or
repurchasing our securities under the indenture. In addition, there are no
financial covenants in the indenture. You are not protected under the indenture
in the event of a highly leveraged transaction or a change in control of Cypress
except to the extent described under "Purchase of Notes at Your Option Upon a
Change in Control."
The notes will bear interest at the annual rate of %. Interest will be
payable on February 1 and August 1 of each year, beginning August 1, 2000,
subject to limited exceptions if the notes are converted, redeemed or purchased
prior to the interest payment date. The record dates for the payment of interest
will be January 15 and July 15. We may, at our option, pay interest on the notes
by check mailed to the holders. However, a holder with an aggregate principal
amount in excess of $2,000,000 will be paid by wire transfer in immediately
available funds at their election. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
We will maintain an office in the Borough of Manhattan in New York, New
York where the notes may be presented for registration, transfer, exchange or
conversion. This office shall initially be a office or agency of the trustee.
BOOK-ENTRY SYSTEM
The notes will initially be issued in the form of a global security held in
book-entry form. DTC or its nominee will be the sole registered holder of the
notes for all purposes under the indenture. Owners of beneficial interests in
the notes represented by the global security will hold such interests pursuant
to the procedures and practices of DTC. As a result, owners of beneficial
interests must exercise any rights in respect of their interests, including any
right to convert or require repurchase of their interests, in accordance with
the procedures and practices of DTC. Beneficial owners will not be holders and
will not be entitled to any rights under the global security or the indenture
with respect to the global security. Cypress and the trustee, and any of their
respective agents, may treat DTC as the sole holder and owner of the global
security.
S-15
<PAGE> 16
CONVERSION OF NOTES
You will have the right, at your option, to convert your notes into shares
of common stock at any time prior to maturity, unless previously redeemed or
purchased, at the conversion price of $ per share, subject to the
adjustments described below. You may convert notes in denominations of $1,000
and multiples of $1,000.
Except as described below, we will not make any payment or other adjustment
for accrued interest thereon or dividends on any common stock issued upon
conversion of the notes. If you submit your notes for conversion between a
record date and the opening of business on the next interest payment date
(except for notes or portions of notes called for redemption on a redemption
date occurring during the period from the close of business on a record date and
ending on the opening of business on the first business day after the next
interest payment date, or if this interest payment date is not a business day,
the second business day after the interest payment date), you must pay funds
equal to the interest payable on the converted principal amount. We will not
issue fractional shares of common stock upon conversion of notes. Instead, we
will pay a cash adjustment based upon the market price of the common stock on
the last trading day prior to the date of conversion. If the notes are called
for redemption, your conversion rights on the notes called for redemption will
expire at the close of business on the last business day before the redemption
date, unless we default in the payment of the redemption price. If you have
submitted your notes for purchase upon a change in control, you may only convert
your notes if you withdraw your election in accordance with the indenture.
The conversion price will be adjusted upon the occurrence of:
(1) the issuance of shares of our common stock as a dividend or
distribution on our common stock;
(2) the subdivision or combination of our outstanding common stock;
(3) the issuance to all or substantially all holders of our common stock of
rights or warrants entitling them for a period of not more than 60 days
to subscribe for or purchase our common stock, or securities
convertible into our common stock, at a price per share or a conversion
price per share less than the then current market price per share,
provided that the conversion price will be readjusted to the extent
that such rights or warrants are not exercised prior to the expiration;
(4) the distribution to all or substantially all holders of our common
stock of shares of our capital stock, evidences of indebtedness or
other assets, excluding:
- dividends, distributions and rights or warrants referred to in clause
(1) or (3) above;
- dividends or distributions exclusively in cash referred to in clause
(5) below;
(5) the distribution to all or substantially all holders of our common
stock of all-cash distributions in an aggregate amount that together
with (A) any cash and the fair market value of any other consideration
payable in respect of any tender offer by us or any of our subsidiaries
for our common stock consummated within the preceding 12 months not
triggering a conversion price adjustment and (B) all other all-cash
distributions to all or substantially all holders of our common stock
made within the preceding 12 months not triggering a conversion price
adjustment exceeds an amount equal to 10% of our market capitalization
on the business day immediately preceding the day on which we declare
such distribution; and
(6) the purchase of our common stock pursuant to a tender offer made by us
or any of our subsidiaries to the extent that the same involves
aggregate consideration that together with (A) any cash and the fair
market value of any other consideration payable in respect of any
tender offer by us or any of our subsidiaries for our common stock
consummated within the preceding 12 months not triggering a conversion
price adjustment and (B) all-cash distributions to all or substantially
all holders of our common stock made within the preceding 12 months not
triggering a conversion price adjustment exceeds an amount equal to 10%
of our market capitalization on the expiration date of such tender
offer.
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<PAGE> 17
In the event of:
- any reclassification of our common stock, or
- a consolidation, merger or combination involving Cypress, or
- a sale or conveyance to another person of the property and assets of
Cypress as an entirety or substantially as an entirety,
in which holders of our outstanding common stock would be entitled to receive
stock, other securities, other property, assets or cash for their common stock,
holders of notes will generally be entitled thereafter to convert their notes
into the same type of consideration received by common stock holders immediately
prior to one of these types of events.
You may, in some circumstances, be deemed to have received a distribution
or dividend subject to United States federal income tax as a result of an
adjustment or the nonoccurrence of an adjustment to the conversion price.
We are permitted to reduce the conversion price of the notes by any amount
for a period of at least 20 days if our board of directors determines that such
reduction would be in the best interest of Cypress. We are required to give at
least 15 days prior notice of any reduction in the conversion price. We may also
reduce the conversion price to avoid or diminish income tax to holders of our
common stock in connection with a dividend or distribution of stock or similar
event.
No adjustment in the conversion price will be required unless it would
result in a change in the conversion price of at least one percent. Any
adjustment not made will be taken into account in subsequent adjustments. Except
as stated above, we will not adjust the conversion price for the issuance of our
common stock or any securities convertible into or exchangeable for our common
stock or the right to purchase our common stock or such convertible or
exchangeable securities.
SUBORDINATION OF NOTES
Payments on the notes will be subordinated in right of payment to all of
our existing and future senior indebtedness. See "Description of the Debt
Securities -- Subordination" in the accompanying prospectus.
A substantial portion of our operations are conducted through our
subsidiaries. As a result, our cash flow and our ability to service our debt,
including the notes, is dependent upon the earnings of our subsidiaries. In
addition, we are dependent on the distribution of earnings, loans or other
payments by our subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. Our subsidiaries
have no obligation to pay any amounts due on the notes or to provide us with
funds for our payment obligations, whether by dividends, distributions, loans or
other payments. In addition, any payment of dividends, distributions, loans or
advances by our subsidiaries to us could be subject to statutory or contractual
restrictions. Payments to us by our subsidiaries will also be contingent upon
our subsidiaries' earnings and business consideration.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
notes to participate in those assets, will be effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors. In addition,
even if we were a creditor of any of our subsidiaries, our rights as a creditor
would be subordinate to any security interest in the assets of our subsidiaries
and any indebtedness of our subsidiaries senior to that held by us.
As of October 3, 1999, we had approximately $111.5 million of senior
indebtedness, while our subsidiaries had approximately $86.5 million of
outstanding indebtedness and other liabilities, including trade payables and
excluding intercompany liabilities, as to which the notes are effectively
subordinated.
Neither we nor our subsidiaries are prohibited from incurring senior
indebtedness or any other indebtedness or liabilities under the indenture. We
expect additional indebtedness and other liabilities, including senior
indebtedness, in the future.
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<PAGE> 18
OPTIONAL REDEMPTION BY THE COMPANY
We may redeem the notes on or after February 5, 2003, on at least 20 days
and no more than 60 days notice, in whole or in part, at the following
redemption prices expressed as percentages of the principal amount:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
Beginning on February 5, 2003 and ending on January 31,
2004...................................................... %
Beginning on February 1, 2004 and ending on January 31,
2005........................................................
</TABLE>
and 100% at February 1, 2005. In each case, we will pay accrued interest to, but
excluding, the redemption date. If the redemption date is an interest payment
date, interest will be paid to the record holder on the relevant record date.
If fewer than all of the notes are to be redeemed, the trustee will select
the notes to be redeemed by lot, or in its discretion, on a pro rata basis. If
any note is to be redeemed in part only, a new note in principal amount equal to
the unredeemed principal portion will be issued. If a portion of your notes is
selected for partial redemption and you convert a portion of your notes, the
converted portion shall be deemed to be of the portion selected for redemption.
No sinking fund is provided for the notes.
PURCHASE OF NOTES AT YOUR OPTION UPON A CHANGE IN CONTROL
In the event of a change in control, you will have the right to require us
to purchase all or any part of your notes 30 business days after the occurrence
of a change in control at a purchase price equal to 100% of the principal amount
of the notes plus accrued and unpaid interest to, but excluding, the purchase
date. Notes submitted for purchase must be in $1,000 or multiples of $1,000
principal amount.
We shall mail to the trustee and to each holder a written notice of the
change in control within 10 business days after the occurrence of a change in
control. This notice shall state among other things:
- the terms and conditions of the change in control;
- the procedures required for exercise of the change in control; and
- the holder's right to require Cypress to purchase the notes.
You must deliver written notice of your exercise of this purchase right to
a paying agent at any time prior to the close of business on the business day
prior to the change in control purchase date. Such written notice must specify
the notes for which the purchase right is being exercised. If you wish to
withdraw this election, you must provide a written notice of withdrawal to the
paying agent at any time prior to the close of business on the business day
prior to the change in control purchase date.
A change in control shall be deemed to have occurred if any of the
following occurs:
- any "person" or "group" is or becomes the "beneficial owner", directly or
indirectly, of shares of voting stock of Cypress representing 50% or more
of the total voting power of all outstanding classes of voting stock of
Cypress or has the power, directly or indirectly, to elect a majority of
the member of the board of directors of Cypress;
- Cypress consolidates with, or merges with or into, another person or
Cypress sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of the assets of Cypress, or any person
consolidates with, or merges with or into, Cypress, in any such event
other than pursuant to a transaction in which the persons that
"beneficially owned," directly or indirectly, shares of voting stock of
Cypress immediately prior to such transaction "beneficially own,"
directly or indirectly, shares of voting stock of Cypress, representing
at least a majority of the total voting power of all outstanding classes
of voting stock of the surviving or transferee person; or
- there shall occur the liquidation or dissolution of Cypress.
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<PAGE> 19
However, a change in control shall not be deemed to have occurred if
either:
- the last sale price of our common stock for any five trading days during
the ten trading days immediately preceding the change in control is at
least equal to 105% of the conversion price in effect on such day; or
- in the case of a merger or consolidation, all of the consideration
excluding cash payments for fractional shares in such merger or
consolidation constituting the change in control consists of common stock
traded on a United States national securities exchange or quoted on the
Nasdaq National Market (or which will be so traded or quoted when issued
or exchanged in connection with such change in control) and as a result
of such transaction or transactions the notes become convertible solely
into such common stock.
For purposes of this change in control definition:
- "person" or "group" have the meanings given such terms for purposes of
Sections 13(d) and 14(d) of the Exchange Act or any successor provisions,
and the term "group" includes any group acting for the purpose of
acquiring, holding or disposing or securities within the meaning of Rule
13d-5(b)(1) under the Exchange Act, or any successor provision;
- a "beneficial owner" shall be determined in accordance with Rule 13d-3
under the Exchange Act, as in effect on the date of the indenture, except
that the number of shares of voting stock of Cypress shall be deemed to
include, in addition to all outstanding shares of voting stock of Cypress
and unissued shares deemed to be held by the "person" or "group" or other
person with respect to which the change in control determination is being
made, all unissued shares deemed to be held by all other persons;
- "beneficially owned" shall have a meaning correlative to that of
beneficial owner;
- "unissued shares" means shares of voting stock not outstanding that are
subject to options, warrants, rights to purchase or conversion privileges
exercisable within 60 days of the date of determination of a change in
control; and
- "voting stock" means any class or classes of capital stock pursuant to
which the holders of capital stock under ordinary circumstances have the
power to vote in the election of the board of directors, managers or
trustees of any person or other persons performing similar functions,
irrespective of whether or not, at the time, capital stock of any other
class or classes shall have, or might have, voting power by reason of the
happening of any contingency.
The term "all or substantially all" as used in the definition of change in
control will likely be interpreted under applicable state law and will be
dependent upon particular facts and circumstances. There may be a degree of
uncertainty in interpreting this phrase. As a result, we cannot assure you how a
court would interpret this phrase under applicable law in the event that you
elect to exercise your rights following the occurrence of a transaction which
you believe constitutes a transfer of "all or substantially all of the assets."
We will under the indenture:
- comply with the provisions of Rule 13e-4 and Rule 14e-1, if applicable,
under the Exchange Act;
- file a Schedule 13E-4 or any successor or similar schedule if required
under the Exchange Act; and
- otherwise comply with all federal and state securities laws in connection
with any offer by us to purchase the notes upon a change in control.
This change in control purchase feature may make more difficult or
discourage a takeover of Cypress and the removal of incumbent management.
However, we are not aware of any specific effort to accumulate shares of our
common stock or to obtain control of us by means of a merger, tender offer,
solicitation or otherwise. In addition, the change in control purchase feature
is not part of a plan by
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<PAGE> 20
management to adopt a series of anti-takeover provisions. Instead, the change in
control purchase feature is a result of negotiations between us and the
underwriter.
We could, in the future, enter into certain transactions, including
recapitalizations, that would not constitute a change in control but would
increase the amount of debt, including senior indebtedness, outstanding or
otherwise adversely affect a holder. Neither we nor our subsidiaries are
prohibited from incurring debt, including senior indebtedness, under the
indenture. The incurrence of significant amounts of additional debt could
adversely affect our ability to service our debt, including the notes.
If a change in control were to occur, we may not have sufficient funds to
pay the change in control purchase price for the notes tendered by holders. In
addition, we may in the future incur debt that has similar change of control
provisions that permit holders of this debt to accelerate or require us to
repurchase this debt upon the occurrence of events similar to a change in
control. Our failure to repurchase the notes upon a change in control will
result in any event of default under the indenture, whether or not the
repurchase is permitted by the subordination provisions of the indenture.
DEFEASANCE AND COVENANT DEFEASANCE
The provisions described under "Description of Debt
Securities -- Defeasance and Covenant Defeasance" in the accompanying prospectus
shall apply to the notes.
TRANSFER AND EXCHANGE
We have initially appointed the trustee as security registrar, transfer
agent and conversion agent, acting through its corporate trust office. We
reserve the right to:
- vary or terminate the appointment of the security registrar, transfer
agent or conversion agent;
- appoint additional transfer agents or conversion agents; or
- approve any change in the office through which any security registrar or
any transfer agent or conversion agent acts.
PURCHASE AND CANCELLATION
All notes surrendered for payment, redemption, registration of transfer or
exchange or conversion shall, if surrendered to any person other than the
trustee, be delivered to the trustee. All notes delivered to the trustee shall
be cancelled promptly by the trustee. No notes shall be authenticated in
exchange for any notes cancelled as provided in the indenture.
We may, to the extent permitted by law, purchase notes in the open market
or by tender offer at any price or by private agreement. Any notes purchased by
us may, to the extent permitted by law, be reissued or resold or may, at our
option, be surrendered to the trustee for cancellation. Any notes surrendered
for cancellation may not be reissued or resold and will be promptly cancelled.
REPLACEMENT OF NOTES
We will replace mutilated, destroyed, stolen or lost notes at your expense
upon delivery to the trustee of the mutilated notes or evidence of the loss,
theft or destruction of the notes satisfactory to us and the trustee. In the
case of a lost, stolen or destroyed note, indemnity satisfactory to the trustee
and us may be required at the expense of the holder of such note before a
replacement note will be issued.
S-20
<PAGE> 21
REOPENING OF THE NOTES
The notes are initially being offered in the principal amount of
$200,000,000 ($230,000,000 if the underwriters' over-allotment option is
exercised in full). Such principal amount may be increased in the future on the
same terms and conditions and with the same CUSIP number(s) as the notes being
offered hereby.
GOVERNING LAW
The subordinated indenture, the supplemental indenture and the notes will
be governed by, and construed in accordance with, the law of the State of New
York, without regard to conflicts of laws principles.
S-21
<PAGE> 22
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of the notes
and of common stock into which the notes may be converted, but does not purport
to be a complete analysis of all the potential tax considerations relating
thereto. This summary is based on interpretations of laws, regulations, rulings
and decisions now in effect, all of which are subject to change. This summary
deals only with holders that will hold the notes and common stock into which
notes may be converted as "capital assets" (within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended, referred to as the Code) and
does not address tax considerations applicable to investors that may be subject
to special tax rules, such as, for example, banks, tax-exempt organizations,
insurance companies, dealers in securities or currencies, foreign persons or
persons that will hold the notes as a position in a hedging transaction,
"straddle" or "conversion transaction" for tax purposes. This summary discusses
the tax considerations applicable to the initial purchasers of the notes who
purchase the notes at their "issue price" as defined in Section 1273 of the Code
and does not discuss the tax considerations applicable to subsequent purchasers
of the notes. The Company has not sought any ruling from the Internal Revenue
Service, referred to as the IRS, with respect to the statements made and the
conclusions reached in the following summary, and there can be no assurance that
the IRS will agree with such statements and conclusions. In addition, the IRS is
not precluded from successfully adopting a contrary position. This summary does
not consider the effect of any applicable foreign, state, local or other tax
laws.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME AND
ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR
UNDER ANY APPLICABLE TAX TREATY.
PAYMENT OF INTEREST
Interest on a note generally will be includable in the income of a holder
as ordinary income at the time such interest is received or accrued, in
accordance with such holder's method of accounting for United States federal
income tax purposes.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of the notes, a holder generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash proceeds and the fair market value of any property received on the sale,
exchange or redemption (except to the extent such amount is attributable to
accrued interest income not previously included in income which is taxable as
ordinary income) and (ii) such holder's adjusted tax basis in the notes. A
holder's adjusted tax basis in the notes generally will equal the cost of the
notes to such holder. Such capital gain or loss will be long-term capital gain
or loss if the holder's holding period in the notes is more than one year at the
time of sale, exchange or redemption.
CONVERSION OF THE NOTES
A holder generally will not recognize any income, gain or loss upon
conversion of the notes 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). A holder's tax basis in the common
stock received on conversion of the notes generally will be the same as such
holder's adjusted tax basis in the notes at the time of conversion (reduced by
any basis allocable to a fractional share interest), and the holding period for
the common stock received on conversion will generally include the holding
period of the notes converted. However, a holder's tax basis on 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 not include the period the converted notes
were held.
S-22
<PAGE> 23
Cash received in lieu of a fractional share of common stock upon conversion
will be treated as a payment in exchange for the fractional share of common
stock. Accordingly, the receipt of cash in lieu of a fractional share of common
stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the holder's adjusted tax
basis in the fractional share).
DIVIDENDS
Dividends paid on the common stock generally will be includable in the
income of a holder as ordinary income to the extent of Cypress' current or
accumulated earnings and profits.
If at any time (i) Cypress makes a distribution of cash or property to its
stockholders or purchases common stock and such distribution or purchase would
be taxable to such stockholders as a dividend for United States federal income
tax purposes (e.g., distributions of evidence of indebtedness or assets of
Cypress, but generally not stock dividends or rights to subscribe for common
stock) and, pursuant to the antidilution provisions of the indenture, the
conversion price of the notes is decreased, or (ii) the conversion price of the
notes is decreased at the discretion of Cypress, such decrease in conversion
price may be deemed to be the payment of a taxable dividend to holders of notes
(pursuant to Section 305 of the Code). Holders of notes could therefore have
taxable income as a result of an event pursuant to which they received no cash
or property.
SALE OF COMMON STOCK
Upon the sale or exchange of common stock, a holder generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (ii) such holder's adjusted tax basis in the common stock.
Such capital gain or loss generally will be long-term capital gain or loss
if the holder's holding period in common stock is more than one year at the time
of the sale or exchange. A holder's basis and holding period in common stock
received upon conversion of the notes are determined as discussed above under
"-- Conversion of Notes."
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on the notes, payments of dividends on
common stock, payments of the proceeds of the sale of the notes and payments of
the proceeds of the sale of common stock to certain noncorporate holders, and a
31% backup withholding tax may apply to such payments if the holder (i) fails to
furnish or certify his correct taxpayer identification number to the payor in
the manner required, (ii) is notified by the IRS that he has failed to report
payments of interest and dividends properly, or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that he
is subject to backup withholding for failure to report interest and dividend
payments. Any amounts withheld under the backup withholding rules from a payment
to a holder will be allowed as a credit against such holder's United States
federal income tax and may entitle the holder to a refund, provided that the
required information is furnished to the IRS.
S-23
<PAGE> 24
UNDERWRITING
Under the terms of, and the conditions contained in, an underwriting
agreement dated January , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, FleetBoston
Robertson Stephens Inc., Prudential Securities Incorporated and SG Cowen
Securities Corporation are acting as representatives, the following respective
principal amounts of the notes:
<TABLE>
<CAPTION>
Principal
Underwriter Amount
----------- ------------
<S> <C>
Credit Suisse First Boston Corporation......................
FleetBoston Robertson Stephens Inc.......................... ............
Prudential Securities Incorporated..........................
SG Cowen Securities Corporation.............................
------------
Total.................................................. $200,000,000
============
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the notes in the offering if any are purchased, other than those
notes covered by the over-allotment option described below. The underwriting
agreement also provides that if an underwriter defaults, the purchase
commitments of non-defaulting underwriters may be increased or the offering of
the notes may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to an additional $30,000,000 principal amount of notes at the
initial public offering price less the underwriting discounts and commissions.
The option may be exercised only to cover any over-allotments in the sale of the
notes.
The underwriters propose to offer the notes initially at the public
offering price on the cover page of this prospectus supplement and to selling
group members at that price less a concession of % of the principal amount
of the notes. The underwriters and selling group members may allow a discount of
% of such principal amount per note on sales to other broker/dealers. After
the initial public offering, the public offering price and concession and
discount to broker/dealers may be changed by the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Note Total
-------------------------------- --------------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions payable by us.......... $ $ $ $
Expenses payable by us............... $ $ $ $
</TABLE>
The notes are a new issue of securities with no established trading market.
The underwriters intend to make a secondary market for the notes. However, they
are not obligated to do so and may discontinue making a secondary market for the
notes at any time without notice. No assurance can be given as to how liquid the
trading market for the notes will be.
We and our executive officers and directors have agreed that we will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any shares of our common stock
or securities convertible into or exchangeable or exercisable for any shares of
our common stock, or publicly disclose the intention to make any such offer,
sale, pledge, disposition or filing, without the prior written consent of Credit
Suisse First Boston Corporation for a period of 90 days after the date of this
prospectus, except, in our case, for (i) issuances of common stock upon
conversion of the notes, (ii) issuances of common stock upon the exercise of
options or warrants or on conversion of other securities outstanding on the date
of this prospectus supplement, (iii) grants of options to purchase, issuances of
common stock upon the exercise of those options, and issuances of common stock
pursuant to any stock option plan, stock purchase plan or
S-24
<PAGE> 25
dividend reinvestment plan, which plans are in existence on the date hereof,
(iv) issuances of securities (and agreements to provide such securities) up to
an aggregate of $150,000,000 as full or partial consideration in connection with
any of our future acquisitions or strategic investments or securities issuable
upon exercise or conversion of the foregoing securities, and (v) issuances of
any debt securities up to $75,000,000 in aggregate principal amount. The
underwriters have also agreed that the executive officers and directors of the
Company may, without such consent, dispose of an aggregate of up to 250,000
shares of common stock.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
Before this offering, there has been no public market for the notes. The
initial public offering price for the notes will be determined by negotiation
between us and the underwriters, and may not reflect the market price for the
notes following this offering.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids, in accordance with Regulation
M under the Securities Exchange Act.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase notes and the underlying
security so long as the stabilizing bids do not exceed a specified
maximum.
- Syndicate covering transactions involve purchases of the notes or
underlying securities in the open market after the distribution has been
completed in order to cover short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the notes originally held by such syndicate
member are purchased in a stabilizing transaction or a syndicate covering
transaction to cover syndicate short position.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the notes and the underlying securities to be higher than
it would otherwise be in the absence of these transactions. These transactions
may be effected on The New York Stock Exchange or otherwise and, if commenced,
may be discontinued at any time.
S-25
<PAGE> 26
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the notes in Canada is being made only on a private
placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of notes are effected. Accordingly, any resale of the notes or the
underlying common stock in Canada must be made in accordance with applicable
securities laws which will vary depending on the relevant jurisdiction, and
which may require resales to be made in accordance with available statutory
exemptions or pursuant to a discretionary exemption granted by the applicable
Canadian securities regulatory authority. Purchasers are advised to seek legal
advice prior to any resale of the notes or the underlying common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of notes in Canada who receives a purchase confirmation will
be deemed to represent to us and the dealer from whom such purchase confirmation
is received that (i) such purchaser is entitled under applicable provincial
securities laws to purchase such notes without the benefit of a prospectus
qualified under such securities laws, (ii) where required by law, that such
purchaser is purchasing as principal and not as agent, and (iii) such purchaser
has reviewed the text above under "Resale Restrictions".
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgement obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of notes to whom the Securities Act (British Columbia) applies
is advised that such purchaser is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any notes acquired
by such purchaser pursuant to this offering. Such report must be in the form
attached to British Columbia Securities Commission Blanket Order BOR #95/17, a
copy of which may be obtained from us. Only one such report must be filed in
respect of notes acquired on the same date and under the same prospectus
exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of notes should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the notes in
their particular circumstances and with respect to the eligibility of the notes
for investment by the purchaser under relevant Canadian legislation.
LEGAL MATTERS
The validity of the notes offered by this prospectus supplement will be
passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Certain legal matters in connection with the
offering will be passed upon for the underwriters by Shearman & Sterling, Menlo
Park, California.
S-26
<PAGE> 27
EXPERTS
The consolidated financial statements incorporated in the prospectus to
which this prospectus supplement relates by reference to the Annual Report on
Form 10-K for the fiscal year ended January 3, 1999 and the current report on
Form 8-K dated December 8, 1999 have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
S-27
<PAGE> 28
PROSPECTUS
CYPRESS SEMICONDUCTOR CORPORATION
-------------------------
$300,000,000
-------------------------
BY THIS PROSPECTUS, WE MAY OFFER --
COMMON STOCK
PREFERRED STOCK
DEBT SECURITIES
-------------------------
SEE "RISK FACTORS" ON PAGE 3 FOR INFORMATION YOU SHOULD CONSIDER BEFORE
BUYING THE SECURITIES.
-------------------------
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
-------------------------
This prospectus may not be used to offer and sell securities unless
accompanied by a prospectus supplement.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
This prospectus is dated March 29, 1999
<PAGE> 29
SUMMARY
PROSPECTUS SUPPLEMENT
This prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission utilizing a "shelf"
registration process. Under this shelf process, we may, over the next two years,
sell any combination of securities described in this prospectus in one or more
offerings up to a total dollar amount of $300,000,000. This prospectus provides
you with a general description of the securities we may offer. Each time we sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with additional
information described below under the heading "Where You Can Find More
Information."
OFFICES AND PLACE OF INCORPORATION
Cypress Semiconductor Corporation is an international supplier of
high-performance integrated circuits with worldwide headquarters in San Jose. We
commenced operations in 1982 and were incorporated in California in December
1982. In February 1987, we were reincorporated in Delaware. Our principal
executive offices are located at 3901 North First Street, San Jose, California
95134. Our telephone number is (408) 943-2600. Our Internet address is
http://www.cypress.com.
THE SECURITIES WE MAY OFFER
We may offer up to $300,000,000 of any of the following securities: debt
securities, preferred stock and common stock. The prospectus supplement will
describe the specific amounts, prices and terms of these securities.
Debt Securities
We may offer unsecured general obligations in the form of either senior or
subordinated debt. Senior debt includes our notes, debt and guarantees, which
are for money borrowed and not subordinated. Subordinated debt, designated at
the time it is issued, is entitled to interest and principal payments after the
senior debt payments.
The senior and subordinated debt will be issued under separate indentures
between us and State Street Bank and Trust Company of California, N.A., as
trustee. We have summarized the general features of the debt from the
indentures. We encourage you to read the indentures, which are exhibits to our
registration statement on Form S-3, file no. 333-67203, and the documents listed
below under the heading "Where You Can Find More Information."
Preferred Stock
We may issue preferred stock in one or more series and will determine the
dividend, voting, and conversion rights, and other provisions at the time of
sale.
Common Stock
Common stock holders are entitled to receive dividends declared by the
Board of Directors, subject to rights of preferred stock holders. Currently, we
do not pay a dividend. Each holder of common stock is entitled to one vote per
share. The holders of common stock have no preemptive rights or cumulative
voting rights.
2
<PAGE> 30
RISK FACTORS
You should carefully consider the risks described below before
participating in this offering. If any of the following risks actually occur,
our business financial condition and operating results could be materially
adversely affected, the trading price of our common stock could decline, and you
might lose all or part of your investment.
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipate," "believes," "expects,"
"future," "intends" and similar expressions to identify forward-looking
statements. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus. Our actual
results could differ materially from those anticipated in these forward-looking
statements for many reasons, including the risks described below and elsewhere
in this prospectus.
CYPRESS' FUTURE OPERATING RESULTS ARE VERY LIKELY TO FLUCTUATE AND THEREFORE MAY
FAIL TO MEET EXPECTATIONS.
Cypress' operating results have varied widely in the past, and may continue
to fluctuate in the future. In addition, our operating results may not follow
any past trends. Our future operating results will depend on many factors and
may fluctuate and fail to meet the expectations of the company or others for a
variety of reasons set forth in these risk factors. Any downward fluctuation or
failure to meet expectations will likely adversely affect the value of your
investment in our stock. The factors we believe make our results more likely to
fluctuate, and difficult to predict, than results of a typical, non-technology
company our size and age, and which are therefore most likely to produce
departure from expectations, include:
- the intense competitive pricing pressure to which our products are
subject, which can lead to rapid and unexpected declines in average
selling prices;
- the complexity of our manufacturing processes and the sensitivity of our
production costs to declines in manufacturing yields, which make yield
problems both possible and costly when they occur;
- the need for constant, rapid new product introductions which present an
ongoing design and manufacturing challenge significantly impacted by even
relatively minor errors, and which may never achieve expected market
demand.
As a result of these or other factors we could fail to achieve our expectations
as to future revenues, gross profit and income from operations. Also, the
performance of the semiconductor industry as a whole is characterized by
cyclical swings in revenue and profitability and these swings may adversely
impact Cypress.
Since we recognize revenues from sales to our domestic distributors only
when these distributors make a sale to customers, we are highly dependent on the
accuracy of their resale estimates. The occurrence of inaccurate estimates also
contributes to the difficulty in predicting our quarterly revenue and results of
operations, particularly in the last month of the quarter.
CYPRESS FACES PERIODS OF INDUSTRY-WIDE SEMICONDUCTOR OVERSUPPLY WHICH HARM ITS
RESULTS.
The semiconductor industry has historically been characterized by wide
fluctuations in the demand for, and supply of, its products, and these
fluctuations have helped produce many occasions when supply and demand for the
industry's products are not in balance. In the past, our operating results have
been adversely affected by these industry-wide fluctuations in the demand for
semiconductors, which have resulted in under-utilization of our manufacturing
capacity. In some cases, industry downturns with these characteristics have
lasted more than a year. If these cycles continue, they will materially and
adversely affect our business, financial condition and results of operations.
3
<PAGE> 31
CYPRESS' FINANCIAL RESULTS COULD BE ADVERSELY IMPACTED IF THE MARKETS IN WHICH
IT SELLS ITS PRODUCTS DO NOT GROW.
Cypress' continued success depends in large part on the continued growth of
various electronics industries that use our semiconductors, including the
following industries:
- data communications and telecommunications equipment;
- computers and computer related peripherals;
- automotive electronics;
- industrial controls; and
- customer electronics equipment and military equipment.
A significant portion of our products 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 our products could adversely affect our business, financial
condition and operating results. In addition, certain of our products, including
Universal Serial Bus micro-controllers, high frequency clocks and static RAMs,
are incorporated into computer and computer-related products, which have
historically experienced significant fluctuations in demand. In addition, we may
be materially and adversely affected by slower growth in the other markets in
which we sell our products.
CYPRESS IS AFFECTED BY A GENERAL PATTERN OF PRODUCT PRICE DECLINE AND
FLUCTUATIONS WHICH CAN ADVERSELY IMPACT OUR BUSINESS.
Even in the absence of an industry downturn, the average selling prices of
our products historically have decreased during the products' lives, and we
expect this trend to continue. In order to offset these average selling price
decreases, we attempt to manufacture the products more cheaply, to generate
greater unit demand to reduce fixed costs per unit and to introduce new, higher
priced products that incorporate advanced features. If our efforts to achieve
these cost reductions, increased unit demand or new product introductions are
not successful or do not occur in a timely manner, or if our newly introduced
products do not gain market acceptance, our business, financial condition and
results of operations could be materially and adversely affected.
In addition to following the general pattern of decreasing average prices
referenced above, the selling prices for certain products, particularly
commodity static RAM products, fluctuate significantly with real and perceived
changes in the balance of supply and demand for these products. Growth in
worldwide supply of static RAMs in recent periods resulted in a decrease in
average selling prices for our products. In the event we are unable to decrease
per unit manufacturing costs faster than the rate at which average selling
prices continue to decline, our business, financial condition and results of
operations will be materially and adversely affected. In addition, we expect our
competitors to invest in new manufacturing capacity and achieve significant
manufacturing yield improvements in the future. These developments could
dramatically increase worldwide supply of static RAM products and associated
downward pressure on pricing.
CYPRESS MAY BE UNABLE TO ADEQUATELY PROTECT ITS INTELLECTUAL PROPERTY RIGHTS,
AND MAY FACE SIGNIFICANT EXPENSES AS A RESULT OF ONGOING, OR FUTURE, LITIGATION.
Protection of intellectual property rights is crucial to Cypress, since
that is how we keep others from copying the innovations which are central to our
existing and future products. So although we are not currently, we may become
involved in litigation to enforce our patents or other intellectual property
rights, to protect our trade secrets and know-how, to determine the validity or
scope of the proprietary rights of others, or to defend against claims of
invalidity. This kind of litigation can be expensive, regardless of whether we
win or lose.
4
<PAGE> 32
Also, Cypress is now and may again become involved in litigation relating
to alleged infringement by us of others' patents or other intellectual property
rights. This kind of litigation is frequently expensive to both the winning
party and the losing party and takes up large amounts of management's time and
attention. In addition, if we lose in this kind of litigation a court could
require us to pay substantial damages and/or royalties, prohibiting from using
essential technologies. For these and other reasons, this kind of litigation
could have a material adverse effect on our business, financial condition and
results of operations. Also, although we may seek to obtain a license under a
third party's intellectual property rights in order to bring an end to certain
claims or actions asserted against us, we may not be able to obtain such a
license on reasonable terms or at all.
We have entered into technology license agreements with third parties which
give those parties the right to use patents and other technology developed by
us, and which give us the right to use patents and other technology developed by
them. We anticipate that we will continue to enter into this kind of licensing
arrangements in the future; however, it is possible that licenses we want will
not be available to us on commercially reasonable terms. If we lose existing
licenses to key technology, or are unable to enter into new licenses which we
deem important, it could have a material adverse effect on our business,
financial condition and results of operations.
Because it is critical to our success that we are able to prevent
competitors from copying our innovations, we intend to continue to seek patent,
trade secret and mask work protection for our semiconductor manufacturing
technologies. The process of seeking patent protection can be long and
expensive, and we cannot be certain that any currently pending or future
applications will actually result in issued patents, or that, even if patents
are issued, they will be of sufficient scope or strength to provide meaningful
protection or any commercial advantage to us. Furthermore, others may develop
technologies that are similar or superior to our technology or design around the
patents we own. We also rely on trade secret protection for our technology, in
part through confidentiality agreements with our employees, consultants and
third parties. However, employees may breach these agreements, and we may not
have adequate remedies for any breach. In any case, others may come to know
about or determine our trade secrets through a variety of methods. In addition,
the laws of certain territories in which we develop, manufacture or sell our
products may not protect our intellectual property rights to the same extent as
do the laws of the United States.
CYPRESS' FINANCIAL RESULTS COULD BE ADVERSELY IMPACTED IF IT FAILS TO DEVELOP,
INTRODUCE AND SELL NEW PRODUCTS OR FAILS TO DEVELOP AND IMPLEMENT NEW
MANUFACTURING TECHNOLOGIES.
Like many semiconductor companies, which frequently operate in a highly
competitive, quickly changing environment marked by rapid obsolescence of
existing products, Cypress' future success depends on its ability to develop and
introduce new products which customers choose to buy. In the last three recent
years we have introduced an average of 131 new products a year, and these
products have been an important source of revenue for us. If we fail to compete
and introduce new product designs in a timely manner or are unable to
manufacture products according to the requirements of these designs, discussed
more below, or if our customers do not successfully introduce new systems or
products incorporating ours, or market demand for our new products does not
exist as anticipated, our business, financial condition and results of
operations could be adversely affected.
For Cypress and many other semiconductor companies, introduction of new
products is a major manufacturing challenge. The new products the market
requires tend to be increasingly complex, incorporating more functions and
operating at greater speed than prior products. Increasing complexity generally
requires smaller features on a chip. This makes manufacturing new generations of
products substantially more difficult than prior products. Ultimately, whether
we can successfully introduce these and other new products depends on our
ability to develop and implement new ways of manufacturing semiconductors. If we
are unable to design, develop, manufacture, market and sell new products
successfully, our business, financial condition and results of operations would
be materially and adversely affected.
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<PAGE> 33
INTERRUPTIONS IN THE AVAILABILITY OF RAW MATERIALS CAN ADVERSELY IMPACT CYPRESS'
FINANCIAL PERFORMANCE.
Cypress' semiconductor manufacturing operations require raw materials that
must meet exacting standards. We generally have available more than one source
of these materials, but there are only a limited number of suppliers capable of
delivering certain raw materials that meet our standards. If we need to use
other companies as suppliers, we would need them to go through a qualification
process. In addition, the raw materials we need for our business could get
harder to obtain as worldwide use of semiconductors increases. Although we have
faced shortages from time to time in the past and on occasion our suppliers have
told us they need more time than expected to fill our orders, to date we have
not experienced any significant interruption in operations as a result of
difficulties in obtaining raw materials for our manufacturing operations.
However, interruption of any raw material source could have a material adverse
effect on our business, financial condition and results of operations.
OPERATIONAL PROBLEMS EXPERIENCED BY ASSEMBLY AND TEST SUBCONTRACTORS USED BY
CYPRESS CAN ADVERSELY IMPACT ITS FINANCIAL PERFORMANCE.
A high percentage of our products are assembled, packaged and tested at our
manufacturing facility located in the Philippines. We rely on independent
subcontractors to assemble, package and test the balance of our products. This
reliance involves certain risks, since we have reduced control over
manufacturing quality and delivery schedules, whether these companies have
adequate capacity to meet our needs and whether or not they discontinue or
phase-out assembly processes we rely on. We cannot be certain that these
subcontractors will continue to assemble, package and test products for us, and
it might be difficult for us to find alternatives if they do not do so.
THE COMPLEX, ESSENTIAL NATURE OF CYPRESS' MANUFACTURING ACTIVITIES MAKE THE
COMPANY HIGHLY SUSCEPTIBLE TO MANUFACTURING PROBLEMS AND THESE PROBLEMS CAN HAVE
SUBSTANTIAL NEGATIVE IMPACT WHEN THEY OCCUR.
Making semiconductors is a highly complex and precise process, requiring
production in a tightly controlled, clean environment. Even very small
impurities in our manufacturing materials, difficulties in the wafer 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 chips on
each wafer to be nonfunctional. We may experience problems in achieving an
acceptable success rate in the manufacture of wafers, and the likelihood of
facing such difficulties is higher in connection with the transition to new
manufacturing methods. The interruption of wafer fabrication or the failure to
achieve acceptable manufacturing yields at any of our facilities would have a
material adverse effect on our business, financial condition and results of
operations. We may also experience manufacturing problems in our assembly and
test operations and in the introduction of new packaging materials.
CYPRESS MAY NOT BE ABLE TO USE ALL OF ITS EXISTING OR FUTURE MANUFACTURING
CAPACITY, WHICH CAN NEGATIVELY IMPACT ITS BUSINESS.
Cypress has spent, and expects to continue spending, large amounts of money
to upgrade and increase its wafer fabrication, assembly and test manufacturing
capability and capacity. If we end up not needing this capacity and capability
for any of a variety of reasons, including inadequate demand or a significant
shift in mix of product orders making our existing capacity and capability
inadequate or in excess of actual needs, our fixed costs per semiconductor
produced will increase, which will adversely affect us. In addition, if the need
for more advanced technologies requires accelerated conversion to technologies
capable of manufacturing semiconductors having smaller features, or using larger
wafers, we are likely to face higher operating expenses and the need to
write-off capital equipment made obsolete by the technology conversion, which
could adversely affect our business and results of operations.
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<PAGE> 34
CYPRESS' OPERATIONS AND FINANCIAL RESULTS COULD BE SEVERELY HARMED BY CERTAIN
NATURAL DISASTERS.
Cypress' headquarters and some manufacturing facilities are located near
major earthquake faults. If a major earthquake or other natural disaster occurs,
we could suffer damages that could materially and adversely affect our business,
financial condition and results of operations.
CYPRESS' BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION WILL BE
ADVERSELY IMPACTED IF IT FAILS TO COMPETE IN ITS HIGHLY COMPETITIVE INDUSTRY AND
MARKETS.
The semiconductor industry is intensely competitive. This intense
competition results in a difficult operating environment for most companies in
the industry, including Cypress, marked by erosion of product sale prices over
the lives of each product, rapid technological change, limited product life
cycles and strong domestic and foreign competition in many markets. If we are
not able to compete successfully in this environment, our business, operating
results and financial condition will be adversely affected. A primary cause of
this highly competitive environment is the strengths or our competitors; the
industry consists of major domestic and international semiconductor companies,
many of which have substantially greater financial, technical, marketing,
distribution and other resources than we do. Cypress faces competition from
other domestic and foreign high performance integrated circuit manufacturers,
many of which have advanced technological capabilities and have increased their
participation in markets which are important to us. Our ability to compete
successfully in a rapidly evolving high performance end of the semiconductor
technology spectrum depends on many factors, including:
- our success in developing new products and manufacturing technologies;
- the quality and price of our products;
- the diversity of our product line;
- the cost effectiveness of our design, development, manufacturing and
marketing efforts;
- the pace at which customers incorporate our products into their systems,
and
- the number and nature of our competitors and general economic conditions.
We believe we currently compete effectively in the above areas to the
extent they are within our control; however, given the pace at which events
change in the industry, our current abilities are not a guarantee of future
success.
CYPRESS MUST BUILD SEMICONDUCTORS BASED ON ITS FORECASTS OF DEMAND, AND CAN END
UP WITH LARGE AMOUNTS OF UNSOLD PRODUCT IF ITS FORECASTS ARE WRONG.
Cypress must order materials and build semiconductors based on its existing
orders, which may be cancelled under many circumstances, and to a greater extent
on its internal forecasts. As a result, we are very dependent on our forecasts
to predict what we think we will be able to sell. Because our markets are
volatile and subject to rapid technology and price changes, our forecasts may be
wrong, and we may make too many or too few of certain products. Also, our
customers frequently place orders requesting product delivery almost immediately
after the order is made, which makes forecasting customer demand all the more
difficult. The above factors also make it difficult to forecast quarterly
operating results. If we are unable to predict accurately the appropriate amount
of product required to meet customer demand, our business, financial condition
and results of operations could be materially adversely affected.
CYPRESS MUST SPEND HEAVILY ON EQUIPMENT TO STAY COMPETITIVE, AND WILL BE
ADVERSELY IMPACTED IF IT IS UNABLE TO SECURE FINANCING FOR SUCH INVESTMENTS.
Semiconductor manufacturers generally must spend heavily on equipment to
maintain or increase manufacturing capacity and capability in order to remain
competitive. In particular, Cypress expects to spend in excess of $100 million
on equipment in 1999 and anticipates significant continuing capital expenditures
in subsequent years. In the past, we have reinvested a substantial portion of
our cash flow
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<PAGE> 35
from operations in capacity expansion and improvement programs. However, our
cash flows from operations depend primarily on average selling prices, which
have been declining, and the per unit cost of our products. If we are unable to
decrease costs for our products at a rate at least as fast as the rate of
decline in selling prices for such products, we may not be able to generate
enough cash flow from operations to maintain or increase manufacturing
capability and capacity as necessary. In that case we would need to seek
financing from external sources to satisfy our needs for manufacturing equipment
and, if cash flow from operations declines too much, for operational cash needs
as well. However, such financing may not be available on terms which are
satisfactory to us, in which case our business, financial condition and results
of operations will be adversely impacted.
CYPRESS COMPETES WITH OTHERS TO ATTRACT AND RETAIN KEY PERSONNEL, AND ANY LOSS
OF, OR INABILITY TO ATTRACT, SUCH PERSONNEL WOULD HURT THE COMPANY.
To a greater degree than most non-technology companies, Cypress depends on
the efforts and abilities of certain key management and technical personnel. Our
future success will depend in part upon our ability retain these personnel, and
to attract and retain other highly qualified personnel, particularly product
design engineers. We compete for such personnel with other companies, academic
institutions, government entities and other organizations. Competition for
personnel such as these is intense throughout the technology industry and we may
not be successful in hiring or retaining new or existing qualified personnel. If
we lose existing qualified personnel or are unable to hire new qualified
personnel as needed, our business, financial condition and results of operations
could be adversely affected.
CYPRESS FACES ADDITIONAL PROBLEMS AND UNCERTAINTIES ASSOCIATED WITH
INTERNATIONAL OPERATIONS THAT COULD ADVERSELY IMPACT IT.
International sales represented 39% of our revenues in 1998 and 36% in
1997. Our offshore assembly and test operations, as well as our international
sales, face risks frequently associated with foreign operations, including
- currency exchange fluctuations,
- political instability,
- changes in local economic conditions,
- the devaluation of local currencies,
- import and export controls, and
- changes in tax laws, tariffs and freight rates.
To the extent any such risks materialize, our business, financial condition
and results of operations could be materially and adversely affected.
CYPRESS MUST COMPLY WITH MANY DIFFERENT ENVIRONMENTAL REGULATIONS, WHICH CAN BE
EXPENSIVE.
Cypress must comply with many different 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. This compliance can be expensive. In addition, over the last several
years, the public has paid a great deal of attention to the potentially negative
environmental impact of semiconductor manufacturing operations. This attention
and other factors may lead to changes in environmental regulations which could
force us to purchase additional equipment or comply with other potentially
costly requirements. If we fail to control the use of, or to adequately restrict
the discharge of, hazardous substances under present or future regulations, we
could face substantial liability or suspension of our manufacturing operations,
which could have a material adverse effect on our business, financial condition
and results of operations.
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<PAGE> 36
CYPRESS DEPENDS ON THIRD PARTIES TO TRANSPORT ITS PRODUCTS AND COULD BE HARMED
IF THESE PARTIES EXPERIENCE PROBLEMS.
Cypress relies on independent carriers and freight forwarders to move its
products between manufacturing plants and to its customers. Cypress has limited
control over these parties; however, any transport or delivery problems because
of their errors, or because of unforeseen interruptions in their activities due
to factors such as strikes, political instability, natural disasters and
accidents, could have a materially adverse effect on our business, financial
conditions and results of operations and ultimately impact our relationship with
our customers.
CYPRESS' OPERATIONS AND PRODUCTS MAY NOT FUNCTION PROPERLY IN THE YEAR 2000
WHICH COULD SIGNIFICANTLY HARM ITS BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
In less than a year, most companies will face a potentially serious problem
because many software applications, operational systems and equipment with
embedded chips or processors may not properly recognize or accurately process
calendar dates beginning in the year 2000, due to the prevalent use of two
digits to represent the year in these systems and equipment.
Like many other companies, the year 2000 issue poses a risk for Cypress.
The year 2000 problem could affect our computers, software and other equipment
we use and operate. This could result in system failures causing disruptions in
operations, including among other things, interruptions in manufacturing, design
and process development operations; temporary disruptions in processing business
transactions; and disruptions in other normal business operations.
Cypress has taken company-wide actions to assess the nature and extent of
work required to prepare its products, systems, equipment and infrastructure for
January 1, 2000. In addition, we have engaged in the process of evaluating our
key suppliers and customers to determine the extent to which our operations are
vulnerable based upon third parties' failure to address their own year 2000
issues. These activities represent our ongoing efforts to address the year 2000
problem that we commenced with the implementation of a year 2000-compliant
accounting software system in 1997.
Cypress' president and executive staff have assumed the responsibility of
managing the impact of the year 2000 problem on all aspects of our operations,
including programs for identification, inventory taking, risk assessment and
cost estimates of problems associates with the year 2000; the plans, remediation
effort and testing methodology to correct those problems; and the development of
contingency plans if some of the corrective actions fail to correct the problem
or do not get implemented in a timely manner. These activities, in varying
phases, are currently in process.
It is our objective to ensure that our internal business (MIS) systems are
compliant by March 1999 and that the rest of our systems, equipment and
infrastructure are compliant by June 1999. Our efforts over the past three
months have shifted in focus from inventory taking and assessment to
remediation, testing, and contingency planning activities. All mission critical
systems, equipment, and infrastructure elements are being tested for year 2000
readiness by June 1999. We have also begun contingency planning efforts,
considering Cypress' entire supply chain and external infrastructure, to ensure
plans will be in place to address any unforeseen year 2000 failures.
Through 1998, Cypress has incurred little cost in addressing the year 2000
problem. In 1999 we expect to incur between two and three million dollars of
expense and capital outlays for remediation, testing and contingency planning
efforts.
In the event year 2000 issues relating to key customers and suppliers are
not successfully resolved, based on information available to us at present, we
believe that the most reasonably likely worst case scenario is a temporary
disruption in infrastructure service, particularly power and telecommunications,
which could adversely impact supplier deliveries or customer shipments. If
severe disruptions occur in these areas and are not corrected in a timely
manner, a revenue or profit shortfall may result in fiscal year 2000.
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<PAGE> 37
Cypress year 2000 contingency planning efforts are guided by three elements
and specifically expressed in our Year 2000 Mission: (1) Cypress serves its
customers continuously, (2) Cypress maintains continuous employment, and (3)
Cypress increases shareholder value relative to its competitors. The executive
staff of Cypress is directly responsible for developing and approving Cypress'
Year 2000 contingency planning efforts, and the team is led by the CEO. The
operating assumption that external infrastructure may be down for up to 2 - 4
weeks has been used in order to create a suitable framework for contingency
planning efforts, and as a result, Cypress expects to have plans in place to
address any unforeseen year 2000 failures. Our contingency planning efforts will
continue through June 1999, at which time these activities will be documented
and implemented accordingly. A number of business responses are being actively
considered and all should be viewed as likely for some segment of our
customer/supplier base:
- developing second/alternate source suppliers for critical raw materials
and subcontract operations,
- work-in-process inventory "build ahead" in Cypress wafer fab locations,
- finished goods inventory "build ahead" in Cypress/subcontractor assembly
locations,
- increased consignment inventory programs for strategic customers, up to 3
months on customer premises,
- higher year-end 1999 stocking levels for primary Cypress distributors,
- partial/full company shutdown for up to 14 days,
- facility "safe state" plans, including plans to preserve equipment and
the controlled environment of manufacturing facilities, i.e., temperature
and humidity controls, for a period of 2 weeks using self-generated power
in the event of infrastructure shutdown, and
- early payment/collection as well as delayed payment/collection for
Cypress suppliers, customers and employees.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
Commission, in accordance with the Securities Exchange Act of 1934. You may read
and copy our reports, proxy statements and other information filed by us at the
public reference facilities of the Commission in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information about the public reference rooms. Our reports, proxy
statements and other information filed with the Commission are available to the
public over the Internet at the Commission's World Wide Web site at
http://www.sec.gov.
The Commission allows us to "incorporate by reference" the information we
filed with them, which means that we can disclose important information by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
by us with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act until our offering is complete:
- Annual Report on Form 10-K for the fiscal year ended January 3, 1999.
- Current Report on Form 8-K dated February 12, 1999, as amended on Form
8-K/A filed with the Commission on March 24, 1999; and
- The description of our common stock contained in Form 8-A filed with the
Commission on May 12, 1986, and any amendment or report filed for the
purpose of updating such description.
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You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Chief Financial Officer
Cypress Semiconductor Corporation
3901 North First Street
San Jose, California 95134
(408) 943-2600
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
USE OF PROCEEDS
Unless otherwise indicated in the prospectus supplement, the net proceeds
from the sale of securities will be used for general corporate purposes,
including capital expenditures and to meet working capital needs. We expect from
time to time to evaluate the acquisition of businesses, products and
technologies for which a portion of the net proceeds may be used. Currently,
however, we do not have any understandings, commitments or agreements with
respect to any material acquisitions for which a portion of the net proceeds may
be used. Pending such uses, we will invest the net proceeds in interest-bearing
securities.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.................. 14.4x 19.7x 9.3x 2.8x --(1)
</TABLE>
(1) Earnings were inadequate to cover fixed charges by $124.9 million.
These computations include us and our consolidated subsidiaries, and 50% or
less equity companies. For these ratios, "earnings" is determined by adding
"total fixed charges," excluding interest capitalized, income taxes, minority
common stockholders' equity in net income and amortization of interest
capitalized to income from continuing operations after eliminating equity in
undistributed earnings and adding back losses of companies in which at least 20%
but less than 50% equity is owned. For this purpose, "total fixed charges"
consists of (1) interest on all indebtedness and amortization of debt discount
and expense, (2) interest capitalized and (3) an interest factor attributable to
rentals.
DESCRIPTION OF THE DEBT SECURITIES
The debt securities will either be our senior debt securities or our
subordinated debt securities. The debt securities will be issued under one or
more separate indentures between us and State Street Bank and Trust Company of
California, N.A., as trustee. Senior debt securities will be issued under a
"Senior Indenture" and subordinated debt securities will be issued under a
"Subordinated Indenture." Together, the Senior Indenture and Subordinated
Indenture are called "Indentures."
The prospectus, together with its prospectus supplement, will describe all
the material terms of a particular series of debt securities. The following
summary of certain provisions of the Indentures is not complete. You should look
at the applicable Indenture that is filed as an exhibit to the registration
statement. In the summary below, we have included references to section and
article numbers of the Indentures so that you may easily refer to such
provisions.
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GENERAL
Debt securities may be issued in separate series without limitation as to
aggregate principal amount. We may specify a maximum aggregate principal amount
for the debt securities of any series. This provision is set forth in section
301 of the applicable Indenture.
Senior debt securities will be unsecured and unsubordinated obligations and
will rank on a parity with all other unsecured and unsubordinated indebtedness,
unless otherwise specified in the prospectus supplement.
Subordinated debt securities will be subordinated in right of payment to
the prior payment in full of all Senior Indebtedness of Cypress, including any
outstanding senior debt securities. See "Subordination" and the prospectus
supplement.
We are not limited as to the amount of debt securities that we may issue
under the Indentures. The Indentures do not contain financial or similar
restrictive covenants. In addition, the Indentures do not provide protection to
holders of debt securities against a sudden or dramatic decline in credit
quality. For example, there would be no protection from a takeover,
recapitalization, special dividend or other restructuring involving Cypress.
The prospectus supplement will set forth the following terms:
- whether the debt securities are senior or subordinated,
- the offering price,
- the title,
- any limit on the aggregate principal amount,
- the person who shall be entitled to receive interest, if other than the
record holder on the record date,
- the date the principal will be payable,
- the interest rate, if any, the date from which interest will accrue, the
interest payment dates and the regular record dates,
- the place for payment of principal, premium, if any, and interest,
- the period, price and terms and conditions for redemption at the option
of Cypress,
- our obligation, if any, to redeem or purchase debt securities pursuant to
any sinking fund or similar provision or at the option of the holder, and
the period, price and terms and conditions for redemption or purchase,
- the denominations of debt securities, if other than denominations of
$1,000 and any integral multiple of $1,000,
- if applicable, the method for determining how principal, premium, if any,
or interest will be calculated by reference to an index or formula,
- if other than U.S. currency, the currency or currency units in which the
principal, premium or interest will be payable,
- if, at our election or the option of the holder, the principal, premium,
if any, or interest is payable in one or more currencies or currency
units other than those in which debt securities are stated to be payable,
the currency or currency units in which payment of any such amount as to
which such election is made will be payable, the periods, the terms and
conditions upon which election shall be made and the amount payable,
- if other than the entire principal amount, the portion of the principal
amount that will be payable upon acceleration of stated maturity,
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<PAGE> 40
- if the principal amount payable at stated maturity will not be
determinable as of any date prior to stated maturity, the amount which
will be deemed to be the principal amount as of any such date for any
purpose,
- if applicable, that the debt securities are defeasible under the
Indentures as described under "Defeasance and Covenant
Defeasance -- Defeasance and Discharge" or "Defeasance and Covenant
Defeasance -- Defeasance of Certain Covenants,"
- if applicable, the terms of any right to convert debt securities into, or
exchange debt securities for, shares of our common stock or other
securities or property,
- whether the debt securities will be issuable in the form of a global
security and, if so, the depositary and the form of any legend on the
global security,
- in the case of subordinated debt securities, whether the subordination
provisions described below under "Subordination" will apply or whether
different subordination provisions will apply,
- any addition to or change in the Events of Default and any change in the
right of the trustee or the holders to declare the principal amount due
and payable,
- any addition to or change in the Indenture covenants described under
"Restrictive Covenants,"
- any other terms of such debt securities not inconsistent with the
relevant Indenture.
These provisions are set forth in section 301 of the applicable Indenture.
Debt securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which, at the time
of issuance, is below market rates.
CONVERSION
Debt securities may be convertible into or exchangeable for common stock,
preferred stock or other securities or property as set forth in the prospectus
supplement. The prospectus supplement will specify whether, among other things,
the conversion is mandatory or at the option of the holder, as well as other
terms and conditions of conversion.
SUBORDINATION
Unless otherwise indicated in the prospectus supplement, the following
provisions will apply to the subordinated debt securities.
The indebtedness evidenced by the subordinated debt securities is
subordinated to the extent provided in the Subordinated Indenture to the prior
payment in full of all Senior Indebtedness, including any senior debt
securities.
Upon any distribution of our assets upon any dissolution, winding-up,
liquidation or reorganization, or in bankruptcy, insolvency, receivership or
similar proceedings, payment of the principal of, premium, if any, and interest
on the subordinated debt securities is to be subordinated to the extent provided
in the Subordinated 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 subordinated debt securities
because of an Event of Default, the holders of any Senior Indebtedness then
outstanding would be entitled to payment in full in cash of all obligations in
respect to such Senior Indebtedness before the holders of subordinated debt
securities are entitled to receive any payment or other distribution. We are
required to promptly notify holders of Senior Indebtedness if payment of
subordinated debt securities is accelerated because of an Event of Default.
These provisions are set forth in section 1502 of the Subordinated Indenture.
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<PAGE> 41
We also may not make any payment upon or redemption of or purchase or
otherwise acquire the subordinated debt securities if:
- a default in the payment of the principal of, premium, if any, interest,
rent or other obligations, in respect of Designated Senior Indebtedness
occurs and is continuing beyond any applicable period of grace, or
- any other default occurs and is continuing with respect to Designated
Senior Indebtedness, as defined, that permits 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, which we
refer to as a payment blockage notice, from us or any other person
permitted to give such notice under the Subordinated Indenture.
We may and shall resume payments on the subordinated debt securities:
- in the case of a payment default, upon the date on which such default is
cured or waived or ceases to exist, and
- in the 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 initial 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, unless such default was
waived, cured or otherwise ceased to exist and thereafter subsequently
reoccurred, shall be, or be made, the basis for a subsequent payment blockage
notice. These provisions are set forth in section 1504 of the Subordinated
Indenture.
By reason of the subordination provisions described above, in the event of
our bankruptcy, dissolution or reorganization, holders of Senior Indebtedness
may receive more, ratably, and holders of the subordinated debt securities may
receive less, ratably, than the other creditors of Cypress. Such subordination
will not prevent the occurrence of any Event of Default under the Subordinated
Indenture.
We may further describe the provisions, if any, applicable to the
subordination of a particular series of subordinated debt securities in the
prospectus supplement.
We are not limited or prohibited from incurring additional Senior
Indebtedness under the Subordinated Indenture. Senior debt securities, if and
when issued, will constitute Senior Indebtedness.
Definitions of Senior Indebtedness, Indebtedness and Designated Senior
Indebtedness
"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 of Cypress, whether outstanding on the
date of the Subordinated Indenture or thereafter created, incurred, assumed,
guaranteed or in effect guaranteed by Cypress, 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
subordinated debt securities or expressly provides that such Indebtedness is
"pari passu" or "junior" to the subordinated debt securities.
Senior Indebtedness does not include:
- any Indebtedness of Cypress to any subsidiary of Cypress, and
- our 6% Convertible Subordinated Notes due 2002.
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<PAGE> 42
"Indebtedness" means, with respect to any person, and without duplication:
(1) all indebtedness, obligations and other liabilities, contingent or
otherwise, of such person for borrowed money, including obligations of
such person (a) 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 (b) 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,
(2) all reimbursement obligations and other liabilities, contingent or
otherwise, of such person with respect to letters of credit, bank
guarantees or bankers' acceptances,
(3) 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
Cypress, and all obligations and other liabilities, contingent or
otherwise, or 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 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,
(4) all obligations of such person, contingent or otherwise, with respect
to an interest rate, currency or other swap, cap, floor or collar
agreement, hedge agreement, forward contract, or other similar
instrument or agreement or foreign currency hedge, exchange, purchase
or similar instrument or agreement,
(5) 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 (1)
through (4),
(6) any indebtedness or other obligations described in clauses (1) through
(4) 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
(7) 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 (1) through
(6).
"Designated Senior Indebtedness" means our obligations under 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
we are a party, expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Subordinated 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.
FORM, EXCHANGE AND TRANSFER
The debt securities will be issuable only in fully registered form, without
coupons. Unless otherwise specified in the prospectus supplement, debt
securities will be issued only in denominations of $1,000 and integral multiples
of $1,000. These provisions are set forth in section 302 of the applicable
Indenture.
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At the option of the holder, subject to the terms of the Indentures and the
limitations applicable to global securities, debt securities of each series will
be exchangeable for other debt securities of the same series of any authorized
denomination and aggregate principal amount. These provisions are set forth in
section 305 of the applicable Indenture.
Subject to the terms of the Indentures and the limitations applicable to
global securities, debt securities may be presented for exchange as provided
above or for registration of transfer, duly endorsed or with a duly executed
form of transfer, at the office of the security registrar or at the office of
any transfer agent designated by us. No service charge will be imposed for any
registration of transfer or exchange of debt securities, but we may require
payment of a sum sufficient to cover any tax or other governmental charge
payable as a result of the transfer or exchange. Such transfer or exchange will
be effected upon the security registrar or such transfer agent being satisfied
with the documents of title and identity of the person making the request.
We have initially appointed the trustee as security registrar. Any transfer
agent, in addition to the security registrar, initially designated by us will be
named in the prospectus supplement. These provisions are set forth in section
305 of the applicable Indenture.
If the debt securities of any series are to be redeemed in part, we will
not be required to:
- issue, register the transfer of or exchange any debt security of that
series during a period beginning at the opening of business 15 days
before the day of mailing of a notice of redemption and ending at the
close of business on the day of such mailing, or
- register the transfer or exchange of any debt security of that series
selected for redemption, in whole or in part, except the unredeemed
portion being redeemed in part.
These provisions are set forth in section 305 of the applicable Indenture.
GLOBAL SECURITIES
Some or all of the debt securities of any series may be represented, in
whole or in part, by one or more global securities, which will have an aggregate
principal amount equal to that of the represented debt securities. Each global
security will:
- be registered in the name of a depositary or nominee thereof identified
in the prospectus supplement,
- be deposited with the depositary or nominee, and
- bear a legend regarding the restrictions on exchanges and registration of
transfer referred to below.
No global security may be exchanged in whole or in part for debt securities
registered, and no transfer of a global security in whole or in part may be
registered, in the name of any person other than the depositary for such global
security or any nominee of the depositary unless:
- the depositary has notified us that it is unwilling or unable to continue
as depositary for such global security or has ceased to be qualified to
act as such as required by the Indentures,
- there shall have occurred and be continuing an Event of Default with
respect to the debt securities represented by such global security, or
- there shall exist such circumstances, if any, in addition to or instead
of those described above as may be described in the prospectus
supplement.
All securities issued in exchange for a global security or any portion of a
global security will be registered in such names as the depositary may direct.
These provisions are set forth in sections 204 and 305 of the applicable
Indenture.
As long as the depositary, or its nominee, is the registered holder of a
global security, the depositary or nominee will be considered the sole owner and
holder of such global security and the debt securities
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represented by such global security for all purposes under the debt securities
and the Indentures. Except in the limited circumstances referred to above,
owners of beneficial interests in a global security:
- will not be entitled to have the global security or any debt securities
represented by the global security registered in their names,
- will not receive or be entitled to receive physical delivery of
certificated debt securities in exchange for the global security, and
- will not be considered to be the owners or holders of such global
security or any debt securities represented by the global security.
All payments of principal, premium, if any, and interest on a global
security will be made to the depositary or its nominee as the holder of such
global security. Some jurisdictions have laws that require that certain
purchasers of securities take physical delivery of such securities in definitive
form. These laws may impair the ability to transfer beneficial interests in a
global security.
Ownership of beneficial interests in a global security will be limited to
institutions that have accounts with the depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. The depositary will credit, on its book-entry registration and
transfer system, the respective principal amounts of debt securities represented
by the global security to the accounts of its participants.
Ownership of beneficial interests in a global security will be shown on and
effected through, records maintained by the depositary, with respect to
participants' interests, or any such participant, with respect to interests of
persons held by such participants on their behalf.
Payments, transfers, exchanges and other matters relating to beneficial
interests in a global security will be subject to various depositary policies
and procedures. The depositary policies and procedures may change from time to
time. Neither Cypress nor the trustee will have any responsibility or liability
for the depositary's or any participant's records with respect to beneficial
interests in a global security, or for maintaining, supervising or reviewing any
records relating to such beneficial interests.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the prospectus supplement, payment of
interest on a debt security on any interest payment date will be made to the
person in whose name the debt security, or one or more predecessor debt
securities, is registered at the close of business on the regular record date.
This provision is set forth in section 307 of the applicable Indenture.
Unless otherwise indicated in the prospectus supplement, principal,
premium, if any, and interest on the debt securities of a particular series will
be payable at the office of such paying agent or paying agents as we may
designate for such purpose from time to time. However, at our option, we may pay
interest by mailing a check to the record holder.
Unless otherwise indicated in the prospectus supplement, the corporate
trust office of the trustee will be designated as our sole paying agent. Any
other paying agents initially designated by us for the debt securities of a
particular series will be named in the prospectus supplement. We may at any time
designate additional paying agents or rescind the designation of any paying
agent or approve a change in the office through which any paying agent acts.
However, we will be required to maintain a paying agent in each place of payment
for the debt securities of a particular series. These provisions are set forth
in section 1002 of the applicable Indenture.
All moneys paid by us to a paying agent for the payment of the principal,
premium, if any, or interest on any debt security which remain unclaimed (1) for
a period ending the earlier of 10 business days prior to the date such money
would be turned over to the State, or (2) at the end of two years after such
principal, premium or interest has become due and payable, will be repaid to us,
and thereafter, the holder
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of such debt security may look only to us for payment. These provisions are set
forth in section 1003 of the applicable Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may not consolidate with or merge into any other person, in a
transaction in which we are not the surviving corporation, or convey, transfer
or lease our properties and assets substantially as an entirety to, any
successor person, unless:
- the successor person, if any, is a corporation, limited liability
company, partnership, trust or other entity organized and existing under
the laws of the United States, or any state of the United States, and
assumes Cypress's obligations on the debt securities and under the
Indentures,
- immediately after giving effect to the transaction, and treating any
indebtedness which becomes an obligation of Cypress or any subsidiary as
a result of the transaction as having been incurred by it at the time of
the transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have
occurred and be continuing, and
- certain other conditions are met.
These provisions are set forth in section 801 of the applicable Indenture.
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default, unless the
prospectus supplement makes the event inapplicable to a particular series of
debt securities:
(1) failure to pay principal of or any premium on any debt security of that
series when due, whether or not such payment is prohibited by the
subordination provisions of the Subordinated Indenture,
(2) failure to pay any interest on any debt securities of that series when
due, continued for 30 days, whether or not such payment is prohibited by
the subordination provisions of the Subordinated Indenture,
(3) failure to deposit any sinking fund payment, when due, in respect of
any debt security of that series, whether or not such deposit is
prohibited by the subordination provisions of the Subordinated
Indenture,
(4) failure of Cypress to perform any other covenant required of us in the
Indenture, other than a covenant included in the Indentures solely for
the benefit of a series other than that series, continued for 60 days
after written notice has been given by the trustee, or the holders of at
least 25% in aggregate principal amount of the outstanding Securities of
that series, as provided in the Indentures,
(5) certain events in bankruptcy, insolvency or reorganization with respect
to Cypress, and
(6) any other Event of Default specified in the prospectus supplement.
These provisions are set forth in section 501 of the applicable Indenture.
If an Event of Default, other than an Event of Default described in clause
(5) above, shall occur and be continuing, either the trustee or the holders of
at least 25% in aggregate principal amount of the outstanding Securities of that
series may declare the principal amount of the debt securities of that series to
be due and payable immediately.
If an Event of Default described in clause (5) above shall occur, the
principal amount of all the debt securities of that series will automatically
become immediately due and payable. Any payment by us on the subordinated debt
securities following any such acceleration will be subject to the subordination
provisions described above. See "Subordination" above.
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After any such acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal amount of the
outstanding Securities of that series may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than the non-payment
of accelerated principal, or other specified amount, have been cured or waived.
These provisions are set forth in section 502 of the applicable Indenture. For
information as to waiver of defaults, see "Modification and Waiver."
Subject to the trustee's duties in the case of an Event of Default, the
trustee will not be obligated to exercise any of its rights or powers at the
request of the holders, unless the holders shall have offered to the trustee
reasonable indemnity. This provision is set forth in section 603 of the
applicable Indenture. Subject to the trustee's indemnification, the holders of a
majority in aggregate principal amount of the outstanding Securities of any
series 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 with respect to that series. These provisions
are set forth in section 512 of the applicable Indenture.
No holder of a debt security of any series will have any right to institute
any proceeding under the Indentures, or for the appointment of a receiver or a
trustee, or for any other remedy under the Indenture unless:
- such holder has previously given to the trustee written notice of a
continuing Event of Default with respect to the debt securities of that
series,
- the holders of at least 25% in aggregate principal amount of the
outstanding Securities of that series have made a written request, and
such holder or holders have offered reasonable indemnity to the trustee to
institute such proceeding as trustee, and
- the trustee has failed to institute such proceeding, and has not received
from the holders of a majority in aggregate principal amount of the
outstanding Securities of that series a direction inconsistent with such
request within 60 days after such notice, request and offer.
These provisions are set forth in section 507 of the applicable Indenture.
However, such limitations do not apply to a suit instituted by a holder of
a debt security for the enforcement of payment of the principal of or any
premium or interest on such debt security on or after the applicable due date
specified in such debt security. These provisions are set forth in section 508
of the applicable Indenture.
We are required to furnish to the trustee, on an annual basis, a statement
by our officers as to whether or not Cypress, to the officer's knowledge, is in
default in the performance or observance of any of the terms, provisions and
conditions of the Indenture. If so, such statement shall specify all such known
defaults. These provisions are set forth in section 1004 of the applicable
Indenture.
MODIFICATION AND WAIVER
Cypress and the trustee may make modifications and amendments to the
Indentures with the consent of the holders of a majority in aggregate principal
amount of the outstanding Securities of each series affected by the modification
or amendment.
However, neither Cypress nor the trustee may make any modification or
amendment without the consent of the holder of each outstanding Security of that
series who is affected by the modification or amendment if such modification or
amendment would do any of the following:
- change the stated maturity of the principal of, or any installment of
principal of or interest on, any debt security,
- reduce the principal amount of, or any premium or interest on, any debt
security,
- reduce the amount of principal of an Original Issue Discount Security or
any other debt security payable upon acceleration of the maturity of the
debt security,
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- change the place or currency of payment of principal of, or any premium
or interest on, any debt security,
- impair the right to institute suit for the enforcement of any payment on
or with respect to any debt security,
- in the case of subordinated debt securities, modify the subordination
provisions in a manner materially adverse to the holders of the
subordinated debt securities,
- in the case of debt securities that are convertible into Securities or
other securities of Cypress, adversely affect the right of holders to
convert any of the debt securities other than as provided in or under the
Indentures,
- reduce the percentage in principal amount of outstanding Securities of
any series, the consent of whose holders is required for modification or
amendment of the Indentures,
- reduce the percentage in principal amount of outstanding Securities of
any series necessary for waiver of compliance with certain provisions of
the Indentures or for waiver of certain defaults, or
- modify such provisions with respect to modification and waiver.
These provisions are set forth in section 902 of the applicable Indenture.
Holders of a majority in aggregate principal amount of the outstanding
Securities of any series may waive, on behalf of the holders of all debt
securities of that series, compliance by us with respect to certain restrictive
provisions of the Indentures. These provisions are set forth in section 1010 of
the Senior Indenture and section 1008 of the Subordinated Indenture.
The holders of not less than a majority in principal amount of the
outstanding Securities of any series may, on behalf of all holders of debt
securities of that series, waive any past default under the Indenture with
respect to debt securities of that series, except a default:
- in the payment of principal of or premium or interest on any debt
security of that series, or
- in respect of a covenant or provision of the Indenture which cannot be
amended without the consent of the holder of each outstanding Security of
the series who is affected.
These provisions are set forth in section 513 of the applicable Indenture.
In determining whether the holders of the requisite principal amount of the
outstanding Securities have given or taken any direction, notice, consent,
waiver or other action under the Indenture as of any date, each Indenture will
set forth the following:
- the principal amount of an Original Issue Discount Security that will be
deemed to be outstanding will be the amount of the principal that would be
due and payable as of such date upon acceleration of the maturity to such
date,
- if, as of such date, the principal amount payable at the stated maturity
of a debt security is not determinable, for example, because it is based
on an index, the principal amount of such debt security deemed to be
outstanding as of such date will be an amount determined as set forth in
the Indenture, and
- the principal amount of a debt security denominated in one or more
foreign currencies or currency units that will be deemed to be outstanding
will be the U.S. dollar equivalent.
These provisions are set forth in section 101 of the applicable Indenture.
DEFEASANCE AND COVENANT DEFEASANCE
At our option, we may elect in the prospectus supplement to have the
provisions of section 1302, relating to defeasance and discharge of
indebtedness, or section 1303, relating to defeasance of certain
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restrictive covenants, applied to the debt securities of any series. These
provisions are set forth in section 1301 of the applicable Indenture.
Defeasance and Discharge
Upon our option, if any, to have section 1302 applied to any debt
securities, the provisions of Article 15 of the Subordinated Indenture relating
to subordination will cease to be effective and, with respect to any debt
securities, we will be discharged from all of our obligations, except those
obligations specified in the following sentence, upon the deposit in trust of
money or U.S. government obligations that will provide money in an amount
sufficient to pay the principal, premium, if any, and interest on such debt
securities.
We will, however, continue to be required to:
- exchange or register the transfer of debt securities,
- replace stolen, lost or mutilated debt securities,
- maintain paying agencies,
- hold moneys for payment in trust, and
- effect conversion.
Such defeasance or discharge may occur only if:
- we have delivered to the trustee an opinion of counsel to the effect that
we have received from, or there has been published by, the United States
Internal Revenue Service a ruling, or
- there has been a change in tax law,
in either case to the effect that holders will not recognize gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, in the
same manner, and at the same times as would have been the case if such deposit,
defeasance and discharge were not to occur.
These provisions are set forth in sections 1302 and 1304 of the applicable
Indenture.
Defeasance of Certain Covenants
Upon our option, if any, to have section 1303 applied to any debt
securities, we may omit to comply with certain restrictive covenants, including
those described in the prospectus supplement. In such case, the occurrence of
certain Events of Default described in clause (4) above with respect to such
restrictive covenants under "Events of Default" and in the prospectus
supplement, will be deemed not to result in an Event of Default and, in the case
of the Subordinated Indenture, the provisions of Article 15 relating to
subordination will cease to be effective with respect to any subordinated debt
securities. In order to exercise such option, we will be required to deposit, in
trust for the benefit of the holders of such debt securities, money or U.S.
government obligations which will provide money in an amount sufficient to pay
the principal, premium, if any, and interest on the debt securities.
We will also be required, among other things, to deliver to the trustee an
opinion of counsel that holders will not recognize gain or loss for federal
income tax purposes as a result of such deposit and defeasance of certain
obligations, and will be subject to federal income tax on the same amount, in
the same manner and at the same times as would have been the case if such
deposit and defeasance were not to occur.
In the event we exercised this option and the debt securities were declared
due and payable because of an Event of Default, the amount of deposited money
and U.S. government obligations in trust would be sufficient to pay amounts due
on the debt securities at the time of their respective stated maturities, but
may not be sufficient to pay amounts due on such debt securities upon any
acceleration resulting from
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such Event of Default. In such case, we would remain liable for such payments.
These provisions are set forth in sections 1303 and 1304 of the applicable
Indenture.
We may, at our option, satisfy and discharge each of the Indentures, except
for certain of our obligations and the trustee's obligations, including, among
others the obligations to apply money held in trust when:
- either (1) all debt securities previously authenticated and delivered,
other than those that were destroyed, lost or stolen and that have been
replaced or paid, and for which money has been deposited in trust or
segregated and held in trust by us and thereafter repaid to us or
discharged from the trust, have been delivered to the trustee for
cancellation or discharge from the trust, or (2) all such debt securities
not previously delivered to the trustee for cancellation
(a) have become due and payable;
(b) will become due and payable at their stated maturity within one
year; or
(c) are to be called for redemption within one year under arrangements
satisfactory to the trustee for the giving of notice of redemption by the
trustee in our name and at our expense, and we have deposited or caused to
be deposited an amount sufficient to pay and discharge the entire
indebtedness on debt securities not previously delivered to the trustee for
cancellation, for principal and any premium and interest to the date of
such deposit, in the case of debt securities which have become due and
payable, or to the stated maturity or redemption date, as the case may be,
- we have paid or caused to be paid all other sums payable by us, and
- we have delivered to the trustee an officers' certificate and an opinion
of counsel to the effect that all conditions precedent relating to the
satisfaction and discharge have been satisfied.
NOTICES
Notices to holders will be given by mail to the addresses of the holders in
the security register. This provision is set forth in sections 101 and 106 of
the applicable Indenture.
GOVERNING LAW
The Indentures and the debt securities will be governed by, and construed
in accordance with, the law of the State of New York, without giving effect to
such state's conflicts of law principles. This provision is set forth in section
112 of the applicable Indenture.
REGARDING THE TRUSTEE
The Indentures contain certain limitations on the right of the trustee,
should it become a creditor of Cypress, to obtain payment of claims in certain
cases or to realize for its own account on certain property received in respect
of any such claim as security or otherwise. These provisions are set forth in
section 613 of the applicable Indenture.
The trustee is permitted to engage in certain other transactions. However,
if the trustee acquires any conflicting interest and there is a default under
the Securities of any series for which the trustee serves as trustee, the
trustee must eliminate such conflict or resign. These provisions are set forth
in section 608 of the applicable Indenture.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 255,000,000 shares. Those shares
consist of:
- 250,000,000 shares designated as common stock, $.01 par value, and
- 5,000,000 shares designated as preferred stock, $.01 par value. The only
equity securities currently outstanding are shares of common stock. As of
September 28, 1998, there were approximately 86.0 million shares of
common stock issued and outstanding.
COMMON STOCK
Holders of common stock are entitled to receive dividends declared by the
Board of Directors, out of funds legally available for the payment of dividends,
subject to the rights of holders of preferred stock. Currently, we are not
paying a dividend. Each holder of common stock is entitled to one vote per
share. Upon any liquidation, dissolution or winding up of our business, the
holders of common stock are entitled to share equally in all assets available
for distribution after payment of all liabilities and provision for liquidation
preference of shares of preferred stock then outstanding. The holders of common
stock have no preemptive rights and no rights to convert their common stock into
any other securities. There are also no redemption or sinking fund provisions
applicable to the common stock.
All outstanding shares of common stock are fully paid and nonassessable.
Our common stock is listed on the New York Stock Exchange under the symbol
"CY." The transfer agent and registrar for the common stock is Boston Equiserve
Limited Partnership.
PREFERRED STOCK
The following description of preferred stock and the description of the
terms of a particular series of preferred stock that will be set forth in the
related prospectus supplement are not complete. These descriptions are qualified
in their entirety by reference to the certificate of designation relating to
that series. The rights, preferences, privileges and restrictions of the
preferred stock of each series will be fixed by the certificate of designation
relating to that series. The related prospectus supplement will also contain a
description of certain United States federal income tax consequences relating to
the purchase and ownership of the series of preferred stock that is described in
the prospectus supplement.
As of September 28, 1998, there were no shares of preferred stock
outstanding. The Board of Directors has the authority, without further action by
the stockholders, to issue up to 5,000,000 shares of preferred stock in one or
more series, and to fix or designate, under our certificate of designation, the
following terms of the preferred stock:
- designations, powers, preferences, and privileges,
- relative participating, optional or special rights, and
- qualifications, limitations or restrictions, including dividend rights,
conversion rights, voting rights, terms of redemption and liquidation
preferences.
Any or all of these rights may be greater than the rights of the holders of
common stock.
The Board of Directors, without stockholder approval, may authorize and
issue preferred stock with voting, conversion or other rights that could
negatively affect the voting power and other rights of the holders of common
stock. The terms of the preferred stock that might be issued could conceivably
prohibit us from:
- consummating a merger,
- reorganizing,
- selling substantially all of our assets,
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- liquidating, or
- engaging in other extraordinary corporate transactions without
stockholder approval.
Preferred stock could therefore be issued quickly with terms calculated to
delay, defer or prevent a change in control of Cypress or make it more difficult
to remove our management. Additionally, the issuance of preferred stock may have
the effect of decreasing the market price of the common stock.
The prospectus supplement will specify:
- the maximum number of shares,
- the designation of the shares,
- the annual dividend rate, if any, whether the dividend rate is fixed or
variable, the date dividends will accrue, the dividend payment dates, and
whether dividends will be cumulative,
- the price and the terms and conditions for redemption, if any, including
redemption at our option or at the option of the holders, including the
time period for redemption, and any accumulated dividends or premiums,
- the liquidation preference, if any, and any accumulated dividends upon
the liquidation, dissolution or winding up of our affairs,
- any sinking fund or similar provision, and, if so, the terms and
provisions relating to the purpose and operation of the fund,
- the terms and conditions, if any, for conversion or exchange of shares of
any other class or classes of our capital stock or any series of any
other class or classes, or of any other series of the same class, or any
other securities or assets, including the price or the rate of conversion
or exchange and the method, if any, of adjustment,
- the voting rights, and
- any or all other preferences and relative, participating, optional or
other special rights, privileges or qualifications, limitations or
restrictions.
Preferred stock will be fully paid and nonassessable upon issuance. The
preferred stock or any series of preferred stock may be represented, in whole or
in part, by one or more global certificates, which will have an aggregate
principal amount equal to that of the preferred stock represented by the global
certificate.
Each global certificate will:
- be registered in the name of a depositary or a nominee of the depositary
identified in the prospectus supplement,
- be deposited with such depositary or nominee or a custodian for the
depositary, and
- will bear a legend regarding the restrictions on exchanges and
registration of transfer, and any other matters as may be provided for
under the certificate of designation.
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SECTION 203 OF DELAWARE GENERAL CORPORATION LAW
We are a Delaware corporation subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
transaction with an "interested stockholder" for a period of three years after
the date the person became an interested stockholder, unless, with certain
exceptions, the business combination or the transaction in which the person
became an interested stockholder is approved in a prescribed manner, as
described below.
The Section 203 restrictions do not apply if:
(1) the business combination or transaction is approved by our Board of
Directors before the date the interested stockholder obtained such
status,
(2) upon consummation of the transaction which resulted in the stockholder
obtaining such status, the stockholder owned at least 85% of the shares
of stock entitled to vote generally in the election of directors that
are outstanding at the time the transaction commenced. The 85%
calculation does not include those shares (a) owned by directors who
are also officers of the target corporation, and (b) held by employee
stock plans that do not permit employees to decide confidentially
whether to accept a tender or exchange offer, or
(3) on or after the date the interested stockholder obtained such status,
the business combination is approved by our Board of Directors and at a
stockholder meeting by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested
stockholder.
Generally, a "business combination" includes a merger, asset sale, or other
transaction resulting in a financial benefit to the interested stockholder.
Generally, an "interested stockholder" is a person who, together with affiliates
and associates, owns, or within three years prior to the determination of
interested stockholder status did own, 15% or more of a corporation's voting
stock. Section 203 may prohibit or delay mergers or other takeover or change in
control attempts with respect to Cypress. As a result, Section 203 may
discourage attempts to acquire us even though such transaction may offer our
stockholders the opportunity to sell their stock at a price above the prevailing
market price.
PLAN OF DISTRIBUTION
We may sell the Securities separately or together:
- through one or more underwriters or dealers for public offering and sale,
- directly to investors,
- through agents, or
- through a block trade in which the broker or dealer engaged to handle the
block trade will attempt to sell the Securities as agent, but may
position and resell a portion of the block as principal to facilitate the
transaction.
We may distribute the Securities from time to time in one or more
transactions at a fixed price or prices, which may be changed from time to time:
- at market prices prevailing at the times of sale,
- at prices related to such prevailing market prices, or
- at negotiated prices.
We will describe the method of distribution of the Securities in the
prospectus supplement.
Underwriters, dealers or agents may receive compensation in the form of
discounts, concessions or commissions from us or our purchasers, as their agents
in connection with the sale of Securities. These underwriters, dealers or agents
may be considered to be underwriters under the Securities Act. As a result,
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discounts, commissions, or profits on resale received by the underwriters,
dealers or agents may be treated as underwriting discounts and commissions. In
the prospectus supplement we will identify any such underwriter, dealer or
agent, and describe any compensation received by them from us. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
Underwriters, dealers and agents may be entitled to indemnification by us
against certain civil liabilities, including liabilities under the Securities
Act. Underwriters, dealers and agents also may be entitled to contribution with
respect to payments made by the underwriters, dealers or agents, under
agreements between us and the underwriters, dealers and agents.
We may grant underwriters who participate in the distribution of Securities
an option to purchase additional Securities to cover over-allotments, if any, in
connection with the distribution.
All debt securities will be new issues of securities with no established
trading market. Underwriters involved in the public offering and sale of debt
securities may make a market in the debt securities. However, they are not
obligated to make a market and may discontinue market making activity at any
time. No assurance can be given as to the liquidity of the trading market for
any debt securities.
Underwriters or agents and their associates may be customers of, engage in
transactions with or perform services for us in the ordinary course of business.
LEGAL MATTERS
The validity of the issuance of Cypress' Securities offered by this
prospectus will be passed upon for Cypress 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 January 3,
1999 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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